Attached files
| file | filename |
|---|---|
| EX-31.1 - FOMO CORP. | ex31-1.htm |
| EX-32.1 - FOMO CORP. | ex32-1.htm |
| EX-31.2 - FOMO CORP. | ex31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| [X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2015
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _____________ to ____________
Commission file number 0-192227
2050 MOTORS, INC.
(Exact name of small business issuer as specified in its charter)
| California | 95-4040591 | |
| (State or other jurisdiction | (IRS Employer | |
| of incorporation) | Identification No.) |
3420 Bunkerhill Drive, North Las Vegas, Nevada 89032
(Address of principal executive offices) (Zip Code)
(702)-591-6029
(Issuer’s telephone number)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, no par value
Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a small. See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [X] |
| (Do not check if smaller reporting company) | |||
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of April 4, 2015 was $1,446,900.
As of April 4, 2016, there were 33,748,599 shares of Common Stock, no par value, outstanding.
Documents Incorporated By Reference. None.
TABLE OF CONTENTS
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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
The information contained in this Report includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.
In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.
For a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors” set forth under “Item 1. Description of Business” below. In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.
Item 1. Description of Business.
History and Development of the Company
2050 Motors, Inc. has an exclusive license, subject to minimum sales requirements, to import, market and sell in the United States, Puerto Rico, the US Territories and Peru, the “e-Go” lightweight carbon fiber all-electric vehicle design and electric light truck, manufactured by Jiangsu Aoxin New Energy Automobile Co., Ltd. (“Aoxin Automobile”) located in the People’s Republic of China (“PRC”). Aoxin Automobile was a wholly-owned subsidiary of Dongfeng Motor Corporation (“Dongfeng Motor”), which is one of the largest automobile manufacturers in China, producing over 3.76 million cars and trucks in 2012. Aoxin Automobile was funded by Dongfeng Motor to develop and manufacture a lightweight, super-efficient, carbon fiber e-Go EV electric car (“e-Go EV”). Dongfeng Motor, over a five year period, invested a substantial amount of money to develop with the support of Italian engineers a new carbon fiber technology to produce carbon fiber parts at a significantly reduced cost. They also developed a lightweight aluminum racing frame to ultimately create the ultralight weight electric automobile known as the e-Go.
In 2014, Yancheng Municipal State-Owned Asset Investment Group, Co. Ltd. (YMSIG), an investment and property development company founded by the Yancheng Municipal Government, purchased Aoxin Automobile from Dongfeng Motor, Co. Ltd. YMSIG has made major investments in Aoxin, which funded on a fast track schedule the completion of the e-Go automobile manufacturing facility that culminated in a grand opening ceremony on January 20, 2015.
The e-Go EV is a unique lightweight carbon fiber electric vehicle built on an aluminum frame. It will be the only production line electric vehicle with a carbon fiber body manufactured by a new process that uses robotics to produce parts, which significantly reduces the production time and cost of carbon fiber components. The carbon fiber composite material is five times stronger than steel, and one third the weight.
In accordance with the exclusive license agreement signed with Aoxin Automobile, in order to maintain exclusive rights for the United States (USA), the Company is required to purchase and sell a certain amount of e-Go EV model vehicles per year for a certain period of time starting from the completion of the requirements established by the United States Department of Transportation’s (US DOT) protocols for the e-Go EV model. The required amount of vehicles that the company needs to sell per year are as follows: Year one-2,000 vehicles; Year 2-6,000 vehicles; Year 3-12,000 vehicles; Year 4-24,000 vehicles and Year 5-48,000 vehicles.
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The exclusive license contract between 2050 Motors and Aoxin Automobile requires that 2050 Motors complete US crash testing according to US Department of Transportation (“US DOT”) safety standards. 2050 Motors has entered into negotiations with the Calspan Corporation (“Calspan”). Calspan is committed to the evolution of safety in the air and on the ground, and has assisted in developing new aircraft; training world-class test pilots; performing ground-breaking automobile accident research; and contributing to safety innovations on the ground and in the air over its 70-year history. Calspan has performed over 40,000 sled test operations for aircraft and 2,500 full-scale crash tests conducted on behalf of the US DOT.
Two demonstration vehicles were received from Aoxin in the fourth quarter of 2015. One of the demonstration vehicles was showcased to the American public at the William Carr Gallery in Las Vegas, Nevada. This vehicle will remain for public viewing at the gallery until April 30, 2016. 2050 Motors intends to eventually crash test eight (8) e-Go EV vehicles by the end of 2016. However, before this is done, design of the airbags must also be completed by Aoxin Automobile. Aoxin is currently designing an airbag system for the e-Go EV however 2050 Motors cannot predict at this time whether the airbag system will suffice for the US market and/or may require additional airbags for successful crash testing. In addition, Aoxin Automobile has stated that the e-Go EV will be equipped with US DOT approved parts and equipment; these are, windshield, tires, breaking system, etc. 2050 Motors does not know at the present time if all the equipment on the e-Go EV will be DOT compliant, and 2050 Motors may or may not have to re-equip the parts, if any, either in China or the United States.
During the year 2013, both the engineers in the United States and in China collaborated on many aspects of the e-Go EV to meet or surpass the US standards. These modifications have been incorporated into the e-Go EV. One of these modifications was to specifically address a new crash test which is not yet required in the United States. This test, created by the leading insurance industry group IIHS, is called the overlap test which insurance companies are trying to adopt into the standard automobile crash test program. The crash test consists of a vehicle to be submitted under new safety standards for front-end collisions in which 25% of the front end, on the driver’s side, strikes a 5-foot-tall barrier at 40 mph. The overlap test has proven to be very difficult for present automobiles on the road to pass. In fact, thirteen automobiles produced by the top end manufacturers such as Mercedes, Audi, etc., have either failed or done very poorly in this crash test sequence.
2050 Motors intends to import all vehicles completely fabricated and assembled in China from Aoxin Automobile. 2050 Motors will market the e-Go EV vehicles in designated markets and is not expected to need any raw materials, components or equipment, except spare parts which will be supplied by Aoxin Automobile. However, the e-Go EV and all of its parts and equipment must be DOT approved. After the demonstration vehicles are delivered to the USA, some of the existing parts of the e-Go EV may or may not meet DOT specifications. Aoxin Automobile has made every effort to build the e-Go EV according to American standards. However, there is no certainty that all the parts will be DOT approved. 2050 Motors may elect to secure replacement parts here in the USA or in China for installation either in the United States or in China, if required.
2050 Motors intends to initially sell the e-Go EV to a network of customers primarily in the Las Vegas, Nevada area. 2050 Motors plans to establish a service and parts center, which would be separate from the Showroom. The Showroom facility will be at an area with high volume of people in Las Vegas, where visitors to the city can directly view the e-Go EV. 2050 Motors may also elect to sell the e-Go EV at selected distributors in the Las Vegas Area, which have already provided letters of interest to sell our vehicles. 2050 Motors’ initial plan is not to sell the vehicle outside of the Las Vegas vicinity, consisting of an area within a radius of 100 miles. In the metropolitan area of Las Vegas the population is approximately 1.9 million people. This is the Company’s current marketing plan in order to effectively market to and support people that work and/or live in Las Vegas.
2050 Motors is a development stage company with no operating history and may never be able to carry out our business plan or achieve any revenues or profitability. 2050 Motors was established in October 2012 and it has not generated any revenues nor have we realized a profit from our operations to date, and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from its business will be dependent upon the successful marketing and sales of the e-Go EV. 2050 Motors may not be able to successfully carry out its business plan. There can be no assurance that it will ever achieve any revenues or profitability. Accordingly, its prospects must be considered in light of the risks, expenses, and difficulties frequently encountered in establishing a new business, especially one in the automobile industry, and therefore it is a highly speculative venture involving significant financial risk.
We are completely dependent on Aoxin Automobile to supply us with the e-Go EV and other trucks and automobiles and parts and components thereto. The inability of Aoxin Automobile to continue to deliver, or their refusal to deliver such vehicles and parts at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating results. Changes in business conditions, global financial instability, wars, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect Aoxin Automobile’s ability to deliver vehicles and/or parts on a timely basis and cause material adverse consequences to 2050 Motors.
