Filed pursuant to Rule 424(b)(3)
Registration No.
333-195710
PROSPECTUS SUPPLEMENT NO. 3
27,173,913 Shares of Common Stock
WORLD MOTO INC.
This Prospectus Supplement No. 3 supplements and amends our
Prospectus dated December 8, 2014. This Prospectus Supplement No. 3 includes our
attached Quarterly Report on Form 10-Q for the quarter ended September 30, 2015,
as filed with the Securities and Exchange Commission on November 23, 2015.
The Prospectus, any prospectus supplements filed before the
date hereof, and this Prospectus Supplement No. 3 relate to the registration and
resale of up to 27,173,913 shares of our common stock, par value $0.0001 per
share, by the selling security holders (the Selling Security Holders), of
which up to: (a) 9,098,408 shares of common stock are issuable upon the
conversion of the principal amount of the convertible debenture, dated April 4,
2014, issued to Dominion Capital LLC (the Dominion Debenture), (b) 1,091,809
shares of common stock are issuable upon the conversion of interest accrued
under the Dominion Debenture, (c) 3,032,803 shares of common stock are issuable
upon the conversion of the principal amount of the convertible debenture, dated
April 4, 2014, issued to Redwood Management, LLC (the Redwood Debenture,
together with the Dominion Debenture, the Initial Debentures), (d) 363,936
shares of common stock are issuable upon the conversion of interest accrued
under the Redwood Debenture, (e) 9,098,408 shares of common stock are issuable
upon the conversion of the principal amount of a convertible debenture to be
issued by the Company to Dominion (the Additional Dominion Debenture), (f)
1,091,809 shares of common stock are issuable upon the conversion of the
interest to be accrued under the Additional Dominion Debenture, (g) 3,032,803
shares of common stock are issuable upon the conversion of the principal amount
of a convertible debenture to be issued by the Company to Redwood (the
Additional Redwood Debenture, together with the Additional Dominion Debenture,
the Additional Debentures), and (h) 363,936 shares of common stock are
issuable upon the conversion of the interest to be accrued under the Additional
Redwood Debenture.
We will not receive any of the proceeds from the sale of shares
by the Selling Security Holders. These shares will be offered for sale by the
Selling Security Holders in accordance with the Plan of Distribution. We will
bear all costs associated with this registration. No underwriter or person has
been engaged to facilitate the sale of shares of our common stock in this
offering.
This Prospectus Supplement No. 3 should be read in conjunction
with the Prospectus and any prospectus supplements filed before the date hereof.
Any statement contained in the Prospectus and any prospectus supplements filed
before the date hereof shall be deemed to be modified or superseded to the
extent that information in this Prospectus Supplement No. 3 modifies or
supersedes such statement. Any statement that is modified or superseded shall
not be deemed to constitute a part of the Prospectus except as modified or
superseded by this Prospectus Supplement No. 3.
Our common stock is quoted on the OTC marketplace, under the
stock symbol FARE. On November 20, 2015, the closing price of our common stock
was $0.002 per share.
Investing in our common stock involves a high degree of
risk. See Risk Factors beginning on page 12 to read about factors you should
consider before investing in shares of our common stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS OR PROSPECTUS SUPPLEMENT NO. 3 IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is November 23, 2015.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2015
[ ] 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 November 13, 2015 |
Common stock, $.0001 par value |
[842,710,260]
|
World Moto, Inc.
Form 10-Q
For the Nine Months Ended September 30, 2015
INDEX
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 16, 2015.
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.
2
World Moto, Inc.
Consolidated Balance Sheets
(Unaudited)
|
|
September 30, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
ASSETS |
|
Current Assets |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
26,660 |
|
$ |
169,265 |
|
Prepaid expenses and other
current assets |
|
31,217 |
|
|
20,741 |
|
Inventory |
|
7,160 |
|
|
2,986 |
|
Total current assets |
|
65,037 |
|
|
192,992 |
|
Property and
equipment, net of accumulated depreciation |
|
17,660 |
|
|
24,215 |
|
Deferred financing costs, net of
accumulated amortization |
|
41,289 |
|
|
28,867 |
|
Other assets |
|
9,981 |
|
|
10,984 |
|
TOTAL ASSETS |
$ |
133,967 |
|
$ |
257,058 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS
DEFICIT |
|
Current Liabilities |
|
|
|
|
|
|
Accounts payable and accrued
expenses |
$ |
489,895 |
|
$ |
211,336 |
|
Convertible
notes payable, net of discount of $610,208 and $779,573, respectively |
|
262,435 |
|
|
274,123 |
|
Derivative liabilities |
|
1,063,350 |
|
|
1,256,159 |
|
Short-term debt
related party |
|
36,479 |
|
|
45,707 |
|
Unearned revenues |
|
55,865 |
|
|
59,056 |
|
Total current liabilities |
|
1,908,024 |
|
|
1,846,381 |
|
Contingencies and Commitments |
|
|
|
|
|
|
Stockholders Deficit |
|
|
|
|
|
|
Preferred stock, $0.0001 par value;
50,000,000 shares authorized; no shares issued and outstanding |
|
|
|
|
|
|
Common stock, $0.0001 par
value; 2,000,000,000 shares authorized 712,157,315 and 395,369,204 shares
issued and outstanding, respectively |
|
71,215 |
|
|
39,536 |
|
Additional paid-in capital |
|
3,962,624 |
|
|
1,752,443 |
|
Accumulated deficit |
|
(5,785,486 |
) |
|
(3,365,780 |
) |
Accumulated other comprehensive loss |
|
(22,410 |
) |
|
(15,522 |
) |
Total stockholders deficit |
|
(1,774,057 |
) |
|
(1,589,323 |
) |
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |
$ |
133,967 |
|
$ |
257,058 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
F-3
World Moto, Inc.
