UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACTOF 1934
For the transition period from__________ to __________
Commission file number: 000-54694
WORLD MOTO, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
77-0716386 |
(State or other jurisdiction |
(IRS Employer Identification No.) |
of Incorporation or organization) |
|
131 Thailand Science Park INC-1 #214
Phahonyothin
Road Klong1,
Klong Luang
Pathumthani
12120
Thailand
(Address of principal executive
offices and zip code)
(646) 840-8781
(Registrants telephone number,
including area code)
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.
[X] Yes
[ ] 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 (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act.
[ ] Large accelerated filer |
[ ] Accelerated filer |
[ ] Non-accelerated filer |
[X] Smaller Reporting company |
|
|
|
|
|
|
(Do not check if smaller reporting company) |
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
[ ]
Yes [X] No
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.
Class |
Outstanding at August 19, 2014 |
Common stock, $.0001 par value |
378,033,149
|
World Moto, Inc.
Form 10-Q/A
For the Three Months Ended June 30, 2014
INDEX
EXPLANATORY NOTE
This Amendment No. 1 to World Moto Inc.s (the Company)
Quarterly Report on Form 10-Q/A (this "Amendment") is being filed in response to
comments from the staff of the Securities and Exchange Commission (the SEC) to
the Company's Quarterly Report on Form 10-Q filed on August 19, 2014 (the
"Original Quarterly Report"). The consolidated financial statements have been
restated to correct for certain errors related to the Companys recognition of
intangible assets and share-based compensation.
Except for the changes made in connection with the SECs
comments, no other changes have been made to the Original Quarterly Report. The
Original Quarterly Report continues to speak as of the date of the Original
Quarterly Report, and we have not updated any other disclosures contained
therein to reflect any events which occurred at a date subsequent to the filing
of the Original Quarterly Report. Currently dated certifications from the
Companys Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer have been included as exhibits to this Amendment.
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Reference is made in particular to the
description of our plans and objectives for future operations, assumptions
underlying such plans and objectives, and other forward-looking statements
included in this report. Such statements may be identified by the use of
forward-looking terminology such as may, will, expect, believe,
estimate, anticipate, intend, continue, or similar terms, variations of
such terms or the negative of such terms. Such statements are based on
managements current expectations and are subject to a number of factors and
uncertainties, which could cause actual results to differ materially from those
described in the forward-looking statements. Such statements address future
events and conditions concerning, among others, capital expenditures, earnings,
litigation, regulatory matters, liquidity and capital resources, and accounting
matters. Actual results in each case could differ materially from those
anticipated in such statements by reason of factors such as future economic
conditions, changes in consumer demand, legislative, regulatory and competitive
developments in markets in which we operate, results of litigation, and other
circumstances affecting anticipated revenues and costs, and the risk factors set
forth in our Annual Report on Form 10-K filed on April 15, 2014
As used in this Form 10-Q, we, us, and our refer to
World Moto, Inc., which is also sometimes referred to as the Company.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING
STATEMENTS
The forward-looking statements made in this report on Form
10-Q relate only to events or information as of the date on which the statements
are made in this report on Form 10-Q. Except as required by law, we undertake no
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events, or otherwise, after the date on
which the statements are made or to reflect the occurrence of unanticipated
events. You should read this report and the documents that we reference in this
report, including documents referenced by incorporation, completely and with the
understanding that our actual future results may be materially different from
what we expect or hope.
World Moto, Inc.
Consolidated Balance Sheets
(Unaudited)
|
|
June 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(Restated) |
|
|
(Restated) |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
54,576 |
|
$ |
179,132
|
|
Prepaid expenses and other
current assets |
|
23,951 |
|
|
17,424 |
|
Inventory |
|
23,123 |
|
|
- |
|
Total current assets |
|
101,650 |
|
|
196,556 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
27,899 |
|
|
31,273 |
|
Deferred financing cost, net
of amortization |
|
65,281 |
|
|
- |
|
Other assets |
|
11,136 |
|
|
1,704 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
205,966 |
|
$ |
229,533 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable and accrued
expenses |
$ |
112,131 |
|
$ |
27,482 |
|
Unearned
revenues |
|
59,528 |
|
|
35,000 |
|
Convertible note payable, net of
discount of 464,892 and 0, respectively |
|
78,587 |
|
|
- |
|
Derivative
liability |
|
499,767 |
|
|
- |
|
Stock payable |
|
46,584 |
|
|
- |
|
Total current
liabilities |
|
796,597 |
|
|
62,482 |
|
|
|
|
|
|
|
|
Stockholders equity
(deficit): |
|
|
|
|
|
|
Preferred
stock, $0.0001 par value; 50,000,000 shares
authorized; no
shares issued and outstanding |
|
- |
|
|
- |
|
Common
stock, $0.0001 par value, 500,000,000 shares
authorized; 378,033,149
and 378,033,149 shares issued and outstanding respectively |
|
37,802 |
|
|
37,802 |
|
Additional paid-in capital |
|
1,332,431 |
|
|
1,332,431 |
|
Accumulated
other comprehensive income (loss) |
|
(1,742 |
)
|
|
1,899 |
|
Accumulated deficit |
|
(1,959,122 |
) |
|
(1,205,081 |
) |
Total
stockholders' equity (deficit) |
|
(590,631 |
)
|
|
167,051 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) |
$ |
205,966 |
|
$ |
229,533 |
|
The accompanying notes are an integral part of these financial
statements.
World Moto, Inc.
Consolidated Statements of
Operations and Comprehensive Loss
(Unaudited)
|
|
For
the three months ended |
|
|
For
the six months ended |
|
|
|
June
30, |
|
|
June
30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
|
(Restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research & development |
|
126,590 |
|
|
- |
|
|
247,696 |
|
|
- |
|
General and administrative |
|
233,723 |
|
|
186,670 |
|
|
372,734 |
|
|
384,784 |
|
Total operating expense |
|
360,313 |
|
|
186,670 |
|
|
620,430 |
|
|
384,784 |
|
Loss from operations |
|
360,313 |
|
|
186,670 |
|
|
620,430 |
|
|
384,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) and expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
86,341 |
|
|
- |
|
|
86,737 |
|
|
- |
|
Interest income |
|
- |
|
|
(273 |
) |
|
(6 |
) |
|
(4,546 |
) |
Foreign currency transaction loss |
|
74 |
|
|
- |
|
|
(182 |
) |
|
- |
|
Change in fair value of derivative
liability |
|
47,062 |
|
|
- |
|
|
47,062 |
|
|
- |
|
Total other (income) expense |
|
133,477 |
|
|
273 |
|
|
133,611 |
|
|
4,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(493,790 |
) |
$ |
(186,397 |
) |
$ |
(754,041 |
) |
$ |
(380,238 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) |
|
(769 |
) |
|
2,635 |
|
|
(1,742 |
) |
|
2,635 |
|
Comprehensive loss |
$ |
(494,559 |
) |
$ |
(183,762 |
) |
$ |
(755,783 |
) |
$ |
(377,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding -
basic and diluted |
|
378,033,149 |
|
|
378,033,149 |
|
|
378,033,149 |
|
|
377,809,299 |
|
The accompanying notes are an integral part of these financial
statements.