2050 Motors has signed an exclusive Agreement with Aoxin Automobile for the sale of these vehicles in the United States. Phase I. Phase II will involve assembly of these vehicles in the United States, creating hundreds of American jobs after all State and Federal Standards and requirements have been met. Phase III, assembly and manufacturing of the complete vehicle in the United States, will occur after an established market is created in Phase I and Phase II, creating upwards of a thousand US jobs for each manufacturing facility.
Research by Aoxin Automobile over the past five years developed this advanced all-electric vehicle. The e-Go EV is a five passenger sedan which weighs only 1,450 lbs with its battery pack included. It will be the first vehicle of this advanced type to be sold in the price range of less than $35,000.
The body components are built out of carbon fiber which is five times stronger than steel and one third its weight constructed over a strong ultralight aluminum frame chassis and race car suspension. This ensures that the vehicle will be the safest and strongest ever built for the consumer market. It will also be the most efficient vehicle ever built, capable of achieving 150+ miles to the gallon energy equivalent.
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An investment in our securities is highly speculative and subject to numerous and substantial risks. Readers are encouraged to review these risks carefully before making any investment decision.
Risk Factors Affecting Future Operating Results
2050 Motors is a development company with limited operating history which makes the evaluation of its future business prospects difficult.
You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, have a limited operating history. We may not successfully address these risks and uncertainties or successfully market our proposed new products. If we fail to do so, it could materially harm our business and impair the value of our common stock. Even if we accomplish these objectives, we may not generate the positive cash flows or profits we anticipate in the future. 2050 Motors, which is our only operating business, was incorporated in Nevada on November 12, 2012 and has generated no revenue to date. Since its inception its principal activities have been the design of its business plan and the development, with third parties, of a new and improved electric vehicle. Unanticipated problems, expenses and delays are frequently encountered in establishing and developing new products, especially in the automobile industry. These include, but are not limited to, inadequate funding, lack of consumer acceptance, competition, product development, and inadequate sales and marketing. The failure by us to meet any of these conditions would have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.
If we are unable to meet our future capital needs, we may be required to reduce or curtail operations.
To date, we have relied on funding from investors, our officers and directors, and close associates to fund operations. To date, we have not generated any revenue and have extremely limited cash liquidity and capital resources. Our future capital requirements will depend on many factors, including our ability to market our products successfully, cash flow from operations, and our ability to obtain financing in the capital markets. Our business plan requires additional funding beyond our anticipated cash flow from operations. Consequently, although we currently have no specific plans or arrangements for financing, we intend to raise funds through private placements, public offerings or other financing. Any equity financing would result in dilution to our then-existing stockholders. Sources of debt financing may result in higher interest expense and may expose the Company to liquidity problems. Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, we may be required to reduce or curtail operations. We anticipate that our existing capital resources will be adequate to satisfy our operating expenses and capital requirements for approximately 6 months. However, this estimate of expenses and capital requirements may prove to be inaccurate.
Our business will depend on certain key 2050 Motors personnel, the loss of which would adversely affect our chances of success.
2050 Motors’ success depends to a significant extent upon the continued service of its senior management, key executives and consultants. We do not have “key person” life insurance policies on or any employment agreement with any of our officers or other employees. The loss of the services of any of the key members of senior management, other key personnel or consultants, or our inability to retain high quality subcontractors or personnel may have materially adverse effects on our business and operating results.
Our future growth is dependent upon consumers’ willingness to accept electric vehicles.
Our growth is highly dependent upon the adoption by consumers of, and we are subject to an elevated risk of any reduced demand for, alternative fuel vehicles, generally, and electric vehicles in particular. If consumers do not adopt electric vehicles, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for our electric vehicles. Significant developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we cannot anticipate. Any failure by us and our manufacturer to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced electric vehicles, which could result in the loss of competitiveness of our vehicles, decreased revenue and a loss of market share to competitors.
The automotive market is highly competitive, and we may not be successful in competing in this industry. We currently face competition from established competitors and expect to face competition from others in the future.
The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future. In 2009, no other mass produced performance highway capable electric vehicles were being sold in the United States or Europe. By December 2014, just five years later, there are many companies selling mass produced electric vehicles. We expect greater significant competition, as more competitors enter these markets within the next several years.
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Almost all of our current and potential competitors have significantly greater financial, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition, almost all of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.
Furthermore, certain large manufacturers offer financing and leasing options on their vehicles and also have the ability to market vehicles at a substantial discount, provided that the vehicles are financed through their affiliated financing company. We do not currently offer discounts or leasing options on our vehicles, which may put our vehicles at a competitive disadvantage.
If our vehicles fail to perform as expected, our ability to develop, market and sell our electric vehicles could be harmed.
Our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. Any product defects or any other failure of our performance electric vehicles to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
If we are unable to address the service requirements of our existing and future customers our business will be materially and adversely affected.
If we are unable to successfully address the service requirements of our existing and future customers our business and prospects will be materially and adversely affected. In addition, we anticipate the level and quality of the service that we will provide our customers will have a direct impact on the success of our vehicles. If we are unable to satisfactorily service our customers, our ability to generate customer loyalty, grow our business and sell additional electric vehicles would be greatly impaired.
Although we have many years of experience working with electric vehicles, we have no direct experience servicing the e-Go EV vehicles. Aoxin Automobile has not yet begun production of our automobiles. We expect to receive three demonstration electric vehicles from Aoxin’s new Manufacturing Plant. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques.
We plan to service our performance electric vehicles through our company-owned stores. As of the date hereof, we have only one company owned store located in Las Vegas, Nevada. As we grow, we will need to open additional stores with service capabilities, as well as hire and train significant numbers of new employees to staff these centers. There can be no assurance that these service arrangements will adequately address the service requirements of our customers to their satisfaction, or that we will have sufficient resources to meet these service requirement in a timely manner as the volume of vehicles we are able to deliver annually increases.
We are dependent upon our relationship with Aoxin Automobile for the manufacturing of the e-Go EV automobile.
In July 2013, we entered into a distribution agreement with Aoxin Automobile pursuant to which Aoxin Automobile agreed to assist with the design and manufacture of the e-Go EV automobile. Pursuant to the distribution agreement with Aoxion, in order to maintain our exclusive distribution rights, we are obligated to purchase a minimum of 2,000 fully assembled automobiles in the first year (beginning at the time of approval from the US DOT, State and Federal standards and requirements, and completion of crash testing according to US protocol), which doubles each year thereafter until year five when the minimum purchase is 48,000 automobiles. If we are unable to meet this volume requirement, our exclusive distribution rights revert to non-exclusive rights. Additionally, because we are dependent upon our relationship with Aoxin Automobile for the manufacturing of the e-Go EV automobile, our business depends on Aoxin continuing to operate as a viable and solvent entity and to continue to produce the e-Go EV vehicles pursuant to our agreement. Any delay or discontinuance by Aoxin of delivery of the e-Go EV vehicles and or failure by Aoxin to produce the vehicles in accordance with quality standards would have a material adverse effect on our business, prospects, operating results and financial condition.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
In their report dated April 5, 2015, our independent registered public accounting firm stated that our financial statements for the fiscal year ended December 31, 2015 were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of recurring losses and cash used in operations for the past two years. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities. Our continued net operating losses increase the difficulty in meeting such goals, and there can be no assurances that such methods will prove successful. In addition, we most likely will need to raise monies for future development costs. Even though these development costs may be incurred over a three to five year period, we may be unable to raise the funds necessary to cover such costs. Therefore, there is no assurance that further capital can be raised, which if not raised will substantially change our plans to develop our electric car business.
Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle, fiscal tightening or other reasons may result in the diminished competitiveness of the alternative fuel vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results. Our growth depends in part on the availability and amounts of government subsidies and economic incentives for alternative fuel vehicles generally and performance electric vehicles specifically. In addition, certain regulations that encourage sales of electric cars could be reduced, eliminated or applied in a way that creates an adverse effect against our vehicles, either currently or at any time in the future.
Inadequate market liquidity may make it difficult to sell our stock.
There is currently a limited public market for our common stock, but we can give no assurance that there will always be such a market. Only a limited number of shares of our common stock are actively traded in the public market and we cannot give assurance that the market for our stock will develop sufficiently to create significant market liquidity and stable market prices. An investor may find it difficult or impossible to sell shares of our common stock in the public market because of the limited number of potential buyers at any time or because of fluctuations in our market price. In addition, the shares of our common stock are not eligible as a margin security and lending institutions may not accept our common stock as collateral for a loan.
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We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.