Consolidated Statements of
Operations and Comprehensive Loss
(Unaudited)
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research & development |
|
106,582 |
|
|
|
|
|
331,056 |
|
|
247,696 |
|
General and administrative |
|
223,972 |
|
|
242,325 |
|
|
579,288 |
|
|
634,696 |
|
Total operating expense |
|
330,554 |
|
|
242,325 |
|
|
910,344 |
|
|
882,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(330,554 |
) |
|
(242,325 |
) |
|
(910,344 |
) |
|
(882,392 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(845,186 |
) |
|
(201,258 |
) |
|
(1,688,335 |
) |
|
(287,995 |
) |
Interest income |
|
|
|
|
|
|
|
|
|
|
6 |
|
Change in fair value of derivative liabilities |
|
(117,484 |
) |
|
1,586 |
|
|
77,317 |
|
|
(45,476 |
) |
Gain on settlement of debt |
|
107,974 |
|
|
|
|
|
107,974 |
|
|
|
|
Foreign exchange (gain) loss |
|
2,837 |
|
|
7,012 |
|
|
(6,318 |
) |
|
7,194 |
|
Total other income (expense) |
|
(851,859 |
) |
|
(192,660 |
) |
|
(1,509,362 |
) |
|
(326,271 |
) |
Net loss |
$ |
(1,182,413 |
) |
$ |
(434,985 |
) |
$ |
(2,419,706 |
) |
$ |
(1,208,663 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translations |
|
2,267 |
|
|
(5,273 |
) |
|
(6,888 |
) |
|
(10,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
$ |
(1,180,146 |
) |
$ |
(440,258 |
) |
$ |
(2,426,594 |
) |
$ |
(1,219,267 |
) |
Net loss per common share basic and
diluted |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
Weighted average common shares outstanding basic and
diluted |
|
532,648,145 |
|
|
378,038,740 |
|
|
491,009,507 |
|
|
378,035,047 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
F-4
World Moto, Inc.
Consolidated Statements of Cash
Flows
(Unaudited)
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net loss |
$ |
(2,419,706 |
) |
$ |
(1,208,663 |
) |
Adjustments to reconcile
net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
6,555 |
|
|
5,462 |
|
Non-cash
interest expense from derivative liability in excess of face value of
convertible notes |
|
457,848 |
|
|
|
|
Amortization of debt discount and deferred financing
costs |
|
1,006,648 |
|
|
270,576 |
|
Gain on settlement of debt |
|
(107,974 |
) |
|
|
|
Change in fair value of derivative liabilities |
|
(77,317 |
) |
|
45,476 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current
assets |
|
(9,473 |
) |
|
(5,080 |
) |
Inventory |
|
(4,174 |
) |
|
(24,974 |
) |
Accounts payable and accrued expenses |
|
404,865 |
|
|
237,182 |
|
Unearned revenues |
|
(3,191 |
) |
|
24,980 |
|
|
|
|
|
|
|
|
Net cash used in operating
activities |
|
(745,919 |
) |
|
(655,041 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
(313 |
) |
|
|
|
|
|
|
|
Net cash used in
investing activities |
|
|
|
|
(313 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
Proceeds from convertible notes payable, net of financing costs |
|
619,430 |
|
|
534,500 |
|
Related party advances (repayments) |
|
(9,228 |
) |
|
37,008 |
|
|
|
|
|
|
|
|
Net cash
provided by financing activities |
|
610,202 |
|
|
571,508 |
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY
TRANSLATIONS |
|
(6,888 |
) |
|
(10,604 |
) |
|
|
|
|
|
|
|
Net decrease in cash |
|
(142,605 |
) |
|
(94,450 |
) |
|
|
|
|
|
|
|
Cash at beginning of period |
|
169,265 |
|
|
179,132 |
|
|
|
|
|
|
|
|
Cash at end of period |
$ |
26,660 |
|
$ |
84,682 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOWS
INFORMATION: |
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
Income
taxes |
$ |
|
|
$ |
|
|
Interest |
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
Shares issued
for deferred finance cost |
$ |
|
|
$ |
46,584 |
|
Shares issued for conversion of
debt |
$ |
869,811 |
|
$ |
|
|
Reclassification
of fair value of derivatives from liability to equity |
$ |
1,340,300 |
|
$ |
|
|
Fair value of conversion feature of
convertible debt classified as derivative liabilities |
$ |
1,207,424 |
|
$ |
552,701 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
F-5
World Moto, Inc.