World Moto, Inc.
Consolidated Statements of Cash
Flows
(Unaudited)
|
|
For the six months ended, |
|
|
|
June
30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(Restated) |
|
|
(Restated) |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net loss |
$ |
(754,041 |
) |
$ |
(380,238 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
3,861 |
|
|
87 |
|
Amortization of debt discount and deferred financing
cost |
|
70,095 |
|
|
- |
|
Change in fair value of derivative liability |
|
47,062 |
|
|
- |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Inventory |
|
(23,123 |
) |
|
|
|
Prepaid expenses and other
current assets |
|
(15,959 |
) |
|
(19,897 |
) |
Unearned revenues |
|
24,528 |
|
|
- |
|
Accounts payable and accrued
expenses |
|
84,649 |
|
|
11,420 |
|
Net cash used in operating
activities |
|
(562,928 |
) |
|
(388,628 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchases of property and equipment |
|
(487 |
) |
|
(3,322 |
) |
Refundable deposit paid |
|
- |
|
|
(1,759 |
) |
Net cash used in
investing activities |
|
(487 |
) |
|
(5,081 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
Net proceeds from convertible notes payable |
|
442,500 |
|
|
- |
|
Proceeds from shares issued for cash |
|
- |
|
|
1,000,000 |
|
Net cash provided by financing
activities |
|
442,500 |
|
|
1,000,000 |
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY TRANSLATIONS |
|
(3,641 |
) |
|
2,635 |
|
|
|
|
|
|
|
|
Net increase (decrease) |
|
(124,556 |
) |
|
608,926 |
|
Cash at beginning of period |
|
179,132 |
|
|
75,774 |
|
|
|
|
|
|
|
|
Cash at end of period |
$ |
54,576 |
|
$ |
684,700 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOWS
INFORMATION: |
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
Income tax |
$ |
- |
|
$ |
- |
|
Interest |
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
Debt discount |
$ |
452,702 |
|
$ |
- |
|
The accompanying notes are an integral part of these financial
statements.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
World Moto, Inc. (the Company) was incorporated in the State
of Nevada on March 24, 2008 under the name Net Profits Ten Inc. The original
purpose of the Company was to market and distribute user-friendly interactive
yearbook software for the military. The Company was reclassified as a shell
company until the completion of its acquisition of the World Moto Assets, which
was consummated on November 14, 2012, and discussed in Note 3. Effective
November 12, 2012, the Company amended its Articles of Incorporation to change
its name from Net Profits Ten Inc. to World Moto, Inc.
On January 30, 2013, World Moto, Inc. established two wholly
owned subsidiaries that were incorporated in the State of Nevada. World Moto
Technologies, Inc. and World Moto Holdings, Inc. were both established, but have
no activity to report to date. On February 4, 2013, World Moto Technologies Ltd,
a wholly owned subsidiary of the Company, was organized under the laws of the
Kingdom of Thailand and the name of this company was later changed to World Moto
Co., Ltd. World Moto Co., Ltd. is owned in its entirety by World Moto, Inc.,
World Moto Technologies, Inc. and World Moto Holdings, Inc. and it is an
operating entity of the Company in Thailand for the purposes of research and
development in the Southeast Asia region.
Basis of Presentation
The unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information in accordance with Securities
and Exchange Commission ("SEC") Regulation S-X rule 8-03 and should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's last Annual Report filed with the SEC on Form 10-K for the year
ended December 31, 2013. In the opinion of management, the unaudited
consolidated financial statements have been prepared on the same basis as the
annual financial statements and reflect all adjustments, which include normal
recurring adjustments, necessary to present fairly the financial position as of
June 30, 2014 and the results of operations and cash flows for the periods then
ended. The financial data and other information disclosed in these notes to the
interim consolidated financial statements related to the period are unaudited.
The results for the three-month period ended June 30, 2014, are not necessarily
indicative of the results to be expected for any subsequent quarters or for the
entire year ending December 31, 2014. Notes to the unaudited interim
consolidated financial statements that would substantially duplicate the
disclosures contained in the audited financial statements for the most recent
fiscal year as reported in the Form 10-K have been omitted.
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 at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased
with a maturity of three months or less to be cash equivalents to the extent the
funds are not being held for investment purposes.
Foreign Currency Translation
The functional currency of our subsidiary is the Thai Baht.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective periods.
For financial reporting purposes, the financial statements of the subsidiary are translated into the Company’s reporting currency, United States Dollars (“USD”). Asset and liability accounts are translated using the closing
exchange rate in effect at the balance sheet date, equity account and dividend are translated using historical exchange rates and income and expense accounts are translated using the average exchange rate prevailing during the reporting period.
Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholder’s equity (deficit).
Long-Lived Assets
Property and equipment
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the
related assets using the straight-line method of 3 years for financial statement purposes.
Software
The Company capitalizes software acquisition and development costs incurred during the software application development stage. The software application development stage is characterized by software design and configuration activities, coding,
testing and installation. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software acquisition and
development costs, once placed in service, are amortized using the straight-line method over the estimated useful life of 3 to 10 years. Capitalized software acquisition and development costs subject to amortization are carried at cost less
accumulated amortization.
Patents
Patents are initially measured based on their fair values. Patents are being amortized on the straight-line method over the estimated useful life of 10 to 20 years.
Management evaluates the recoverability of the Company’s property and equipment including patent development costs when events or circumstances indicate a potential impairment exists. The Company considers certain events and circumstances in
determining whether the carrying value of identifiable property and equipment may not be recoverable including, but not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the
assets; significant negative industry or economic trends; and changes in the business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these
assets. If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Income Taxes
The Company uses the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and
liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not
that the deferred tax asset will be fully realized. A valuation allowance, if necessary, is provided against deferred tax assets, based upon management’s assessment as to their realization.
Fair Value Measurement
The Company values its derivative instruments under FASB ASC 820 which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk and the risks inherent in the inputs
to the valuation technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company classifies fair value
balances based on the observability of those inputs. ASC 820 establishes a fair
value hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date. Active markets are
those in which transactions for the asset or liability occur in sufficient
frequency and volume to provide pricing information on an ongoing basis. Level 1
primarily consists of financial instruments such as exchange-traded derivatives,
marketable securities and listed equities.