There is a limited trading market for our common stock and if a market for our common stock does not further develop, our investors may be unable to sell their shares in a timely manner.
Although we are trading on the OTC Bulletin Board under the symbol “ETFM”, there is currently no active trading market for our common stock and such a market may not develop or be sustained. If an active trading market is established for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operating results, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices of the shares of companies like 2050 Motors, which may adversely affect the market price of our common stock in a material manner.
The regulation of “Penny” stocks by the SEC and FINRA may discourage the tradability of our common stock.
We are a “penny stock” company. Our securities are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks”. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute “penny stocks” within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent shareholder losses. Our management is aware of the abuses that have occurred historically in the penny stock market.
Item 1B. Unresolved Staff Comments.
None
We lease approximately 2,000 square feet of office space for $2,400 per month in Summerlin near Las Vegas, Nevada on a lease expiring on December 15, 2015. We continued this lease on a monthly basis until February 29, 2016, at which time we had no further need for this space and we surrendered the leased space. On January 1, 2014, we sublet 1,400 square feet of office space in Los Angeles, California from two of our shareholders, on a month to month lease for $1,900 per month. On March 1, 2014, we signed a three year lease for 4,000 square feet of industrial space in Las Vegas, Nevada at a cost of $2,200 per month. We believe that these facilities are suitable for our needs for the foreseeable future.
The Company presently is not a party to, nor is management aware of, any pending, legal proceedings.
Item 4. Mine Safety Disclosures.
None.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Market Information
There has only been limited trading for the Company’s Common Stock over the past ten years. There is no assurance that an active trading market will ever develop or, if such a market does develop, that it will continue. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Holders
There are approximately 305 holders of the Company’s Common Stock. This figure does not include holders of shares registered in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
Dividends
We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Securities Authorized under Equity Compensation Plans
We do not have any equity compensation plans.
Shares Available for Future Sale
Approximately 90% of all outstanding shares of our common stock are “restricted securities,” as that term is defined under Rule 144 promulgated under the Securities Act, because they were issued in a private transaction not involving a public offering. Accordingly, none of the outstanding shares of our common stock may be resold, transferred, pledged as collateral or otherwise disposed of unless such transaction is registered under the Securities Act or an exemption from registration is available. In connection with any transfer of shares of our common stock other than pursuant to an effective registration statement under the Securities Act, the Company may require the holder to provide to the Company an opinion of counsel to the effect that such transfer does not require registration of such transferred shares under the Securities Act.
Rule 144 is not available for the resale of securities initially issued by companies that are, or previously were, shell companies, like us, unless the following conditions are met:
| ● | the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
| ● | the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
| ● | the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
| ● | at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company. |
In view of the above, shareholders may utilize Rule 144 for the sale of their shares at any time, assuming all of the other requirements set forth above are met.
| 8 |
Repurchases of Equity Securities
None
Our common stock is approved for quotation on the OTC Markets’ OTCQB marketplace under the symbol “ETFM”. The OTC QB is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. The OTC QB securities are traded by a community of market makers that enter quotes and trade reports. This market is limited in comparison to the national stock exchanges and any prices quoted may not be a reliable indication of the value of our common stock.
On April 4, 2016, the closing price of our common stock reported on the OTCQB was $____ per share. The following table sets forth, for each of the quarterly periods indicated, the high and low sales prices of our common stock, as reported on the OTCQB.
| High Bid | Low Bid | ||||||||
| Fiscal Year Ending December 31, 2013 | |||||||||
| Quarter Ended March 31, 2013 | $ | .05 | $ | .04 | |||||
| Quarter Ended June 30, 2013 | $ | .20 | $ | .05 | |||||
| Quarter Ended September 30, 2013 | $ | .15 | $ | .04 | |||||
| Quarter Ended December 31, 2013 | $ | .10 | $ | .06 | |||||
| Fiscal Year Ending December 31, 2014 | |||||||||
| Quarter Ended March 31, 2014 | $ | 1.79 | $ | .06 | |||||
| Quarter Ended June 30, 2014 | $ | 4.40 | $ | .51 | |||||
| Quarter Ended September 30, 2014 | $ | 1.24 | $ | .80 | |||||
| Quarter Ended December 31, 2014 | $ | 3.00 | $ | 1.01 | |||||
| Fiscal Year Ending December 31, 2015 | |||||||||
| Quarter Ended March 31, 2015 | $ | 2.45 | $ | 1.01 | |||||
| Quarter Ended June 30, 2015 | 1.68 | 0.76 | |||||||
| Quarter Ended September 30, 2015 | 0.75 | 0.36 | |||||||
| Quarter Ended December 31, 2015 | 0.49 | 0.16 | |||||||
| Fiscal Year Ending December 31, 2016 | |||||||||
| January 1 thru March 31, 2016 | 0.18 | 0.16 | |||||||
| April 1 thru April 4, 2016 | |||||||||
Penny Stock Considerations
The trading of our common stock is deemed to be “penny stock” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus are subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:
| Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; | |
| Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; | |
| Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and | |
| Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account. |
| 9 |
Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.
Reports to Stockholders
We are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file periodic reports, and other information with the SEC. We intend to send annual reports to our stockholders containing audited financial statements.
Transfer Agent
Signature, Stock Transfer, Inc., located at 2632 Coachlight Court, Plano, Texas 75093 is the registrar and transfer agent for our common stock.
Recent Sales of Unregistered Securities
Between July 7 and December 1, 2014, the Registrant sold 2,721,146 shares of its common stock to 21 “accredited” investors for an aggregate purchase amount of $955,400.
During the year ended December 31, 2014, the Registrant issued 62,072 shares of its common stock to two consultants for services rendered valued at $51,771.
Between February 15 and March 11, 2015, the Registrant sold 85,713 shares of its common stock to four “accredited” investors for an aggregate purchase amount of $30,000.
On October 9, 2015, the Registrant issued 225,000 shares of its common stock to three consultants for services rendered valued at $48,375.
All of the issuances by us of our unregistered securities were made in reliance upon Regulation D and Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”). No commissions were paid relating to the issuance of the securities. The entities or individuals listed above that purchased the unregistered securities were known to us and our management, through pre-existing business relationships. They were provided access to all material information, all information necessary to verify such information, and our management in connection with the purchases. The purchaser of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.
Additional Information
We are a fully reporting issuer, subject to the Securities Exchange Act of 1934. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at http://www.sec.gov. Our internet website address is http://www.2050motors.com.
Item 6. Selected financial Data.
Not required under Regulation S-K for “smaller reporting companies.”
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
This 10−K contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” in Item 1 above.
| 10 |
Plan of Operation
Prior to the completion of the acquisition of 2050 Motors, Inc., a Nevada corporation, (“2050 Motors”) on May 2, 2014, the Company was a public “shell” company with nominal assets whose sole business was to identify, evaluate, and investigate various companies to acquire or with which to merge. Upon consummation of the transaction with 2050 Motors, the Company’s business became the business of 2050 Motors, which is the Company’s sole operating subsidiary. Our principal business objective for the next 12 months will be to achieve long-term growth through 2050 Motors.
The Company completed the acquisition of all of the issued and outstanding capital stock of 2050 Motors on May 2, 2014. The acquisition was effected pursuant to the terms of a Plan and Agreement of Reorganization (the “Agreement”) entered into on February 5, 2014, by and between the Company, 2050 Motors and Certain Shareholders of 2050 Motors. Pursuant to the terms of the Agreement, the Company acquired all of the outstanding shares of capital stock of 2050 Motors in exchange for 24,994,670post-split shares of the Company’s common stock (aggregating approximately 82% of its issued and outstanding common stock).
2050 Motors principal activity is the importation and the marketing and selling of electric automobiles. 2050 Motors, Inc. has an exclusive license, subject to minimum sales requirements, to import, market and sell in the United States, Puerto Rico, the US Territories and Peru, the “e-Go” lightweight carbon fiber all-electric vehicle design and electric light truck, manufactured by Jiangsu Aoxin New Energy Automobile Co., LTD (“Aoxin Automobile”) located in the Peoples Republic of China (“PRC”). Aoxin Automobile is a wholly-owned subsidiary of Dongfeng Motors Corporation (“Dongfeng Motor”) which is one of the largest automobile manufacturers in China, producing over 3.76 million cars and trucks in 2012. Aoxin Automobile was funded by Dongfeng Motors to develop and manufacture a lightweight, super-efficient, carbon fiber e-Go EV electric car (“e-Go EV”).