Notes to the Consolidated
Financial Statements
(Unaudited)
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. 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. (WM Co. Thailand). WM Thailand represents our operating entity 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, 2014. 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
September 30, 2015 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 and nine-month periods ended
September 30, 2015 are not necessarily indicative of the results to be expected
for any subsequent quarters or for the entire year ending December 31, 2015.
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.
Principal of Consolidation
The consolidated financial statements include the accounts of
World Moto Technologies, Inc., World Moto Holdings, Inc., and World Moto Co.
Ltd, all 100% owned subsidiaries. All significant intercompany balances and
transactions have been eliminated upon consolidation.
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 with
maturity of three months or less at the time of issuance to be cash equivalents.
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.
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 2 - Valuations for assets and liabilities that can be
obtained from readily available pricing sources via independent providers for
market transactions involving similar assets or liabilities. The Companys
principal markets for these securities are the secondary institutional markets,
and valuations are based on observable market data in those markets.
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 September 30, 2015 and December 31, 2014 respectively.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Derivative liability |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015 |
$ |
|
|
$ |
|
|
$ |
1,063,350 |
|
$ |
1,063,350 |
|
December 31, 2014 |
$ |
|
|
$ |
|
|
$ |
1,256,159 |
|
$ |
1,256,159 |
|
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
- Collectability 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.
Collectability Is Reasonably Assured The Company determines
that collectability is reasonably assured prior to recognizing revenue.
Collectability 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 collectability 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 collectability 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 after 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.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or results of
operations.
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 $5,785,486 as of September 30, 2015, 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 total 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 has been recorded as unearned revenues.
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 $20,865 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 RELATED PARTY TRANSACTIONS
At September 30, 2015 and December 31, 2014, the Company had short-term debt of $36,479 and $45,707, respectively, due to one of its majority shareholders. On July 29, 2015, the Company borrowed an additional $6,890 and repaid
$25,940 of related party debt. The loans are for six months and mature beginning November 30, 2015. The loans are accruing interest at a rate of 0%.
NOTE 5 – CONVERTIBLE NOTES PAYABLE
On March 5, 2015, the Company entered into a convertible note with Redwood Management for an aggregate principal amount of $60,870 with a $4,348 original issue discount ("OID") and $12,000 in deferred financing costs for broker fees.
The note earns an interest rate equal to 12% per annum and matures on March 5, 2016. 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. Pursuant to this note, the Company recorded a debt discount of $56,522, as a result of the embedded conversion feature being a financial derivative. The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 25 trading days prior to conversion. The Company also recorded a debt discount of $4,348 as result of the 8% original
issue discount. The Company determined that the fair value of the conversion feature was $110,096 at the issuance date. The fair value of the conversion feature in excess of the principal amount allocated to the notes of $53,574 was expensed
immediately as additional interest expense. During the nine months ended September 30, 2015, the Company recorded $17,941 amortization of the debt discount on the note.
On March 26, 2015, the Company entered into a convertible note with Macallan Partners for an aggregate principal amount of $112,000 with a $12,000 OID and $7,500 in deferred financing costs for broker fees.
The note earns an interest rate equal to 8% per annum and matures on March 31, 2016. Pursuant to this note, the Company recorded a debt discount of $100,000, as a result of the embedded conversion feature being a financial derivative. The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to conversion. The
Company also recorded a debt discount of $12,000 as a result of the 11% original issue discount. The Company determined that the fair value of the conversion feature was $207,690 at the issuance date. The fair value of the conversion feature
in excess of the principal amount allocated to the notes of $107,690 was expensed immediately as additional interest expense. On September 30, 2015, the Company settled the convertible note through the issuance of new convertible note to a third
party.
On September 30, 2015, the Company entered into a convertible note with Union Capital for an aggregate principal amount of $117,476.
The note was issued to settle the $112,000 Macallan Partners note and $5,476 of interest accrued on the note. The note earns an interest rate equal to 8% per annum and matures on September 30, 2017. The note is convertible at 60% of the
lowest trading price of the Company’s common stock during the 20 trading days prior to the date of conversion. Pursuant to this note, the Company recorded a debt discount of $111,304, as a result of the embedded conversion feature being a
financial derivative. The Company determined that the fair value of the conversion feature was $111,304 at the issuance date. During the nine months ended September 30, 2015, the Company recorded $45 amortization of the debt discount on the
note.
On September 30, 2015, the Company entered into an additional convertible note with Union Capital for an aggregate principal amount of $64,674 with $8,674 in deferred financing costs for broker fees.