Level 3 Pricing inputs include significant inputs that are
generally less observable from objective sources. These inputs may be used with
internally developed methodologies that result in managements best estimate of
fair value. The Company uses Level 3 to value its derivative instruments.
The following table sets forth by level with the fair value
hierarchy the Companys financial assets and liabilities measured at fair value
on June 30, 2014.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 4 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability |
$ |
- |
|
$ |
-
|
|
$ |
499,767 |
|
$ |
499,767 |
|
Revenue Recognition
The Company recognizes revenue only when all of the following
criteria have been met:
- Persuasive evidence of an arrangement exists;
- Delivery has occurred or services have been rendered;
- The fee for the arrangement is fixed or determinable; and
- Collectibility is reasonably assured.
Persuasive Evidence of an Arrangement The Company documents
all terms of an arrangement in a written contract signed by the customer prior
to recognizing revenue.
Delivery Has Occurred or Services Have Been Performed The
Company performs all services or delivers all products prior to recognizing
revenue. Monthly services are considered to be performed ratably over the term
of the arrangement. Professional consulting services are considered to be
performed when the services are complete. Equipment is considered delivered upon
delivery to a customers designated location.
The Fee for the Arrangement Is Fixed or Determinable Prior to
recognizing revenue, a customers fee is either fixed or determinable under the
terms of the written contract. Fees for most monthly services, professional
consulting services, and equipment sales and rentals are fixed under the terms
of the written contract. Fees for certain monthly services, including certain
portions of networking, storage, and content distribution and caching services,
are variable based on an objectively determinable factor such as usage. Those
factors are included in the written contract such that the customers fee is
determinable. The customers fee is negotiated at the outset of the arrangement
and is not subject to refund or adjustment during the initial term of the
arrangement.
Collectibility Is Reasonably Assured The Company determines
that collectibility is reasonably assured prior to recognizing revenue.
Collectibility is assessed on a customer by customer basis based on criteria
outlined by management. New customers are subject to a credit review process,
which evaluates the customers financial position and ultimately its ability to
pay. The Company does not enter into arrangements unless collectibility is
reasonably assured at the outset. Existing customers are subject to ongoing
credit evaluations based on payment history and other factors. If it is
determined during the arrangement that collectibility is not reasonably assured,
revenue is recognized on a cash basis.
Franchise Fee Revenue
Revenues from licensees include a royalty based on a percent of
sales, and may include initial fees. Continuing royalties are recognized in the
period earned. Initial fees are recognized upon granting of a new franchise
term, which is when the Company has performed substantially all initial services
required by the franchise arrangement and once the franchisee commences
operations. Additionally, the first twelve months of operations are royalty free
for the franchisee.
Stock-based Compensation
The Company expenses the cost of employee services received in
exchange for an award of equity instruments based on the grant date fair value
of such instruments over the service period.
Equity instruments issued to parties other than employees for
acquiring goods or services are recorded at either the fair value of the
consideration received or the fair value of the instruments issued in exchange
for such services, whichever is more reliably measurable.
Subsequent Events
The Company evaluated subsequent events through the date when
financial statements are issued for disclosure consideration.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU 2014-10, Development Stage
Entities (Topic 915): Elimination of Certain Financial Reporting Requirements.
ASU 2014-10 eliminates the distinction of a development stage entity and certain
related disclosure requirements, including the elimination of inception-to-date
information on the statements of operations, cash flows and stockholders
equity. The amendments in ASU 2014-10 will be effective prospectively for annual
reporting periods beginning after December 15, 2014, and interim periods within
those annual periods, however early adoption is permitted. The Company evaluated
and adopted ASU 2014-10 for the reporting period ended June 30, 2014.
NOTE 2 GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has an
accumulated deficit of $1,959,122 as of June 30, 2014, has limited liquidity,
and has not established a reliable source of revenues sufficient to cover
operating costs over an extended period of time. These factors raise substantial
doubt about the Companys ability to continue as a going concern.
Management anticipates that the Company will be dependent, for
the near future, on additional investment capital to fund operating expenses.
The Company intends to position itself so that it may be able to raise
additional funds through the capital markets. In light of managements efforts,
there are no assurances that the Company will be successful in this or any of
its endeavors or become financially viable and continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 3 UNEARNED REVENUES
On December 2, 2013, WM Co. Thailand entered into a Purchase
and Licensing Agreement (the PL Agreement) with Mobile Advertising Ventures
Ltd. (MAV). Pursuant to the terms of the PL Agreement, MAV will purchase 10
initial Wheelies from WM Co. Thailand at a purchase price of $35,000, and will
have an option to purchase an additional 190 Wheelies at a purchase price of
$3,500 per unit. WM Co. Thailand also grants a non-exclusive license to MAV for
the use of its software in connection with the operation of the Wheelies in
consideration for a fee based on net revenue per quarter from advertising sales
relating to the use of the Wheelies. The Company received $35,000 from MAV
before December 31, 2013 and recorded unearned revenue at the yearend.
On March 10, 2014, the Company entered into a Fleet Franchise
Agreement (the Franchise Agreement) with Mobile Advertising Ventures, Ltd.
(MAV). MAV paid the Company $24,980 for the right to utilize the Yes software
and all other trademarks of the Company, including but not limited to Yes,
World Moto and Wheelies (collectively, the Marks) in the Federal Territory
of Kuala Lumpur, Malaysia. Initial training has been completed for
the Franchisee; however, the Franchisee has not begun operations. This revenue
will be reclassified as earned when MAV completes its first sale using the Yes
software.
NOTE 4 CONVERTIBLE NOTE PAYABLE
On April 4, 2014, the Company entered into the Initial
Debentures with the Investors in the aggregate principal amount of $543,479 for
a purchase price of $500,000 (8% original issue discount). The holder is
guaranteed interest at the rate of 12% and the notes have a maturity date of
April 4, 2015. The Company is obligated to make amortization payments beginning
on the six month anniversary of the issuance date of the Debentures and
continuing monthly thereafter. The Debentures are convertible into shares of
common stock of the Company at any time at the discretion of the Investors at a
conversion price equal to the lesser of: (i) $0.10 per share or (ii) 70% of the
lowest traded price per share of the common stock during the twenty five (25)
trading days prior to the date of conversion.
For the six months ended June 30, 2014, the Company recorded a
debt discount of $452,702, as result of the embedded conversion feature being a
financial derivative, for proceeds received. The company also recorded a debt
discount of $63,482, $43,479 as result of the 8% original issue discount and
$20,000 in fees related to fees paid to the investors.