Dongfeng Motor, over a five year period, invested a substantial amount of money to develop with the support of Italian engineers a new carbon fiber technology to produce carbon fiber parts at a significantly reduced cost. They also developed a lightweight aluminum racing frame to ultimately create the ultralight weight electric automobile known as the e-Go.
In 2014, Yancheng Municipal State-Owned Asset Investment Group, Co. Ltd. (YMSIG), an investment and property development company founded by the Yancheng Municipal Government, purchased Aoxin Automobile from Dongfeng Motor, Co. Ltd. YMSIG has made major investments in Aoxin, which funded on a fast track schedule the completion of the e-Go automobile manufacturing facility that culminated in a grand opening ceremony on January 20, 2015.
The e-Go EV is a unique concept electric vehicle. It will be the only production line electric vehicle with a carbon fiber body manufactured by a new process that uses robotics to produce parts, which significantly reduces the production time and cost of carbon fiber components. The carbon fiber composite material is five times stronger than steel, and one third the weight.
The exclusive license contract between 2050 Motors and Aoxin Automobile requires that 2050 Motors complete US crash testing according to US Department of Transportation (“DOT”) safety standards. 2050 Motors has entered into negotiations with Calspan Corporation (“Calspan”). Calspan is committed to the evolution of safety in the air and on the ground, and has assisted in developing new aircraft; training world-class test pilots; performing ground-breaking automobile accident research; and contributing to safety innovations on the ground and in the air over its 70-year history. It’s important to note that one of the three demonstration vehicles shipped to the United States in February, 2016 will be used to evaluate this overlap crash test at Calspan’s facilities during the summer of 2016. This will be a definitive evaluation of the effectiveness of the design modifications incorporated into the e-Go EV vehicle. There is no assurance that the e-Go EV will pass this crash test in June 2016 or at any other time.
2050 Motors intends to import vehicles completely fabricated and assembled in China from Aoxin Automobile. 2050 Motors will market the e-Go EV vehicles in designated markets and is not expected to need any raw materials, components or equipment, except spare parts which will be supplied by Aoxin Automobile. However, the e-Go EV and all of its parts and equipment must be DOT approved. After the demonstration vehicles are delivered to the USA, some of the existing parts of the e-Go EV may or may not meet DOT specifications. Aoxin Automobile has made every effort to build the e-Go EV according to American standards. However, there is no certainty that all the parts will be DOT approved. 2050 Motors may elect to secure replacement parts here in the USA or in China for installation either in the United States or in China, if required.
2050 Motors intends to initially sell the e-Go EV to a network of customers primarily in the Las Vegas, Nevada area. 2050 Motors plans to establish a service and parts center, which would be separate from the Showroom. The Showroom facility will be at an area with high volume of people in Las Vegas, where visitors to the city can directly view the e-Go EV. 2050 Motors may also elect to sell the e-Go EV at selected distributors in the Las Vegas Area, which have already provided letters of interest to sell our vehicles. 2050 Motors’ initial plan is not to sell the vehicle outside of the Las Vegas vicinity, consisting of an area within a radius of 100 miles. This is the Company’s current marketing plan in order to effectively market to and support people that work and/or live in Las Vegas. In the metropolitan area of Las Vegas the population equals 1.9 million.
2050 Motors is a development stage company with no operating history and may never be able to carry out its business plan or achieve any revenues or profitability. 2050 Motors was established in October 2012 and it has not generated any revenues nor has it realized a profit from its operations to date, and there is little likelihood that it will generate any revenues or realize any profits in the short term. Any profitability in the future from its business will be dependent upon the successful marketing and sales of the e-Go EV. 2050 Motors may not be able to successfully carry out its business plan. There can be no assurance that it will ever achieve any revenues or profitability. Accordingly, its prospects must be considered in light of the risks, expenses, and difficulties frequently encountered in establishing a new business, especially one in the automobile industry, and therefore it is a highly speculative venture involving significant financial risk.
| 11 |
We are completely dependent on Aoxin Automobile to supply us with the e-Go EV and other trucks and automobiles and parts and components thereto. The inability of Aoxin Automobile to continue to deliver, or their refusal to deliver such vehicles and parts at prices and volumes acceptable to us would have a material adverse effect on our business, prospects and operating results. Changes in business conditions, global financial instability, wars, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect Aoxin Automobile’s ability to deliver vehicles and/or parts on a timely basis and cause material adverse consequences to 2050 Motors.
Research by Aoxin Automobile over the past five years developed this advanced all-electric vehicle. The e-Go EV is a five passenger sedan which weighs only 1,450 lbs with its battery pack included. It will be the first vehicle of this advanced type to be sold in the price range of less than $35,000.
The body components are built out of carbon fiber which is five times stronger than steel and one third its weight constructed over a strong ultralight aluminum frame chassis and race car suspension. This ensures that the vehicle will be one of the safest and strongest ever built for the consumer market. It will also be the most efficient vehicle ever built, capable of achieving 200+ miles to the gallon energy equivalent.
2050 Motors projects expenses associated with its business over the next 6 months to be approximately $1,000,000. The primary cost component will be related to meeting the crash testing requirements of the DOT.
Costs and Resources
The Company is currently pursuing additional funding resources that will enable it to maintain its current and planned operations through the next 6 months. The Company anticipates, however, that it will need to raise additional capital in order to sustain and grow its operations over the next few years.
To the extent that the Company’s capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will provide any portion of the Company’s future financing requirements. No assurance can be given that additional financing will be available when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company.
Results of Operation for the years ended December 31, 2015 and 2014
During the years ended December 31, 2015 and 2014, the Company had no operating revenues. During the year ended December 31, 2015, the Company incurred operating expenses of $731,524 consisting primarily of R&D expenses, consulting fees and travel expenses and other general and administrative costs of 2050 Motors. During the year ended December 31, 2014, the Company incurred operating expenses of $546,072. These operating expenses combined with a lack of operating revenues resulted in net losses of $(728,924) and $(546,072) for the periods ended December 31, 2015 and 2014, respectively. As of December 31, 2015 the Company had stockholders’ equity of $218,198 compared to a stockholders’ equity of $868,747 as of December 31, 2014. The decrease in stockholders’ equity was due to the net loss of $(728,924) for 2015 and the additional issuance of common stock by the Company at $78,375.
Equity and Capital Resources
We have incurred losses since inception of our business and, as of December 31, 2015, we had an accumulated deficit of $1,775,798. As of December 31, 2015, we had cash of $81,984 and working capital of $31,011.
To date, we have funded our operations through short-term debt and equity financing. From inception, we have borrowed approximately $150,000 as an advance from our largest stockholder. In May 2014, we agreed to issue 106,000 shares of common stock to Alfred E. Booth, Jr., our largest stockholder) in full satisfaction of $106,412, which was the total owed to Mr. Booth, Jr. as of that date. The Company completed private placements during the year ended December 31, 2014 with the receipt of aggregate proceeds of $955,400 from the sale of 2,741,146 shares of its common stock at $0.35 per share. The proceeds from the sale of equity were used to pay fees and expenses, to the extent that such expenses are not deferred, arising from the Company’s compliance with its public reporting requirements and to continue to proceed with its business plan to market, develop and sell electric automobiles. During the year ended December 31, 2015, the Company issued 310,713 shares of its common stock, 85,713 shares for cash proceeds totaling $30,000 and 225,000 shares for services valued at $48,375.
We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of our automobile business. However, we do not expect to start generating revenues from our operations for another 12 months. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse affect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of additional capital or that our estimates of our capital requirements will prove to be accurate. As of the date of this Report we did not have any commitments from any source to provide such additional capital. Even if we are able to secure outside financing, it may not be available in the amounts or the times when we require. Furthermore, such financing would likely take the form of bank loans, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, leases or debt would increase our capital requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.
| 12 |
Off-balance Sheet Arrangements
Since our inception through December 31, 2015, we have not engaged in any off-balance sheet arrangements.
Recent Accounting Pronouncements
We have adopted all applicable recently issued accounting pronouncements. The adoption of the accounting pronouncements did not have a material effect on our operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not required under Regulation S-K for “smaller reporting companies.”
Item 8. Financial Statements and Supplementary Data.
Our audited consolidated financial statements are set forth in this Annual Report beginning on page F-1.
| 13 |
2050 MOTORS, INC.
INDEX TO FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of 2050 Motors, Inc.