The note was issued in consideration for the $56,000 prepayment premium owed as a result of settling the $112,000 Macallan Partners note. The note earns an interest rate equal to 8% per annum and matures on September 30, 2017. The note is
convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the date of conversion. Pursuant to this note, the Company recorded a debt discount of $59,718, as a result of the embedded
conversion feature being a financial derivative. The Company determined that the fair value of the conversion feature was $59,718 at the issuance date. During the nine months ended September 30, 2015, the Company recorded $27 amortization of
the debt discount on the note.
On April 16, 2015, the Company entered into a convertible note with Union Capital for an aggregate principal amount of $71,500 with a $6,500 OID and $8,125 in deferred financing costs for broker fees.
The note earns an interest rate equal to 8% per annum and matures on April 16, 2016. The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the date of conversion. Pursuant
to this note, the Company recorded a debt discount of $65,000, as a result of the embedded conversion feature being a financial derivative. The Company also recorded a debt discount of $6,500 as a result of the 10% original issue discount.
The Company determined that the fair value of the conversion feature was $126,021 at the issuance date. The fair value of the conversion feature in excess of the principal amount allocated to the notes of $61,021 was expensed immediately as
additional interest expense. During the nine months ended September 30, 2015, the Company recorded $11,285 amortization of the debt discount on the notes.
On June 24, 2015, the Company entered into a convertible note with Redwood Management for an aggregate principal amount of $60,870 with a $4,348 original issue discount ("OID") and $6,250 in deferred financing costs for broker fees.
The note earns an interest rate equal to 12% per annum and matures on June 15, 2016. The note is convertible at the lower of $0.10 or 70% of the lowest traded price of the Company’s common stock during the 25 trading days prior to the date
of conversion. The Company is obligated to make amortization payments beginning on the six month anniversary of the issuance date of the convertible note and continuing monthly thereafter. Pursuant to this note, the Company recorded a debt discount
of $56,522, as a result of the embedded conversion feature being a financial derivative. The Company also recorded a debt discount of $4,348 as a result of the 8% original issue discount. The Company determined that the fair value of the
conversion feature was $117,086 at the issuance date. The fair value of the conversion feature in excess of the principal amount allocated to the notes of $60,564 was expensed immediately as additional interest expense. During the nine
months ended September 30, 2015, the Company recorded $54,661 amortization of the debt discount on the note.
On July 9, 2015, the Company issued a convertible note to Redwood Management for an additional principal amount of $141,305 with a $11,305 original issue discount ("OID") and $13,500 in deferred financing costs for broker fees.
The note earns an interest rate equal to 12% per annum and matures on June 15, 2016. The note is convertible at the lower of $0.10 or 70% of the lowest traded price of the Company’s common stock during the 25 trading days prior to the date
of conversion. The Company is obligated to make amortization payments beginning on the six month anniversary of the issuance date of the convertible note and continuing monthly thereafter. Pursuant to this note, the Company recorded a debt discount
of $130,000, as a result of the embedded conversion feature being a financial derivative. The Company also recorded a debt discount of $11,305 as a result of the 8% original issue discount. The Company determined that the fair value of the
conversion feature was $307,439 at the issuance date. The fair value of the conversion feature in excess of the principal amount allocated to the notes of $194,396 was expensed immediately as additional interest expense. During the nine
months ended September 30, 2015, the Company recorded $97,227 amortization of the debt discount on the note.
On July 10, 2015, the Company entered into a convertible note for an aggregate principal amount of $69,000 with $4,000 in deferred financing costs for broker fees.
The note is convertible any time after 180 days from issuance at 62% of the average of the lowest 3 trading prices of the Company’s common stock during the 30 trading days prior to the conversion date. The note earns an interest rate equal to
8% per annum and is due on April 30, 2016. Pursuant to this note, the Company recorded a debt discount of $53,778, as a result of the embedded conversion feature being a financial derivative. During the nine months ended September 30, 2015, the
Company recorded $8,005 amortization of the debt discount on the note.
On July 27, 2015, the Company entered into a convertible note for an aggregate principal amount of $45,000 with $2,250 in deferred financing costs for broker fees.
The note is convertible at 62% of the lowest trading price of the Company’s common stock during the 15 trading days prior to the conversion date. The note earns an interest rate equal to 8% per annum and matures on July 27, 2016. Pursuant to
this note, the Company recorded a debt discount of $35,365, as a result of the embedded conversion feature being a financial derivative. During the nine months ended September 30, 2015, the Company recorded $3,045 amortization of the debt
discount on the note.
On August 31, 2015, the Company entered into a convertible note for an aggregate principal amount of $44,000 with a $4,000 original issue discount ("OID").
The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the conversion date. The note earns an interest rate equal to 12% per annum and matures on August 31, 2017. Pursuant
to this note, the Company recorded a debt discount of $40,000, as a result of the embedded conversion feature being a financial derivative. The Company also recorded a debt discount of $4,000 as a result of the original issue discount. The
Company determined that the fair value of the conversion feature was $43,038 at the issuance date. The fair value of the conversion feature in excess of the principal amount allocated to the notes of $3,038 was expensed immediately as
additional interest expense. During the nine months ended September 30, 2015, the Company recorded $1,806 amortization of the debt discount on the note.