The discounts on the Debentures are amortized by the Company
through interest expense over the life of the notes. During the six months ended
June 30, 2014, the Company recorded $51,292 amortization of the debt discount on
the notes.
As summary of value changes to the notes for the period ended
from April 4, 2014 to June 30, 2014 is as follows:
Carrying Value at April 4, 2014 |
$ |
543,479
|
|
Less: repayment of principle |
|
- |
|
Less: discount related to fair value of the
embedded conversion feature |
|
(452,702 |
) |
Less: discount related to 8% original issue discount and
financing cost |
|
(63,482 |
) |
Add: Amortization of discount |
|
51,292 |
|
Carrying value at June 30, 2014 |
$ |
78,587 |
|
In connection with the sale of the Debentures, the Company
issued 520,000 shares of common stock valued at $46,584 and cash in the amount
of $37,500 to its placement agent. The fees have been recorded to deferred
financing cost. The deferred financing cost are amortized by the Company through
interest expense over the life of the notes. During the six months ended June
30, 2014, the Company recorded $18,803 amortization of the deferred financing
cost.
NOTE 5 DERIVATIVE LIABILITY
The Company has determined that the variable conversion price
under its convertible notes causes the embedded conversation feature to by a
financial derivative. The Company may not have enough authorized common stock to
settle its obligation if the note holder elects to convert the note into common
shares when the trading price is lower than a certain threshold.
The derivative instruments were valued at April 4, 2014 and at
June 30, 2014. The following assumptions were used for the valuation of the
derivative liability related to the Notes as of April 4, 2014 and June 30, 2014:
-
The underlying stock price was used as the fair value of the common stock;
-
The initial notes cash amount total $500,000 plus an 8% OID plus a
guaranteed 12% interest is converted at 70% of the lowest trading price during
25 days preceding conversion.
-
The projected volatility for each valuation period was based on the
volatility of the Company based on a 6 month average of annualized rates:
April 4, 2014: 219% and June 30, 2014: 104%
-
The note conversions effectively convert at discounts rates of 33.56% and
24.75% as of 4/41/14 and 6/30/14.
-
An event of default would occur 0% of the time, increasing 1.00% per month
to a maximum of 10%; the Maturity date is 12 months from the valuation date;
-
Capital raising events would occur annually with full resets for the Notes;
-
The Holder would redeem based on availability of alternative financing, 0%
of the time increasing 1.0% monthly to a maximum of 10%;
-
The Holder would automatically convert the note starting after 180 days and
at maturity if the registration was effective and the company was not in
default.
The fair values of the derivative liabilities related to the
Convertible notes are summarized as:
Fair value at April 4, 2014 |
$ |
452,702
|
|
Change in Notes due to issuances |
|
47,062 |
|
Fair value at June 30, 2014 |
|
499,767 |
|
NOTE 6 RESTATEMENTS
On September 22, 2014, the Company determined that the assets
acquired from World Moto in 2012 should be recorded at the transferors
historical cost basis because the Companys new shareholders obtained control of
the Company as of the acquisition date, with an overall ownership percentage of
approximately 60%. The Company also determined that the shares issued to the new
shareholders should be recorded at sellers historical cost of zero on the
assets acquired. The financial statements as of June 30, 2014 and December 31,
2013 and for six months ended June 30, 2014 and 2013 were restated by the
Company to reflect the following adjustments:
|
1. |
To remove the intangible assets initially capitalized by
the Company at fair value of common stock issued to the new
shareholders; |
|
|
|
|
2. |
To adjust the shares issued to the new shareholders for
the assets to their historical cost basis of zero; |
|
|
|
|
3. |
To remove the amortization expense previously recorded
for the intangible assets. |
The impact of the restatements on the Balance Sheet as of
December 31, 2013 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
Intangible assets |
|
191,615 |
|
|
(191,615 |
) |
|
- |
|
Total assets |
|
421,148 |
|
|
(191,615 |
) |
|
229,533 |
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital |
|
1,568,745 |
|
|
(236,314 |
) |
|
1,332,431 |
|
Accumulated deficit |
|
(1,249,780 |
) |
|
44,699 |
|
|
(1,205,081 |
) |
Total stockholders' equity |
|
358,666 |
|
|
(191,615 |
) |
|
167,051 |
|
Total liabilities and stockholders' equity
|
|
421,148 |
|
|
(191,615 |
) |
|
229,533 |
|
The impact of the restatements on the Balance Sheet as of
June 30, 2014 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
Intangible assets |
|
171,978 |
|
|
(171,978 |
) |
|
- |
|
Total assets |
|
377,944 |
|
|
(171,978 |
) |
|
205,966 |
|
|
|
|
|
|
|
|
|
|
|
Additional paid in capital |
|
1,568,745 |
|
|
(236,314 |
) |
|
1,332,431 |
|
Accumulated deficit |
|
(2,023,458 |
) |
|
64,336 |
|
|
(1,959,122 |
) |
Total stockholders' equity |
|
(418,653 |
) |
|
(171,978 |
) |
|
(590,631 |
) |
Total liabilities and stockholders' equity
|
|
377,944 |
|
|
(171,978 |
) |
|
205,966 |
|
The impact of the restatements on the Statement of
Operations for the three months ended June 30, 2013 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
General and administrative
|
|
196,543 |
|
|
(9,873 |
) |
|
186,670 |
|
Total operating expense |
|
(196,543 |
) |
|
9,873 |
|
|
(186,670 |
) |
Loss from operations |
|
(196,543 |
) |
|
9,873 |
|
|
(186,670 |
) |
Net loss |
|
(196,270 |
) |
|
9,873 |
|
|
(186,397 |
) |
Total comprehensive loss |
|
(193,635 |
) |
|
9,873 |
|
|
(183,762 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
basic and diluted |
|
(0.00 |
) |
|
|
|
|
(0.00 |
)
|
The impact of the restatements on the Statement of
Operations for the six months ended June 30, 2013 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
General and administrative
|
|
404,421 |
|
|
(19,637 |
) |
|
384,784 |
|
Total operating expense |
|
(404,421 |
) |
|
19,637 |
|
|
(384,784 |
) |
Loss from operations |
|
(404,421 |
) |
|
19,637 |
|
|
(384,784 |
) |
Net loss |
|
(399,875 |
) |
|
19,637 |
|
|
(380,238 |
) |
Total comprehensive loss |
|
(397,240 |
) |
|
19,637 |
|
|
(377,603 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
basic and diluted |
|
(0.00 |
) |
|
|
|
|
(0.00 |
)
|
The impact of the restatements on the Statements of Cash
Flows for the six months ended June 30, 2013 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
Net loss |
|
(399,875 |
) |
|
19,637 |
|
|
(380,238 |
) |
Depreciation and amortization |
|
19,724 |
|
|
(19,637 |
) |
|
87 |
|
The impact of the restatements on the Statement of
Operations for the three months ended June 30, 2014 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