We have audited the accompanying balance sheets of 2050 Motors, Inc. as of December 31, 2015 and 2014, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015. 2050 Motors, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 2050 motors, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not earned any revenues since inception and has an accumulated deficit $1,775,798 as of December 31, 2015, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Farber Hass Hurley LLP
Chatsworth, CA
April 5, 2016
| F-2 |
2050 Motors, Inc.
| As of | As of | |||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 81,984 | $ | 756,675 | ||||
| Prepaid rent | - | 17,286 | ||||||
| Other prepaid expenses | 25,000 | 975 | ||||||
| Total current assets | 106,984 | 774,936 | ||||||
| Property and equipment, net | 105,382 | 60,309 | ||||||
| Other assets: | ||||||||
| Vehicle deposits | 24,405 | 86,000 | ||||||
| Other deposits | 7,400 | 4,600 | ||||||
| License | 50,000 | 50,000 | ||||||
| Total other assets | 81,805 | 140,600 | ||||||
| Total assets | $ | 294,171 | $ | 975,845 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Commitments and contingencies | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 3,515 | $ | 1,074 | ||||
| Accrued interest on loans payable to related parties | 4,980 | 3,550 | ||||||
| Loans payable to related parties | 66,500 | 100,763 | ||||||
| Deferred rent | 978 | 1,711 | ||||||
| Total current liabilities | 75,973 | 107,098 | ||||||
| Stockholders’ equity | ||||||||
| Common stock; no par value | 1,993,996 | 1,915,621 | ||||||
| Authorized: 100,000,000 shares at December 31, 2015 and December 31, 2014 | ||||||||
| Issued and outstanding: 33,748,599 at December 31, 2015 and 33,437,886 at December 31, 2014 | ||||||||
| Accumulated deficit | (1,775,798 | ) | (1,046,874 | ) | ||||
| Total stockholders’ equity | 218,198 | 868,747 | ||||||
| Total liabilities and stockholders’ equity | $ | 294,171 | $ | 975,845 | ||||
The accompanying notes are an integral part of these financial statements
| F-3 |
2050 Motors, Inc.
| Year Ended | Year Ended | |||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Operating revenue | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| R&D | 97,734 | - | ||||||
| Interest expense | 11,438 | 3,961 | ||||||
| General & administrative | 622,352 | 542,111 | ||||||
| Total operating expenses | 731,524 | 546,072 | ||||||
| Net loss from operations | (731,524 | ) | (546,072 | ) | ||||
| Other income, net | 2,600 | - | ||||||
| Loss before income taxes | (728,924 | ) | (546,072 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (728,924 | ) | $ | (546,072 | ) | ||
| Net loss per share, basic and diluted | $ | (0.02 | ) | $ | (0.02 | ) | ||
| Weighted average common equivalent shares outstanding, basic and diluted | 33,553,057 | 31,589,646 | ||||||
The accompanying notes are an integral part of these financial statements
| F-4 |
2050 Motors, Inc.
Statements of Stockholders’ Equity
| Common Stock | Total | |||||||||||||||
| Number | No | Accumulated | stockholders’ | |||||||||||||
| of shares | Par value | deficit | equity | |||||||||||||
| Balance, December 31, 2013 | 30,634,670 | $ | 908,450 | $ | (500,802 | ) | $ | 407,648 | ||||||||
| Shares issued for cash | 2,741,146 | 955,400 | - | 955,400 | ||||||||||||
| Shares issued for services | 62,070 | 51,771 | - | 51,771 | ||||||||||||
| Net loss | - | - | (546,072 | ) | (546,072 | ) | ||||||||||
| Balance, December 31, 2014 | 33,437,886 | $ | 1,915,621 | $ | (1,046,874 | ) | $ | 868,747 | ||||||||
| Shares issued for cash | 85,713 | 30,000 | - | 30,000 | ||||||||||||
| Shares issued for services | 225,000 | 48,375 | - | 48,375 | ||||||||||||
| Net loss | - | - | (728,924 | ) | (728,924 | ) | ||||||||||
| Balance, December 31, 2015 | 33,748,599 | $ | 1,993,996 | $ | (1,775,798 | ) | $ | 218,198 | ||||||||
The accompanying notes are an integral part of these financial statements
| F-5 |
2050 Motors, Inc.
| Year Ended | Year Ended | |||||||
| December 31, 2015 | December 31, 2014 | |||||||
| Cash flows provided by (used for) operating activities: | ||||||||
| Net loss | $ | (728,924 | ) | $ | (546,072 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||||||
| Depreciation | 21,628 | 8,016 | ||||||
| Issuance of common stock for services | 48,375 | 51,771 | ||||||
| Changes in assets and liabilities: | ||||||||
| Increase (decrease) in assets and liabilities: | ||||||||
| Deposits | 58,796 | (2,200 | ) | |||||
| Prepaid rent | 17,286 | (8,186 | ) | |||||
| Other prepaid expenses | (24,025 | ) | (975 | ) | ||||
| Accounts payable | 2,441 | 1,074 | ||||||
| Accrued interest on loans payable to related parties | 1,430 | 3,550 | ||||||
| Deferred rent | (733 | ) | 1,711 | |||||
| Net cash used for operating activities | (603,726 | ) | (491,311 | ) | ||||
| Cash flows provided by (used for) investing activities: | ||||||||
| Purchase of property and equipment | (66,702 | ) | (68,325 | ) | ||||
| Net cash used for investing activities | (66,702 | ) | (68,325 | ) | ||||
| Cash flows provided by (used for) financing activities: | ||||||||
| Proceeds from related party advances | - | 150,000 | ||||||
| Payments made on related party advances | (34,263 | ) | (51,000 | ) | ||||
| Proceeds from issuance of common stock | 30,000 | 955,400 | ||||||
| Net cash provided by (used for) financing activities | (4,263 | ) | 1,054,400 | |||||
| Net increase (decrease) in cash | (674,691 | ) | 494,764 | |||||
| Cash, beginning of year | 756,675 | 261,911 | ||||||
| Cash, end of period | $ | 81,984 | $ | 756,675 | ||||
| Supplemental disclosure of cash flow information - | ||||||||
| Income tax payment | $ | - | $ | - | ||||
| Interest payment | $ | 10,008 | $ | 411 | ||||
The accompanying notes are an integral part of these financial statements
| F-6 |
2050 Motors, Inc.
1. BUSINESS
2050 Motors, Inc., (the “Company”) was formed to import, market, and sell electric cars manufactured in China. 2050 Motors has entered into an agreement with Jiangsu Aoxin New Energy Automobile Co., Ltd., located in Jiangsu, China (“Aoxin”), for the distribution in the United States of a new electric automobile, known as the e-Go EV.
2. GOING CONCERN
The Company’s ability to continue in existence is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations, positive cash flows, and the successful distribution of the vehicles in the USA markets. Management’s plan is to aggressively pursue its present business plan. Since inception the Company has funded its operations through the issuance of common stock and related party funding and advances, and will seek additional debt or equity financing as required. However, there can be no assurance that the Company would be successful in raising such additional funds. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash
Cash consists of deposits in one large national bank.
Advertising and Marketing Costs
Costs incurred for producing and communicating advertising and marketing are expensed when incurred and included in selling general and administrative expenses. Advertising and marketing expense amounted to $16,764 and $720 for the years ended December 31, 2015 and 2014, respectively.
| F-7 |
2050 Motors, Inc.
Notes To Financial Statements
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
Depreciation is calculated using straight-line method over the assets estimated useful lives as follows:
| Furniture and fixtures Leasehold | 7 years |
| improvements Vehicles and parts | Lessor of lease term or life of related assets |
| Tools and equipment | 3 years |
| 5 years |
Depreciation expense amounted to $21,628 and $8,016 for the years ended December 31, 2015 and 2014, respectively.
Impairment of Long-Lived Assets and Assets
The Company reviews long lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recorded. No impairment losses were recognized for the year ended December 31, 2015 and 2014.
Earnings Per Share
Basic earnings per share are computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. For the years ended December 31, 2015, and 2014, the Company has incurred losses; therefore the effect of any Common Stock equivalent would be anti-dilutive during those periods. There were no warrants, options, or other stock equity outstanding as of December 31, 2015 and 2014.
| F-8 |
2050 Motors, Inc.
Notes To Financial Statements
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
Cash is mainly maintained by one highly qualified institution in the United States. At various times such amounts are in excess of federally insured limits. Management does not believe that the Company is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Company has not experienced any losses on our deposits of cash.