On September 3, 2015, the Company entered into a convertible note for an aggregate principal amount of $41,000 with a $4,000 original issue discount ("OID").
The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the conversion date. The note earns an interest rate equal to 10% per annum and matures on September 3, 2016. Pursuant
to this note, the Company recorded a debt discount of $35,888, as a result of the embedded conversion feature being a financial derivative. The Company also recorded a debt discount of $4,000 as a result of the original issue discount. The
Company determined that the fair value of the conversion feature was $39,888 at the issuance date. During the nine months ended September 30, 2015, the Company recorded $345 amortization of the debt discount on the note.
As summary of value changes to the notes for the nine months
ended September 30, 2015 is as follows:
Carrying value of Convertible Notes at
December 31, 2014 |
$ |
274,123
|
|
Additional borrowings |
|
715,695 |
|
Total principal |
|
989,818 |
|
Less: conversion carrying value of convertible notes |
|
(896,747 |
) |
Less: discount related to fair value of the
embedded conversion feature |
|
(758,632 |
) |
Less: discount related to original issue discount |
|
(31,966 |
) |
Add: amortization of discount |
|
959,962 |
|
Carrying value of Convertible Notes at September 30, 2015
|
$ |
262,435 |
|
The deferred financing costs are amortized by the Company
through interest expense over the life of the notes. During the nine months
ended September 30, 2015, the Company recorded $51,877 amortization of the
deferred financing costs.
NOTE 6 DERIVATIVE LIABILITIES
The Company has determined that the variable conversion prices
under its convertible notes caused the embedded conversation feature to be 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 warrants
described in Note 8 also qualify for derivative classification.
The derivative instruments were valued at loan origination
date, issuance date, date of debt conversion and at September 30, 2015, The fair
values of the derivative liabilities related to the conversion options of these
notes and warrants were estimated on the transaction dates (loan original date
and date of debt conversion) using the Multinomial Lattice option pricing model,
under the following assumptions:
|
|
December 31, |
|
|
|
|
|
September 30, |
|
|
|
2014 |
|
|
New
Issuances |
|
|
2015 |
|
Shares of common stock
issuable upon exercise of debt |
|
23,193,987 |
|
|
163,052,712 |
|
|
513,193,798 |
|
Estimated market value of common stock on
measurement date |
$ |
0.17 |
|
$ |
0.0018 - $0.026 |
|
$ |
0.0017 |
|
Exercise price |
$ |
0.00766 -0.01 |
|
$ |
0.0009 - 0.10 |
|
$ |
0.0007 - 0.10 |
|
Risk free interest rate (1) |
|
0.04% - 0.25% |
|
|
0.00% - 0.33% |
|
|
0.00% - 0.33% |
|
Expected dividend yield (2)
|
|
0.00% |
|
|
0.00% |
|
|
0.00% |
|
Expected volatility (3) |
|
62% - 105% |
|
|
106% - 169% |
|
|
153%-170% |
|
Expected exercise term in
years (4) |
|
0.25 - 1.00 |
|
|
0.01-2.00 |
|
|
0.20 1.92 |
|
|
|
December 31, |
|
|
|
|
|
September 30, |
|
|
|
2014 |
|
|
New
Issuances |
|
|
2015 |
|
Shares of common stock
issuable upon exercise of warrants |
|
- |
|
|
12,344,002 |
|
|
12,344,002 |
|
Estimated market value of common stock on
measurement date |
$ |
- |
|
$ |
0.0037 |
|
$ |
0.0017 |
|
Exercise price |
$ |
- |
|
$ |
0.0032-$0.0332 |
|
$ |
0.0032-$0.0332 |
|
Risk free interest rate (1) |
|
- |
|
|
1.54% |
|
|
0.92% |
|
Expected dividend yield (2)
|
|
- |
|
|
0.00% |
|
|
0.00% |
|
Expected volatility (3) |
|
- |
|
|
159% |
|
|
170% |
|
Expected exercise term in
years (4) |
|
- |
|
|
5.00 |
|
|
4.84 |
|
(1) |
The risk free interest rate was determined by management
using the one month Treasury bill yield as of the valuation
dates. |
|
|
(2) |
The expected dividend yield is based on the Companys
current dividend yield as the best estimate of projected dividend yield
for periods within the expected term of the share options and similar
instruments. |
|
|
(3) |
The volatility was determined by referring to the average
historical volatility of a peer group of public companies because we do
not have sufficient trade history to determine our historical
volatility. |
|
|
(4) |
The exercise term is the remaining contractual term of
the convertible instrument at the valuation
date. |
The change in fair values of the derivative liabilities related
to the Convertible Notes for the nine months ended September 30, 2015 is
summarized as:
Fair value of derivatives December 31, 2014
|
$ |
1,256,159
|
|
New issuances of conversion features |
|
1,215,752 |
|
Conversion of derivative liabilities |
|
(1,340,300 |
) |
Change in fair value of conversion features |
|
(70,960 |
) |
New issuances of warrants |
|
9,056 |
|
Change in fair value of derivative warrants |
|
(6,357 |
) |
Fair value of derivative liabilities at
September 30, 2015 |
$ |
1,063,350 |
|
NOTE 7 EQUITY TRANSACTIONS
On April 9, 2015, the Company amended its Articles of
Incorporation to increase the Companys authorized shares of Common Stock from
1,000,000,000 to 2,000,000,000 shares.