General and administrative
|
|
243,596 |
|
|
(9,873 |
) |
|
233,723 |
|
Total operating expense |
|
370,186 |
|
|
(9,873 |
) |
|
360,313 |
|
Loss from operations |
|
370,186 |
|
|
(9,873 |
) |
|
360,313 |
|
Net loss |
|
(503,663 |
) |
|
9,873 |
|
|
(493,790 |
) |
Total comprehensive loss |
|
(504,432 |
) |
|
9,873 |
|
|
(494,559 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
basic and diluted |
|
(0.00 |
) |
|
|
|
|
(0.00 |
)
|
The impact of the restatements on the Statement of
Operations for the six months ended June 30, 2014 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
General and administrative
|
|
392,371 |
|
|
(19,637 |
) |
|
372,734 |
|
Total operating expense |
|
640,067 |
|
|
(19,637 |
) |
|
620,430 |
|
Loss from operations |
|
640,067 |
|
|
(19,637 |
) |
|
620,430 |
|
Net loss |
|
(773,678 |
) |
|
19,637 |
|
|
(754,041 |
) |
Total comprehensive loss |
|
(775,420 |
) |
|
19,637 |
|
|
(755,783 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share -
basic and diluted |
|
(0.00 |
) |
|
|
|
|
(0.00 |
)
|
The impact of the restatements on the Statement of Cash
Flows for the six months ended June 30, 2014 is as follows:
|
|
As originally |
|
|
|
|
|
|
|
|
|
Reported |
|
|
Change |
|
|
Restated |
|
Net loss |
|
(773,678 |
) |
|
19,637 |
|
|
(754,041 |
) |
Depreciation and amortization |
|
23,498 |
|
|
(19,637 |
) |
|
3,861 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Forward looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements.
Overview
World Moto, Inc. was incorporated on March 24, 2008, in the State of Nevada under the name Net Profits Ten Inc. On November 8, 2012, we amended our Articles of Incorporation to increase our authorized shares of common stock from 100,000,000 to
500,000,000 and our board of directors approved a stock dividend of 180 shares of common stock of the Company for each share of common stock issued and outstanding. Additionally, on November 12, 2012, we amended our Articles of Incorporation to
change our name from “Net Profits Ten Inc.” to “World Moto, Inc.”, which name change became effective on November 15, 2012, upon approval from the Financial Industry Regulatory Authority (“FINRA”).
On September 1, 2012, we entered in an Asset Purchase Agreement (“Agreement”) with World Moto (Thailand) Co., Ltd., a corporation established under the laws of the Kingdom of Thailand (“Old WM”), Chris Ziomkowski, the Chief
Technical Officer of Old WM and Paul Giles, the Chief Executive Officer of Old WM. The Agreement was consummated on November 14, 2012. We purchased from Old WM substantially all of the intellectual property and certain other specific intellectual
property assets related to Old WM’s initial product, the Moto-Meter (the “Assets”), which includes three United States patent applications, the data related to the patent applications, certain software related to the operation of
the Moto-Meter, several URLs and trade-names and associated names related to the Moto-Meter and Old WM.
On January 30, 2013, we established two wholly owned subsidiaries that were incorporated in the State of Nevada. World Moto Technologies, Inc. and World Moto Holdings, Inc. were both established, but have no activity to report to date. On February
4, 2013, World Moto Technologies Ltd. was organized under the laws of the Kingdom of Thailand. The name was later changed to World Moto Co., Ltd. (“WM Co. Thailand”). WM Co. Thailand is owned in its entirety by World Moto, Inc., World
Moto Technologies, Inc. and World Moto Holdings, Inc. and represents our operating entity for the purposes of research and development in the Southeast Asia region.
As of June 30, 2014, WM Co. Thailand had 12 employees. WM Co. Thailand has been performing extensive research and development activities since its inception related to improving the Moto-Meter design to allow for higher yields in mass production, as
well as substantial work on the Wheelies product, previously known as Circulars. Additionally, much of our time has been used in administrative tasks such as preparing its application for admission to the Thai Science Park and establishing
promotional privileges and tax exemptions through the Thailand Board of Investment.
Business Overview
Plan of Operations
We plan to establish ourselves as a company that designs, manufactures, markets and sells the Moto-Meter products, which are devices that provide moto-taxi fare metering and other communication capabilities. We currently have patent applications
pending for our products in 59countries. To achieve our objective, we have (i) raised approximately $1,250,000 in new capital in late 2012 and early 2013, (ii) established our operational subsidiary in Thailand for product development and a
presence in two additional potential markets, Brazil and Nigeria, and (iii) begun expanding our work force to be able to implement our business plan.
We anticipate rolling out the Moto-Meter, which is a device that provides moto-taxi fare metering and other services to motorcycle-taxi operators, by the end of the fourth quarter 2014 initially in one or more of Indonesia, Vietnam, Thailand, as a
test of its capabilities. Once we are satisfied with this pre-production launch of our product in real-world conditions, we will begin to sell the Moto-Meter to other motorcycle-taxi operators in Indonesia, Vietnam and Thailand by the end of the
first quarter of 2015, and motorcycle-taxi operators in Brazil in the next 12 months.
We are also focused on the development of our advertising product, Wheelies. Wheelies displays static and streaming media on the wheels of motorcycles and automobiles, providing a new mobile medium for advertising, broadcasting, self-expression and
publishing. We intend to market Wheelies over the next 12 months primarily as an advertising platform in the country of Thailand. We are currently in the process of establishing a joint venture with Forever Network Co. Ltd. in Bangkok to promote
this technology, and the joint venture will be responsible for securing any necessary permits and waivers that may be necessary. We will be moving immediately into limited production of Wheelies, which involves low volume production runs of tens to
hundreds of units in order to refine the production yields, increase the efficiency, and decrease warranty and support costs of the manufacturing process. We anticipate the limited production and optimization stage to last approximately 6 months,
after which full commercial production will commence by the fourth quarter of 2014 for distribution in Thailand.
We intend to launch Yes™, which provides a mobile enabled commerce solution that runs on smartphones, in the third quarter of 2014 in Kuala Lumpur, Malaysia, and in Thailand and Cambodia in the next 12 months. The primary purpose of Yes™
is the delivery of goods to consumers rapidly after ordering.