Recent Accounting Pronouncement
In February 2013, the FASB issued a new accounting standard that provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements. This new accounting standard was effective as of January 1, 2014. The adoption of this accounting standard did not have any impact on the Company’s financial statements.
In July 2013, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. The new accounting standard was effective as of January 1, 2014 and is consistent with the Company’s present practice.
In May 2014, the FASB issued ASU No. 2014-09 “ Revenue from Contracts with Customers “ (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments create a new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts with Customers”. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. Management is currently evaluating the impact this guidance will have on Company’s financial position and statement of operations.
In June 2014, FASB issued amendment 2014-10 that eliminates certain financial reporting requirements for Development Stage Entities. This amendment is effective for annual reporting periods beginning after December 15, 2014 and interim periods therein. Early application is permitted. The Company adopted this amendment effective July 1, 2014 by removing the following disclosures:
a) Presentation of inception-to-date information in the statement of income, cash flows and shareholder equity.
b) Labeling the financial statements as those of a development stage entity.
c) Description of the development stage activities in which the entity is engaged.
| F-9 |
2050 Motors, Inc.
Notes To Financial Statements
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “ Presentation of Financial Statements – Going Concern” , Subtopic 205-40, “ Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendments in this ASU apply to all entities and require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Management is currently evaluating the impact this guidance will have on Company’s financial position and results of operations.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. This statement requires an asset and liability approach for accounting for income taxes. The accounting principles generally accepted in the United States of America provides accounting and disclosure guidance about positions taken by an entity in its tax returns that might be uncertain.
The accounting principles generally accepted in the United States of America provides accounting and disclosure guidance about positions taken by an organization in its tax returns that might be uncertain. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company files income tax returns in the U.S. and various state jurisdictions. The Company is subject to examinations by U.S. Federal and State tax authorities from 2012 (inception) to the present, generally for three years after they are filed.
Foreign Currency Risk
Any significant changes in foreign currency exchange rates may have significant impact on Company’s future financial statements upon fulfilling certain purchase commitments in accordance to the license agreement disclosed in Note 8.
| F-10 |
2050 Motors, Inc.
Notes To Financial Statements
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 2015 and 2014:
| 2015 | 2014 | |||||||
| Furniture and fixtures | $ | 14,303 | $ | 14,303 | ||||
| Leasehold improvements | 18,184 | 14,082 | ||||||
| Vehicles and parts | 80,045 | 18,450 | ||||||
| Tools and equipment | 22,494 | 21,490 | ||||||
| 135,026 | 68,325 | |||||||
| Less: accumulated depreciation | (29,644 | ) | (8,016 | ) | ||||
| Property and equipment, net | $ | 105,382 | $ | 60,309 | ||||
5. VEHICLE DEPOSITS
2050 Motors purchased three prototype test models for delivery into the United States. One will undergo an advanced crash test known in the Automobile Safety Industry as the “overlap crash test” designed by the Insurance Institute for Highway Safety. The other two, delivered in October and November of 2015, are being used for marketing and sales purposes. Actual production line models are not expected to be deliverable until year 2016.
The total purchase price for these three vehicles was $86,000. This was paid by 2050 Motors in increments of $25,800 on August 20, 2013 and $60,200 on December 4, 2013.
6. LICENSE AGREEMENT
In 2012 and 2013, the Company made a total payment of $50,000 and signed an exclusive license agreement with Aoxin to import, assemble and manufacture the advanced carbon fiber electric vehicle, the e-Go EV model. The cost of this license agreement has been recognized as a long-term asset and is evaluated, by management, for impairment losses at each reporting period.
7. SHORT-TERM ADVANCES
On June 30, 2014, the Company borrowed $50,000 from a shareholder. The loan bears 12% interest. The entire amount plus interest was fully paid on July 25, 2014.
On August 29, 2014 and September 30, 2014, the Company issued two loans for a total amount of $100,000 due to a shareholder. The loans bear 12% interest and mature on February 28, 2015 and March 30, 2015, respectively. Under a loan addendum, the maturity of the loans have been extended until December 31, 2016. As of December 31, 2015 and 2014, the unpaid principal balance of the loans is $66,500 and $100,763 and the accrued interest is $4,980 and $3,550, respectively.
| F-11 |
2050 Motors, Inc.
Notes To Financial Statements
7. SHORT-TERM ADVANCES (Continued)
During the year ended December 31, 2013, a third party advanced funds to the Company for the amount of $40,067. The advance is due upon demand and bears no interest. As of December 31, 2015 and December 31, 2014, the outstanding balance due to this third party was $0, and $763, respectively.
8. COMMITMENTS AND CONTINGENCIES
In November 2013, the Company signed a new facility lease. The monthly lease amount was $2,400. The lease term commenced on December 15, 2013 and terminated on December 31, 2015. The lease was continued on a month to month basis and was terminated on February 29, 2016.
Effective September 16, 2015, the Company renewed its residential lease agreement in California for its traveling consultants. Effective September 2015, the Company extended the lease agreement for one more year with a new monthly amount of $2,300. The lease expires on September 15, 2016.
Effective March 1, 2014, the Company signed a four thousand square feet of industrial space in North Las Vegas. The term of the lease is for three years and cost $2,200 per month. The lease expires on April 30, 2017.
In November 2014, the Company signed a one year lease agreement for a storage facility. The Company prepaid the entire lease amount with 10,000 shares of Company’s common stock for an amount of approximately $13,000. The lease terminated on November 11, 2015 and was not extended.
Rent expense amounted to $93,103 and $68,711 for the years ended December 31, 2015 and 2014, respectively.
The minimum aggregate payments due under these leases are as follows : Years ending December:
| 2016 | 44,800 | |||
| 2017 | 8,800 | |||
| $ | 53,600 |
According to the license agreement signed between the Company and Aoxin, in order to maintain exclusive rights for the United States (US), the Company is required to purchase and sell certain amount of e-Go EV model vehicles per year for a certain period of time starting from the completion of the requirements established by the United States Department of Transportation’s protocols for the e-Go EV model. The table below demonstrates the required amount of vehicles that the company needs to sell per year.
| First year | 2,000 | |||
| Second year | 6,000 | |||
| Third year | 12,000 | |||
| Fourth year | 24,000 | |||
| Fifth year | 48,000 | |||
| 92,000 |
| F-12 |
2050 Motors, Inc.
Notes To Financial Statements
8. COMMITMENTS AND CONTINGENCIES (Continued)
As part of the license agreement, the Company is committed to pay expenses related to any required airbag testing procedures. The cost of these airbags could be as little as $500,000 or as much as $2 million.
The Company may from time to time, become a party to various legal proceedings, arising in the ordinary course of business.The Company investigates these claims as they arise. Management does not believe, based on current knowledge, that there were any such claims outstanding as of December 31, 2015 and 2014.
9. INCOME TAXES
The Company did not file its income tax returns for fiscal years 2012 through 2015. Management believes that it should not have any material impact on the Company’s financials because the Company did not have any tax liabilities due to net loss incurred for these years.
Based on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at December 31, 2015 and 2014 will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at December 31, 2015 and 2014. At December 31, 2015 and 2014, the Company had federal net operating loss carry-forwards of approximately $1,775,000 and $1,047,000, respectively, expiring beginning in 2032.
Deferred tax assets consist of the following components:
| December 31, 2015 | December 31, 2014 | |||||||
| Net loss carryforward | $ | 500,000 | $ | 290,000 | ||||
| Valuation allowance | (500,000 | ) | (290,000 | ) | ||||
| Total deferred tax assets | $ | - | $ | - | ||||
| F-13 |
2050 Motors, Inc.
Notes To Financial Statements
10. EQUITY
During the year ended December 31, 2015, the Company issued 85,713 shares of Company’s common stock for $0.35 per share for a total cash amount of $30,000.
During the year ended December 31, 2015, the Company issued 225,000 shares of Company’s common stock for $0.215 per share for a total of $48,375 of services rendered to the Company.
| F-14 |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
Not Applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.