During the nine months ended September 30, 2015, the Company
issued 316,788,111 shares of common stock for the conversion of notes payable
and accrued interests in the amount of $869,881. The Company also recorded
$1,340,300 as increase in additional paid-in capital from derivative liabilities
as a result of the conversions.
NOTE 8 WARRANTS
On August 19, 2015, the Company issued 7 warrants to purchase
an aggregate of 12,344,002 shares of the Companys common stock to its placement
agent for completed securities offerings. The warrants have a term of 5 years
and exercise prices ranging from $0.003 to $0.10 per share. The warrants meet
the criteria for classification as a derivative liability, with a grant date
fair value of $9,056 and during the nine months ended September 30, 2015, the
Company recorded a gain on the change in fair value of the derivative liability
of $6,357.
A summary of the changes in the Companys common share purchase
warrants for the nine months ended September 30, 2015 is presented below:
|
|
|
|
|
Weighted Average |
|
|
Weighted Average |
|
|
|
Number |
|
|
Exercise Price |
|
|
Expected Life |
|
Balance, December 31, 2014
|
|
- |
|
|
- |
|
|
- |
|
Issued |
|
12,344,002 |
|
$ |
0.014 |
|
|
|
|
Balance, September 30, 2015 |
|
12,344,002 |
|
$ |
0.014 |
|
|
4.84 years |
|
NOTE 9 GAIN ON SETTLEMENT OF DEBT
During the nine months ended September 30, 2015, the Company recorded a gain on settlement of debt of $107,974.
NOTE 10 SUBSEQUENT EVENTS
Subsequent to September 30, 2015, the Company issued
130,552,945 shares of common stock upon the conversion of $100,000 of the notes
payable described in Note 5.
On October 13, 2015, the Company approved a new class of
preferred stock of the Company, to be known as Series A Convertible Preferred
Stock. The Company is authorized to issue up to 5,000,000 shares of Series A
Convertible Preferred Stock. Holders of Series A Convertible Preferred Stock
shall be entitled to the number of votes equal to 51% of the total number of
votes entitled to be cast on any matters requiring a stockholder vote. The
shares of Series A Convertible Preferred Stock are convertible at a one to one
ratio into shares of common stock. The holders of Series A Convertible Preferred
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of legally available funds, on an as-converted
basis. However, the current policy of the Board of Directors is to retain
earnings, if any, for operations and growth. Upon liquidation, dissolution or
winding-up, the holders of Series A Convertible Preferred Stock are entitled to
share ratably in all assets that are legally available for distribution after
payment in full of any preferential amounts, on an as-converted basis.
On October 13, 2015, the Company issued an aggregate of
5,000,000 shares of Series A Preferred Stock, consisting of 4,000,000 shares of
Series A Preferred Stock issued to Paul Giles, and 1,000,000 shares of Series A
Preferred Stock issued to Chris Ziomkowski as compensation for services rendered
to the Company.
Item 2. Managements 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 January 18, 2014, we amended our Articles of Incorporation to increase our
authorized shares of common stock from 500,000,000 to 1,000,000,000. On April 9,
2015 we further amended our Articles of Incorporation to increase our authorized
shares of common stock from 1,000,000,000 to 2,000,000,000 shares. On October
13, 2015, we filed a Certificate of Designation which set forth the rights,
preferences and privileges for a new class of preferred stock of the Company, to
be known as Series A Convertible Preferred Stock. We are authorized to issue up
to 5,000,000 shares of Series A Convertible Preferred Stock. Holders of Series A
Convertible Preferred Stock shall be entitled to the number of votes equal to
51% of the total number of votes entitled to be cast on any matters requiring a
stockholder vote. The shares of Series A Convertible Preferred Stock are
convertible at a one to one ratio into shares of common stock. On October 13,
2015, we issued 4,000,000 shares of Series A Convertible Preferred Stock to Paul
Giles, our Chief Executive Officer, and 1,000,000 shares of Series A Convertible
Preferred Stock to Chris Ziomkowski, our Chief Technical Officer, as
compensation for services rendered. On November 16, 2015, we further amended our
Articles of Incorporation to increase our authorized shares of common stock from
2,000,000,000 to 4,000,000,000 shares.
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 WMs 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 September 30, 2015, 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.