In Thailand, we entered into a distribution agreement with Lucky Distributors, Ltd. (“Lucky”) Under the terms of this distribution agreement, Lucky has the non-exclusive right to distribute, sell and service the Moto-Meter and Moto-Meter
accessories throughout Thailand and the surrounding border markets. Lucky is a national distribution company based in Thailand. It is also a preferred supplier for the Motorcycle Taxi Association of Thailand. We believe Lucky’s reputation and
relationship with the moto taxi community will help promote Moto-Meter in Thailand.
On October 30, 2013, we announced the signing of multiple letters of intent for the distribution of our flagship product, the Moto-Meter. To date, we signed letters of intent with qualified distributors in 7 countries. The distributors were selected
for their ability to both sell and support our products as well as to protect our brand image in strategic markets. We are continuing discussions with dozens of further prominent distributors out of the hundreds of retail agents and operators that
have contacted us expressing interest in the Moto-Meter and associated products. The letters of intent include authorizations to sell and support our flagship product, the Moto-Meter, as well as establishing priority for Wheelies and our other
future products and services.
On December 2, 2013, World Moto Co. Thailand entered into a Purchase and Licensing Agreement (the “PL Agreement”) with Mobile Advertising Ventures Ltd. (“MAV”). Pursuant to the terms of the PL Agreement, MAV will purchase 10
initial “Wheelies” from World Moto Co. Thailand at a purchase price of $35,000, and will have an option to purchase an additional 190 Wheelies at a purchase price of $3,500 per unit. World Moto Co. Thailand also grants a
non-exclusive license to MAV for the use of its software in connection with the operation of the Wheelies in consideration for a fee based on net revenue per quarter from advertising sales relating to the use of the Wheelies. This sale will be
completed during 2014.
We entered into discussions to mandate the use of Moto-Meters on all moto taxis within the city of Montes Claros, Brazil. Montes Claros is considered the "motorcycle taxi capital" of northern Brazil and an ideal city to launch the Moto-Meter in
Brazil. We anticipate that a regulatory mandate here will act as a springboard into the potentially larger markets of Brazil's other highly populated cities.
In Africa, we established an office in Lagos, Nigeria.
Previously, the officials in Nigeria have expressed strong interest in the
Moto-Meter, and feedback from our initial discussions has been positive.
Establishing a physical presence in the city is now essential for us as we enter
the process of formalizing these discussions into a clear plan to introduce the
Moto-Meter into Lagos and cities across Africa. On November 4, 2013, we were
awarded a patent on the Moto-Meter technology until 2033 in Nigeria, a country
with more than 3 million motorcycle taxis.
We have assembled an optimal number of employees, including
experienced engineers in our research and development division at the Thailand
Science Park. The development focus is simultaneously devoted to our advertising
product, Wheelies, as well as our flagship product, the Moto-Meter.
The Company filed patent applications for the Wheelies product
in November 2013.
In parallel with this, we have completed the work to adapt the
Moto-Meter electronics so that it can pass all current and anticipated
regulatory requirements of INMETRO, the National Institute of Metrology for
Brazil, as well as other international regulatory agencies. Additional work is
currently being undertaken to improve the weatherization technology used in the
Moto-Meter to enhance its ability to withstand environmental stresses, as well
as work to provide a more generic Moto-Meter installation kit and wiring harness
that will allow its installation into a wider variety of vehicles, such as auto
rickshaws. A fully revised version suitable for certification and sales is
expected in the 3rd quarter of 2014.
We plan to use outside consultants and service companies from
time to time for various tasks in the sales, development and manufacturing of
our products and product launch and distribution, under provider contracts, to
the extent that we are not able to perform the required functions. Using such
outside vendors may make a particular task more expensive, but we believe that
using such experts should improve the outcome or speed up the timing of product
development and time to market. There is no assurance that we will be able to
control the costs and deliveries of such activities in the same manner as if we
were performing the tasks ourselves, and therefore we are subject to the usual
risks of using outside providers.
Estimated Expenses
The following provides an overview of our estimated expenses to
fund our plan of operations for each of our products over the next 12 months.
Funding will be with our current cash assets and may include future capital that
we may have to raise.
Moto-Meter
|
|
Estimated |
|
Expenses |
|
Description |
|
|
|
|
|
Engineering |
$ |
70,000 |
|
Additional Prototyping and Mechanical Construction |
$ |
15,000 |
|
Initial Sales Training and Support |
$ |
10,000 |
|
Production Tooling and NRE Charges |
$ |
50,000 |
|
Development of Production Test Fixtures |
$ |
50,000 |
|
Licensing and Certification |
$ |
20,000 |
|
Components for Initial Production |
$ |
65,000 |
|
Training and Equipment |
$ |
45,000 |
|
|
|
|
|
Total |
$ |
325,000 |
|
Wheelies
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Establish Production and Support |
$ |
70,000 |
|
Warranty Service |
$ |
5,000 |
|
|
|
|
|
Total |
$ |
75,000 |
|
Yes
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Development of Handset Application |
$ |
84,000 |
|
Development of Agent Handset Application |
$ |
84,000 |
|
Establishment of Customer Service Center
|
$ |
5,000 |
|
Initial Awareness Campaign |
$ |
3,000 |
|
|
|
|
|
Total |
$ |
176,000 |
|
In order to execute on our plan of operations over the next 12
months, we will need to raise additional amounts of working capital through debt
or equity offerings. There are no assurances that we will be able to raise the
required working capital on terms favorable, or that such working capital will
be available on any terms when needed. Any failure to secure additional
financing may force us to modify or delay our business plan.
Results of Operations
Comparison of three-month periods ended June 30, 2014 and
2013 and the six-month periods ended June 30, 2014 and 2013
Revenue
We have generated no revenues for the three months and six
months ended June 30, 2014 and for the three months and six months ended June
30, 2013.
Net Loss
For the three-month period ended June 30, 2014, we incurred a
net loss of $493,790 compared to a net loss of $183,762 for the three-month
period ended June 30, 2013. For the six-month period ended June 30, 2014, we
incurred a net loss of $754,041 compared to a net loss of $380,238 for the
six-month period ended June 30, 2013.
Expenses
General and administration expenses for the three-month period
ended June 30, 2014, amounted to $233,723 compared to $186,670 during the
three-month period ended June 30, 2013. General and administration expenses for
the six-month period ended June 30, 2014, amounted to $372,734 compared to
$384,784 during the six-month period ended June 30, 2013.
R&D expenses for the three-month period ended June 30, 2014
amounted to $126,590 compared to $0 during the three-month period ended June 30,
2013. R&D expenses for the six-month period ended June 30, 2014 amounted to
$247,696 compared to $0 during the six-month period ended June 30, 2013.