The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our chief executive officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that there were weaknesses in our internal controls over Financial reporting as of December 31, 2015 and they were therefore not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The weaknesses in our controls and procedure were failure to timely file tax returns, lack of formal documents such as invoices and consulting agreements and lack of evidence for proper approval and review of disbursements. Management does not believe that any of these weaknesses materially affected the results and accuracy of its financial statements. However, in view of this discovery of such weaknesses, management has begun a review to improve them.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of the small business issuer’s internal control over financial reporting is as of the year ended December 31, 2015. We believe that internal controls over financial reporting as set forth above shows some weaknesses and are not effective. We have identified certain weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
On May 2, 2014, in accordance with the Reorganization the shareholders of 2050 Motors became the owners of approximately 82% of the issued and outstanding common stock of the Company. As a result of the Reorganization, we acquired the operations and assets of 2050 Motors as described herein and a new Chief Financial Officer, accounting personnel and new internal control procedures.
| 14 |
MANAGEMENT’S REMEDIATION INITIATIVES.
Subsequent to the end of the period covered by this report, and in light of the weakness described above, management is in the process of designing and implementing improvements in its internal control over financial reporting and we currently plan tom hire an independent third party consultant to assist in identifying and determining the appropriate accounting procedures and controls to implement.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There are no family relationships among any of the officers and directors.
| Name | Age | Position(s) | ||
| Michael Hu | 61 | President, Chief Financial Officer and Director | ||
| Bernd Schaefers | 73 | Secretary and Director | ||
| Mark R. Edwards, Ph.D | 67 | Director |
Michael Hu was born in China. Michael received advanced educational classes and upon release he achieved a Degree in Metallurgical Engineering from Tongji University in Shanghai, China. Mr. Hu traveled to the United States in 1986 to continue his education and became a US citizen in 2000. Michael has devoted his adult life to increasing friendly relationships between the United States and China. He has concentrated categorically on projects that are Earth friendly to create a better environment for the world. In the 1990s, he assisted and invested in a photo-voltaic cell manufacturing facility that today produces the most advanced flexible photo-voltaic cells in the world with manufacturing facilities both in the United States and China. See http://www.xunlight.com.
Mr. Hu has been instrumental in developing advanced lubrication products to increase the efficiency of all types of machinery. Michael coordinated an Agreement in the late 1990s to export American made lubricants to China and also coordinated a business to import electric bicycles to the United States during this period. During the past 15 years, Michael has concentrated his experience, expertise and associations in China and other countries to promote technologies for environmental purposes. Michael generously donates his time and efforts to this end for several companies with no compensation. Some of his efforts in the late 1990s and 2000s have led to the development of advanced lubrication for the US military. During the past 5 years, Mr. Hu has devoted much of his time to advanced electric vehicles designed and manufactured in Italy and China. Michael formed 2050 Motors, Inc., a company to import to the United States the most advanced automobile ever built, with a complete carbon fiber body assembled over an aluminum space age frame. The car is all-electric and powered by advanced lithium ion batteries.
Bernd Schaefers is a veteran self-made businessman with over 40 years of work in the media industry, thereof over 20 years in the advertising and marketing sector. Mr. Schaefers founded one of the most successful advertising production companies, Interteam Productions, in the 1970s with offices in Germany, Switzerland, France and Brazil. His client list included Lufthansa, Shell Oil, Polaroid, Reynolds, Audi and Volkswagen. He worked directly with Ferdinand Piech, now Chairman of Volkswagen, on the launch of the ‘Audi 5000’ in the United States. Mr. Schaefers was for many years co-owner of the largest movie production and distribution companies in Germany, ‘Constantin Films’, with internationally successful movies like “The Never-Ending Story”, an all-time children favorite, “The Name of the Rose”, with Sean Connery, the James Bond movie “Never Say Never Again”, also with Sean Connery, as the German distribution and financing partner, among many other movies. In parallel, Bernd Schaefers has over 30 years of involvement in renewable energy. Bernd has funded Research and Development projects with Idaho National Laboratories (INL) for CO 2 recycling, catalytic conversion of syn-gas to higher alcohols and natural gas liquefaction technologies. Mr. Schaefers has for many years been involved in the commercialization of algae production and has provided matching funds for Cal Poly’s ‘Micro-Algae Photo- Bioreactor’ program with Prof. Ilhamil Yildiz in San Luis Obispo. Mr. Schaefers was a founding member of the 110 MMGY ‘American Ethanol’ plant in Santa Maria, California, and initiator of the electrification of agricultural machinery and the creation of ‘Emission Reduction Credits’ in Santa Barbara County, California. For the past six (6) years, Bernd Schaefers has been working closely with national and international companies in developing and investing in the DHA Omega-3 Algae Oil Health Products and Alternative Fuel Algae Oil. Mr. Schaefers traveled to Siberian Russia in early 2012 to assess technology for producing fuel from recycled materials and are now engaged in developing a pyrolysis business extracting oil from over 60 million used automobile tires utilizing Russian technology in the State of Kansas. They intend to expand the operations to include algae sequestration of CO2.
| 15 |
Mark R. Edwards, Ph.D. is a Professor of Strategic Marketing and Sustainability at the Morrison School of Agribusiness and Resource Management, Arizona State University Polytechnic. Mark graduated from the U.S. Naval Academy with a BS in mechanical engineering, oceanography and meteorology. He earned an MBA and PhD in marketing and consumer behavior and has taught strategic marketing, sustainability, leadership and entrepreneurship at Arizona State University since 1978. Mark has published over 100 articles that span business and science disciplines, as well as 24 books. His industrial experience includes service as a Director for The Greyhound/Armour Corporation, then 27th among the Fortune 500. He also served as marketing director for the Pritikin Longevity Research Institute, where he helped develop the Pritikin diet and lifestyle Program and the Pritikin line of diet and nutritional foods. He also served as marketing director for several hospital lifestyle programs.
Mr. Edwards’ teaching has focused on adding value through sustainability, marketing, customer relationships, organizational leadership and entrepreneurship. His recent work focuses on resolving world hunger and sustainable energy with green solutions. He has taught several interdisciplinary courses in engineering, psychology and sustainable world future. He is well known internationally as an executive trainer, author and innovator of metrics that help people to learn and develop faster, to take actions to improve performance and to grow human capital. His unusual measurement innovations appear in numerous college text books on marketing, management, leadership, talent assessment and executive development as well as Business Week, The Wall Street Journal, Forbes, Financial Times and Fortune Magazine.
Mr. Edwards’ award winning Green Algae Strategy Series focuses on sustainable and affordable food and energy, (SAFE) production. His books are used in colleges, universities and institutes in over 26 countries for courses in biology, botany, biotechnology, environment, sustainability, energy engineering, world future and global hunger. Green Algae Strategy won the 2009 Independent Publisher Gold Medal for “Best Science Book.” Mr. Edwards believes the message of SAFE production is so important that he enables free color PDF downloads of his books for students, faculty and food and energy policy leaders at www.AlgaeCompetition.com. His books are also available on Amazon.com and other retailers.
Term of Office
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified or until removed from office in accordance with our bylaws. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Board Committees
Audit Committee
We do not have a standing audit committee of the Board of Directors. Management has determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the Board of Directors or employed as an officer based on management’s belief that the cost of obtaining the services of a person who meets the criteria for a financial expert under Item 401(e) of Regulation S-B is beyond its limited financial resources and the financial skills of such an expert are simply not required or necessary for us to maintain effective internal controls and procedures for financial reporting in light of the limited scope and simplicity of accounting issues raised in its financial statements at this stage of its development.
Code of Ethics
To date, we have not adopted a Code of Ethics applicable to our principal executive officer and principal financial officer because the Company has no meaningful operations. The Company does not believe that a formal written code of ethics is necessary at this time. We expect that the Company will adopt a code of ethics if and when the Company successfully completes a business combination that results in the acquisition of an on-going business and thereby commences operations.
Our directors and officers devote time to our affairs on an “as needed” basis, but less than 10 hours per month. As a result, the actual amount of time that they will devote to our affairs is unknown and is likely to vary substantially from month to month. Our directors will serve until the next annual meeting of shareholders or until their successors are duly elected and have qualified. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement or understanding between any person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect directors to our board. There are also no arrangements, agreements or understandings between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs. Our Board of Directors does not have any committees at this time.
| 16 |
Indemnification of Executive Officers and Directors
Our Articles of Incorporation and by-laws provide for indemnification of directors and officers to the fullest extent permitted by the California General Corporation Law (the “CGCL”). Section 317 of the CGCL provides that any director or officer of a California corporation may be indemnified against judgments, penalties, fines, settlements and reasonable expenses actually incurred by him in connection with or in defending any action, suit or proceeding in which he is a party by reason of his position, so long as it shall be determined that he conducted himself in good faith and that he reasonably believed that his conduct was in the corporation’s best interest and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. If a director or officer is wholly successful, on the merits or otherwise, in connection with such proceeding, such indemnification is mandatory.