Business Overview
Plan of Operations
We design, manufacture, market, and sell 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 56 countries. To achieve our business objectives, we have
established our operational subsidiary in Thailand for product development and a
presence in two additional potential markets, Brazil and Nigeria, and begun
expanding our work force to be able to implement our business plan.
The Moto-Meter has entered the production
phase and we began filling orders in October 2015.
In conjunction with the opening of sales for the Moto-Meter, we
launched a smartphone application (App). The App connects directly to the
Moto-Meter via a secure bluetooth connection, and can access data from the
Moto-Meter in real-time, giving customers the ability to view ratings and a
profile of the driver before getting on the motorcycle. While the Moto-Meter is
in use, the App can provide continuous analysis on the fare and GPS location of
the customer, augmenting the Moto-Meter's anti-tampering security protocols, as
well as transmitting the location to designated individuals or safety monitoring
services. The App also has the ability to offer customized products and services
to the users during the ride, with any purchases such as optional insurance
automatically added to the fare.
As an element of mobile commerce, we have introduced Yes, a
concierge service where persons can order products and have the products
delivered to their address by motor scooter. The Yes service has been going
through testing and was launched on March 9, 2015 in Bangkok, Thailand. We have
also developed HailYes, which is an integrated mobile platform that instantly
connects consumers to transport and commerce services in a local community. The
HailYes app allows consumers to simply tap their smartphone to hail a ride,
courier a package, or have refreshments delivered right to their doorstep in a
matter of minutes. On October 13, 2015, we announced the establishment of our
HailYes Licensee program. This program gives interested parties the opportunity
to license HailYes We suspended our planned expansion of our existing Yes
delivery platform into the surrounding countries of Malaysia and Cambodia at
this time in order to avoid conflicting and overlapping marketing efforts.
HailYes is being marketed to drivers in Bangkok, and
we expect to begin marketing the product to consumers in Bangkok in Q4 2015. An
example of a market gaining traction is the city of Pattaya, Thailand, where we
are now actively working to register drivers, including drivers of share taxis.
Known locally as songtaews (literally, "two rows"), and sometimes called "baht
buses", these share taxis are a primary mode of transport for approximately
500,000 passengers a day throughout the city. We intend to generate revenue via
transaction fees for this service and also raise visibility of HailYes through
interior/exterior signage.
In the third quarter of 2015, we announced that we were
launching a new program to provide interested parties with the opportunity to
obtain exclusive licenses for HailYes in territories around the world, and have
subsequently signed two licensees covering the areas of the greater Amsterdam
metropolitan area in the Netherlands and two of Indonesia's major cities, Jambi
City and Batam. We anticipate that the first licensees will begin commercial
operations of HailYes in the fourth quarter of 2015.
We have procured our first customer for Wheelies in Thailand.
We are focused on the development of Wheelies as a unique advertising product,
which 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 have successfully completed a pre-production
version of Wheelies and have successfully completed testing.
We currently use the Wheelies in-house for advertising our
other products and are looking to build out sales to advertising agencies and
large brands.
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 Luckys reputation and relationship with the moto taxi community will
help promote Moto-Meter in Thailand.
On October 14, 2015, we announced the crowdfunding launch of
Wheelies. The Kickstarter campaign introduces
Wheelies to motorbike enthusiasts both in the United States and around the world
at discounted pre-order prices which will run through November 28, 2015.
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 HailYES , 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
has been cancelled and we plan to refund monies to MAV.
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 have established relationships with 2 value added
resellers who wish to incorporate the Moto-Meter into their proprietary
solutions for transport and commerce throughout the continent. These
relationships have obviated the need for us to maintain an office in Lagos. 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.
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.
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 |
$ |
120,000
|
|
Additional Prototyping and Mechanical Construction |
$ |
15,000 |
|
Initial Sales Training and Support |
$ |
10,000 |
|
Licensing and Certification |
$ |
20,000 |
|
Training and Equipment |
$ |
45,000 |
|
|
|
|
|
Total |
$ |
210,000
|
|
Wheelies |
|
|
|
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Establish Production and Support |
$ |
35,000 |
|
Warranty Service |
$ |
5,000 |
|
|
|
|
|
Total |
$ |
40,000 |
|
Yes |
|
|
|
|
|
|
|
|
|
Estimated |
|
Description |
|
Expenses |
|
|
|
|
|
Continued Development of Handset Application |
$ |
20,000 |
|
Continued Development of Agent Handset
Application |
$ |
20,000 |
|
Establishment of Customer Service Center |
$ |
5,000 |
|
Initial Awareness Campaign |
$ |
35,000 |
|
|
|
|
|
Total |
$ |
80,000 |
|
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 period ended September 30, 2015
and 2014, and the nine-month period ended September 30, 2015 and 2014
Revenue
We have generated no revenues for the three and nine-month
periods ended September 30, 2015 and 2014.