The increase in expenses is due to growth of the Company in
Thailand, continued R&D associated with our products and ongoing legal
expenses for items such as patent acquisition in various countries.
Liquidity and Capital Resources
As of June 30, 2014, we have $101,650 in current assets and
$796,597 in current liabilities. Our total assets were $205,966 and our total
liabilities were $796,597. We had $54,576 in cash and our working capital
deficit was $694,947.
Cash Flows:
|
|
For the six months ended |
|
|
|
June
30, |
|
|
|
2014 |
|
|
2013 |
|
Cash Flows from Operating
Activities |
$ |
(562,928 |
) |
$ |
(388,628 |
) |
Cash Flows from Investing Activities |
|
(487 |
) |
|
(5,081 |
) |
Cash Flows from Financing
Activities |
|
442,500 |
|
|
1,000,000 |
|
Effects of Currency Translations |
|
(3,641 |
) |
|
2,635 |
|
Net increase (decrease) in
cash |
$ |
(124,556 |
) |
$ |
608,926 |
|
On April 4, 2014, we entered into a securities purchase
agreement with certain institutional investors pursuant to which we issued
convertible debentures in the aggregate principal amount of $543,378 for a
purchase price of $500,000 (8% original issue discount). Upon the effectiveness
of a registration statement that was filed with the Securities and Exchange
Commission on May 6, 2014 in connection with such financing (the Registration
Statement), such investors will purchase additional debentures in the aggregate
principal amount of $543,378 for a purchase price of $500,000 (8% original issue
discount), for a total aggregate principal amount of $1,086,756 for the
aggregate purchase price of $1,000,000 (8% original issue discount). The
debentures have a maturity date of 12 months with 12% interest paid at maturity
or upon conversion of the amounts owed under the debentures. The number of
shares to be registered under the Registration Statement is 27,173,913
shares.
We have incurred an accumulated loss of $1,959,122 since
inception. Our independent auditors have issued an audit opinion for our
financial statements for the periods ended December 31, 2013 and 2012, which
includes a statement expressing substantial doubt as to our ability to continue
as a going concern due to our limited liquidity and our lack of revenues.
Our current cash requirements are significant due to planned
development and marketing of our current products, and we anticipate generating
losses. While obtaining $556,000 will allow us to execute on our business
strategy over the next 12 months, commensurate with the goals for our planned
marketing, development and distribution efforts, we are actually targeting an
additional $1,000,000 over the next 12 months in additional working capital in
order to increase our growth plans on an expedited basis. Our management
believes that we should be able to raise at least $556,000 through the debenture
financing, however, our ability to raise additional capital may be limited due
to the grant of a security interest on all of the assets of the Company to
secure the obligations under the convertible debentures issued on April 4,
2014.
There are no assurances that we will be able to raise the
required working capital on terms favorable, or that such working capital will
be available on any terms when needed. Any failure to secure additional
financing may force us to modify our business plan. In addition, we cannot be
assured of profitability in the future.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles of the United States (GAAP) 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 year. The more significant areas requiring the use of
estimates include asset impairment, stock-based compensation, and future income
tax amounts. Management bases its estimates on historical experience and on
other assumptions considered to be reasonable under the circumstances. However,
actual results may differ from the estimates.
We believe the following is among the most critical accounting
policies that impact or consolidated financial statement. We suggest that our
significant accounting policies, as described in our financial statements in the
Summary of Significant Accounting Policies, be read in conjunction with this
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
Foreign Currency Translation
The functional currency of our subsidiary is the Thai Baht.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transaction.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income (loss) for the respective periods.
For financial reporting purposes, the financial statements of
the subsidiary are translated into the Companys reporting currency, United
States Dollars (USD). Asset and liability accounts are translated using the
closing exchange rate in effect at the balance sheet date, equity account and
dividend are translated using historical exchange rates and income and expense
accounts are translated using the average exchange rate prevailing during the
reporting period.
Adjustments resulting from the translation, if any, are
included in accumulated other comprehensive income (loss) in stockholders
equity (deficit).
Revenue Recognition
The Company recognizes revenue only when all of the following
criteria have been met:
-
Persuasive evidence of an arrangement exists;
-
Delivery has occurred or services have been rendered;
-
The fee for the arrangement is fixed or determinable; and
-
Collectibility is reasonably assured.
Persuasive Evidence of an Arrangement The Company documents
all terms of an arrangement in a written contract signed by the customer prior
to recognizing revenue.
Delivery Has Occurred or Services Have Been Performed The
Company performs all services or delivers all products prior to recognizing
revenue. Monthly services are considered to be performed ratably over the term
of the arrangement. Professional consulting services are considered to be
performed when the services are complete. Equipment is considered delivered upon
delivery to a customers designated location.
The Fee for the Arrangement Is Fixed or Determinable Prior to
recognizing revenue, a customers fee is either fixed or determinable under the
terms of the written contract. Fees for most monthly services, professional
consulting services, and equipment sales and rentals are fixed under the terms
of the written contract. Fees for certain monthly services, including certain
portions of networking, storage, and content distribution and caching services,
are variable based on an objectively determinable factor such as usage. Those factors are included in the written contract such that the
customers fee is determinable. The customers fee is negotiated at the outset
of the arrangement and is not subject to refund or adjustment during the initial
term of the arrangement.
Collectibility Is Reasonably Assured The Company determines
that collectibility is reasonably assured prior to recognizing revenue.
Collectibility is assessed on a customer by customer basis based on criteria
outlined by management. New customers are subject to a credit review process,
which evaluates the customers financial position and ultimately its ability to
pay. The Company does not enter into arrangements unless collectibility is
reasonably assured at the outset. Existing customers are subject to ongoing
credit evaluations based on payment history and other factors. If it is
determined during the arrangement that collectibility is not reasonably assured,
revenue is recognized on a cash basis.
During the three months ended June 30, 2014, we revised our
revenue recognition policy for the franchise fee revenue as follows:
Franchise Fee Revenue
Revenues from licensees include a royalty based on a percent of
sales, and may include initial fees. Continuing royalties are recognized in the
period earned. Initial fees are recognized upon granting of a new franchise
term, which is when the Company has performed substantially all initial services
required by the franchise arrangement. Additionally, the first twelve months of
operations are royalty free for the franchisee.