We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933.
Currently we do not maintain any directors’ and officers’ liability insurance covering our directors and officers against expenses and liabilities arising from certain actions to which they may become subject by reason of having served in such role.
At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required under California law. We are not aware of any threatened litigation or preceding that might result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires officers, directors and persons who own more than 10% of a registered class of our equity securities of a company that has a class of common stock registered under the Exchange Act to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish us with copies of all forms filed pursuant to Section 16(a).
Based solely on a review of the copies of such reports furnished to us, we believe that our officers and directors and our principal stockholder who are required to file reports pursuant to Section 16(a) of the Exchange Act complied with all of the Section 16(a) filing requirements applicable to them with respect to the last fiscal year, except that our officers and directors and shareholder failed to file a Form 3 after we registered our common stock under Section 12(g) of the Securities Exchange timely. All of the Form 3’s have now been filed and the Company has taken action to insure that all future Section 16(a) reports are timely filed.
Item 11. Executive Compensation.
None of our directors or executive officers received any cash or non-cash compensation from us during the past three fiscal years or had outstanding equity awards at year end. We have not entered into employment agreements with our executive officers and their compensation, if any, will be determined at the discretion of our Board of Directors.
We do not offer retirement benefit plans to our executive officers, nor have we entered into any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to a named executive officer at, or in connection with, the resignation, retirement or other termination of a named executive officer, or a change in control of the company or a change in the named executive officer’s responsibilities following a change in control. We do not have any standard arrangement for compensation of our directors for any services provided as director, including services for committee participation or for special assignments.
The Company does not have a compensation committee. Given the nature of the Company’s business, its limited stockholder base and the current composition of management, the board of directors does not believe that the Company requires a compensation committee at this time.
The following table summarizes all compensation recorded by us in 2015, 2014 and 2013 for our principal executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000, and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at December 31, 2015. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 2 of the Notes to our Financial Statements appearing later in this report.
| 17 |
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary($) | Bonus($) | Stock Awards($) | Option Awards($) | Non-Equity Incentive Plan Compensation($) | Nonqualified Deferred Compensation($) | All Other Compensation($) | Total($) | |||||||||||||||||||||||||
| Michael Hu (1) | 2015 | 0 | 48,000 | 0 | 0 | 0 | 0 | 0 | 48,000 | |||||||||||||||||||||||||
| Michael Hu | 2014 | 0 | 50,440 | 0 | 0 | 0 | 0 | 0 | 50,440 | |||||||||||||||||||||||||
| Alfred Booth (2) | 2014 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 2013 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||
| (1) | Appointed President and Chief Financial Officer and Director on May 2, 2014. |
| (2) | Mr. Booth has been the President and CEO for more than 3 years. On May 2, 2014, Mr. Booth resigned as an officer and Director of the Company. |
Employment Agreement
The Company has no Employment Agreement with any of its officers or directors.
Stock Option Plan
We do not have a stock option plan although we may adopt one or more such plans in the future.
Employee Pension, Profit Sharing or other Retirement Plans
We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of the closing of the acquisition of 2050 Motors, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than five percent (5%) of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.
| Title of Class | Name and Address of Beneficial Owner (2) | Amount and Nature of Beneficial Ownership | Percent of Class (1) | |||||||
| Common Stock | Michael Hu, Pres., CFO & Dir. | 9,060,000 | 27.1 | % | ||||||
| Common Stock | Bernd Schaefers, Sec. & Dir | 1,250,000 | 3.7 | % | ||||||
| Common Stock | Mark R. Edwards, Ph.D., Dir. | 25,000 | * | |||||||
| Common Stock | Jayce Castell | 1,794,360 | 5.3 | |||||||
| Common Stock | All Directors and Officers as a Group (3 persons) | 10,335,000 | 33.83 | % | ||||||
| * | Less than 1% |
| (1) | Unless otherwise indicated, based on 33,748,599 shares of common stock issued and outstanding following the acquisition of 2050 Motors. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person. |
| (2) | Unless indicated otherwise, the address of the shareholder is c/o 2050 Motors, Inc., 3420 Bunkerhill Dr., No. Las Vegas, NV 89032. |
We are not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.
There are no current arrangements which will result in a change in control.
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Item 13. Certain Relationships and Related Transactions and Director Independence.
Related Party Transactions
The following information summarizes transactions we have either engaged in for the past three fiscal years, or propose to engage in, involving our executive officers, directors, more than 5% shareholders, or immediate family members of these persons. These transactions were negotiated between related parties without “arm’s length” bargaining and, as a result, the terms of these transactions may be different than transactions negotiated between unrelated persons.
We had utilized the mailing address of Alfred E. Booth, Jr., our former President, from January, 2012, to May 2, 2014, at no cost.
Except as set forth above, there have been no related party transactions, or any other transactions or relationships required to be disclosed.
Director Independence
Our Common Stock is not quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our board of directors be independent and therefore, the Company is not subject to any director independence requirements. Under NASDAQ Rule 5605(a)(2)(A), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Under such definition our three officers and directors would not be considered an independent director.
Item 14. Principal Accountant Fees and Services.
During 2014 and 2013, Farber Hass Hurley, LLP, the Company’s independent auditors, have billed for their services as set forth below. In addition, fees and services related to the audit of the financial statements of the Company for the period ended December 31, 2014, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2014.
| Year ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Audit Fees | $ | 29,600 | $ | 25,000 | ||||
| Audit-Related Fees | $ | -0- | $ | -0- | ||||
| Tax Fees | $ | -0- | $ | -0- | ||||
| All Other Fees | $ | -0- | $ | -0- | ||||
Pre-Approval Policy
Our Board as a whole pre-approves all services provided by Farber Hass Hurley, LLP. For any non-audit or non-audit related services, the Board must conclude that such services are compatible with the independence as our auditors.
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Item 15. Exhibits; Financial Statement Schedules.
| Exhibit No. | Description | |
| 2.1* | Plan and Agreement of Reorganization dated as of January 30, 2014, among the Company, 2050 Motors and the 2050 Motors Shareholders. | |
| 3.1** | Articles of Incorporation | |
| 3.2** | Articles of amendment | |
| 3.3** | Amended and Restated By-laws | |
| 10.1** | Subordinated Convertible Promissory Note between the Company and Alfred E. Booth, Jr. | |
| 31.1*** | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 31.2*** | Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 32.1*** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Incorporated by reference to the Company’s Form 8-K as filed with the SEC on February 5, 2014. |
| ** | Incorporated by reference to the Company’s Registration Statement on Form 10 as filed with the SEC on October 30, 2012. |
| *** | Filed herewith |
FORM 8-K:
Filed October 16, 2015
Filed November 20, 2015
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In accordance with the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 6th day of April, 2016.
| 2050 MOTORS, INC. | ||
| By: | /s/ Michael Hu | |
| Michael Hu, President (Principal Executive Officer) | ||
In accordance with the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the dates stated.
| /s/ Michael Hu | Dated: April 6, 2016 | |
| Michael Hu | ||
| President (Principal Executive Officer) and Director | ||
| /s/ Bernd Schaefers | Dated: April 6, 2016 | |
| Bernd Schaefers | ||
| Secretary and Director | ||
| /s/ Mark R. Edwards | Dated: April 6, 2016 | |
| Mark R. Edwards, Ph.D | ||
| Director |
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 2.1* | Plan and Agreement of Reorganization dated as of January 30, 2014, among the Company, 2050 Motors and the 2050 Motors Shareholders. | |
| 3.1** | Articles of Incorporation | |
| 3.2** | Articles of amendment | |
| 3.3** | Amended and Restated By-laws | |
| 10.1** | Subordinated Convertible Promissory Note between the Company and Alfred E. Booth, Jr. | |
| 31.1*** | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 31.2*** | Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as Amended. | |
| 32.1*** | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Incorporated by reference to the Company’s Form 8-K as filed with the SEC on February 5, 2014. |
| ** | Incorporated by reference to the Company’s Registration Statement on Form 10 as filed with the SEC on October 30, 2012. |
| *** | Filed herewith |
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