During the fiscal year December 31, 2014, management has
decided not to recognize franchise fee revenues until the franchisee commences
operations. The Company originally recorded $24,980 as revenue for payments
collected from a franchisee, however the franchisee has not yet commences
operations. Accordingly, the company removed the $24,980 from revenues and
increased unearned revenues.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported, within the time period specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the reports filed under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer (our principal executive officer) and our Chief Financial Officer (our
principal financial officer and principal accounting officer) to allow for
timely decisions regarding required disclosure.
As of the quarterly period ended June 30, 2014, we carried out
an evaluation, under the supervision and with the participation of our principal
executive officer and our principal financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based on the
foregoing, our principal executive officer and our principal financial officer
concluded that our disclosure controls and procedures were not effective as of
the quarterly period ended June 30, 2014 in ensuring that information required
to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commissions (the SEC) rules and
forms. This conclusion is based on findings that constituted material
weaknesses. A material weakness is a deficiency, or a combination of control
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Companys interim
financial statements will not be prevented or detected on a timely basis.
In performing the above-referenced assessment, our management
identified the following material weaknesses:
|
i) |
We have insufficient quantity of dedicated resources and
experienced personnel involved in reviewing and designing internal
controls. As a result, a material misstatement of the interim and annual
financial statements could occur and not be prevented or detected on a
timely basis. |
|
|
|
|
ii) |
We do not have an audit committee. While not being
legally obligated to have an audit committee, it is the managements view
that to have an audit committee, comprised of independent board members,
is an important entity-level control over our financial
statements. |
|
|
|
|
iii) |
We did not perform an entity level risk assessment to
evaluate the implication of relevant risks on financial reporting,
including the impact of potential fraud-related risks and the risks
related to non-routine transactions, if any, on our internal control over
financial reporting. Lack of an entity-level risk assessment constituted
an internal control design deficiency which resulted in more than a remote
likelihood that a material error would not have been prevented or
detected, and constituted a material weakness. |
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and a
functioning Chief Financial Officer, does not expect that our disclosure
controls and internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of a simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management or board override
of the control.
The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal controls over financial
reporting that occurred during the quarterly period ended June 30, 2014 that
have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
14
Item 6. Exhibits.
Exhibit |
|
Description |
No. |
|
|
3.1(a) |
|
Articles of Incorporation (filed as an exhibit to
Amendment No. 6 to the Registration Statement on Form S-1/A, as filed with
the SEC on October 16, 2014 and incorporated herein by reference). |
3.2 |
|
By-laws (filed as an exhibit to our Registration
Statement on Form S-1, as filed with the SEC on June 25, 2010, and
incorporated herein by reference). |
10.1 |
|
Securities Purchase Agreement, dated April 4, 2014,
between the Company and certain investors (incorporated by reference to
our Current Report on Form 8-K, filed on April 7, 2014). |
10.2 |
|
Form of Debenture (incorporated by reference to our
Current Report on Form 8-K, filed on April 7, 2014). |
10.3 |
|
Form of Registration Rights Agreement (incorporated by
reference to our Current Report on Form 8-K, filed on April 7, 2014). |
10.4 |
|
Form of Security Agreement (incorporated by reference to
our Current Report on Form 8-K, filed on April 7, 2014). |
10.5 |
|
Employment Agreement, dated April 1, 2014, between World
Moto Co. Ltd. and Paul Giles (incorporated by reference to our Annual
Report on Form 10-K filed on April 15, 2014). |
10.6 |
|
Employment Agreement, dated April 1, 2014, between World
Moto Co. Ltd. and Chris Ziomkowski (incorporated by reference to our
Annual Report on Form 10-K filed on April 15, 2014). |
10.7 |
|
Letter of Intent, dated June 11, 2014, by and among the
Company, Mobile Advertising Ventures, Ltd., and Forever Network
(incorporated by reference to our Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-1 filed on June 17, 2014). |
31.1* |
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* |
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
101 * |
|
Interactive Data Files |
* Filed herewith.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WORLD MOTO, INC.
Dated: October 29, 2014 |
By: |
/s/ Lisa Ziomkowski-Boten
|
|
|
Lisa Ziomkowski-Boten |
|
|
Treasurer (Principal Financial
Officer and Principal |
|
|
Accounting Officer)
|
Exhibit 31.1
OFFICERS CERTIFICATE
PURSUANT TO SECTION 302
I, Paul Giles, certify that:
1. |
I have reviewed this Amendment No. 1 to the Quarterly
Report on Form 10-Q of World Moto, Inc. for the period ended June 30,
2014; |
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have: |
|
a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
c. |
Evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures as of the end of the period covered by this report based on
such evaluation; and |
|
d. |
Disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the Registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: October 29, 2014
By: /s/ Paul
Giles
Name:
Paul Giles
Title: Chief Executive Officer (Principal Executive
Officer)
Exhibit 31.2
OFFICERS CERTIFICATE
PURSUANT TO SECTION 302
I, Lisa Ziomkowski-Boten, certify that:
1. |
I have reviewed this Amendment No. 1 to the Quarterly
Report on Form 10-Q of World Moto, Inc. for the period ended June 30,
2014; |
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
report; |
4. |
The Registrants other certifying officer and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have: |
|
a. |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
Registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
b. |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles; |
|
c. |
Evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures as of the end of the period covered by this report based on
such evaluation; and |
|
d. |
Disclosed in this report any change in the Registrants
internal control over financial reporting that occurred during the
Registrants most recent fiscal quarter (the Registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the Registrants internal
control over financial reporting; and |
5. |
The Registrants other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Registrants auditors and the audit committee
of the Registrants board of directors (or persons performing the
equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrants ability to
record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrants internal control over financial
reporting. |
Date: October 29, 2014
By: /s/ Lisa
Ziomkowski-Boten
Name: Lisa Ziomkowski-Boten
Title: Treasurer (Principal Financial
Officer and Principal Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with this Amendment
No. 1 to the Quarterly Report on Form 10-Q of World Moto, Inc. (the Company)
for the period ended June 30, 2014 as filed with the Securities and Exchange
Commission on the date hereof (the Report), the undersigned, in the capacity
and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to his knowledge:
|
1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
|
|
|
|
2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: October 29, 2014
By: /s/ Paul
Giles
Name: Paul Giles
Title: Chief Executive Officer (Principal Executive
Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Amendment
No. 1 to the Quarterly Report on Form 10-Q of World Moto, Inc. (the Company)
for the period ended June 30, 2014 as filed with the Securities and Exchange
Commission on the date hereof (the Report), the undersigned, in the capacity
and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
to her knowledge:
|
1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
|
|
|
|
2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: October 29, 2014
By: /s/ Lisa
Ziomkowski-Boten
Name: Lisa Ziomkowski-Boten
Title: Treasurer (Principal Financial
Officer and Principal Accounting Officer)