Expenses
General and administration expenses for the three-month period
ended September 30, 2015, amounted to $223,972 compared to $242,325 during the
three-month period September 30, 2014. General and administration expenses for
the nine-month period ended September 30, 2015, amounted to $579,288 compared to
$634,696 during the nine-month period ended September 30, 2014. The decrease in
general and administrative expenses is due to the the decrease in professional and advertising and promotional fees incurred in the current year.
R&D expenses for the three-month period ended September 30,
2015 amounted to $106,582 compared to $0 during the three-month period ended
September 30, 2014. R&D expenses for the nine-month period ended September
30, 2015 amounted to $331,056 compared to $247,696 during the six-month period
ended June 30, 2014. The increase in R&D expense is due to additional
research and testing to prepare the Moto-Meter for sale and the development of
the HailYes software.
Other expense for the three-month period ended September 30,
2015 amounted to $851,159 compared to $192,660 during the three-month period
ended September 30, 2014. The difference is due to the Company having higher
interest expense in the current period partially offset by the gain on
settlement of debt. Other expenses for the nine-month period ended September 30,
2015 amounted to $1,509,362 compared to $326,271 during the nine-month period
ended September 30, 2014. The difference is due to the Company having higher
interest expense in the current nine month period, partially offset by the gain
on settlement of debt.
Net Loss
For the three-month period ended September 30, 2015, we
incurred a net loss of $1,182,413 compared to a net loss of $434,985 for the
three-month period ended September 30, 2014. For the nine-month period ended
September 30, 2015, we incurred a net loss of $2,419,706 compared to a net loss
of $1,208,663 for the nine-month period ended September 30, 2014.
Liquidity and Capital Resources
As of September 30, 2015, we had $65,037 in current assets and
$1,908,024 in current liabilities. Our total assets were $133,967 and our total
liabilities were $1,908,024. We had $26,660 in cash and our working capital
deficit was $1,842,987.
Cash Flows:
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
|
2015 |
|
|
2014 |
|
Cash Flows from Operating
Activities |
$ |
(745,919 |
) |
$ |
(655,041 |
) |
Cash Flows from Investing Activities |
|
- |
|
|
(313 |
) |
Cash Flows from Financing
Activities |
|
610,202 |
|
|
571,508 |
|
Effects of Currency Translations |
|
(6,888 |
) |
|
(10,604 |
) |
Net increase(decrease) in
cash |
$ |
(142,605 |
) |
$ |
(94,450 |
) |
On March 5, 2015, we entered into a securities purchase
agreement with an institutional investor pursuant to which we issued a
convertible debenture in the principal amount of $54,348 for a purchase price of
$50,000 (8% original issue discount). Pursuant to an amendment to the securities
purchase agreement, on June 30, 2015, such investor purchased an additional
convertible debenture in the principal amount of $195,653 for a purchase price
of $180,000 (8% original issue discount). The investor provided $50,000 of the
proceeds on July 21, 2015, and the remaining $130,000 of the purchase price on
July 9, 2015.
On March 26, 2015, we entered into a convertible promissory
note with Macallan Partners of $112,000. The note earns an interest rate equal
to 8% per annum and matures on March 31, 2016. Pursuant to this note, the
Company recorded a debt discount of $100,000, as a result of the embedded
conversion feature being a financial derivative. The Company also recorded a
debt discount of $12,000 as a result of the 11% original issue discount. The
Company determined that the fair value of the conversion feature was $207,690 at
the issuance date. The fair value of the conversion feature in excess of the
principal amount allocated to the notes of $107,690 was expensed immediately as
additional interest expense. During the nine months ended September 30, 2015,
the Company recorded $9,120 amortization of the debt discount on the notes.
On April 16, 2015, the Company entered into a convertible note
with Union Capital for an aggregate principal amount of $71,500 with a $6,500
OID and $8,125 in deferred financing costs for broker fees. The note earns an
interest rate equal to 8% per annum and matures on April 16, 2016. The note is
convertible at 60% of the lowest trading price of the Companys common stock
during the 20 trading days prior to the date of conversion. Pursuant to this
note, the Company recorded a debt discount of $65,000, as a result of the
embedded conversion feature being a financial derivative. The Company also
recorded a debt discount of $6,500 as a result of the 10% original issue
discount. The Company determined that the fair value of the conversion feature
was $126,021 at the issuance date. The fair value of the conversion feature in
excess of the principal amount allocated to the notes of $61,021 was expensed
immediately as additional interest expense. During the nine months ended
September 30, 2015, the Company recorded $11,285 amortization of the debt
discount on the notes.
On June 24, 2015, the Company entered into a convertible note
with Redwood Management for an aggregate principal amount of $60,870 with a
$4,348 original issue discount ("OID") and $6,250 in deferred financing costs
for broker fees. The note earns an interest rate equal to 12% per annum and
matures on June 15, 2016. The note is convertible at the lower of $0.10 or 70%
of the lowest traded price price of the Companys common stock during the 25
trading days prior to the date of conversion. The Company is obligated to make
amortization payments beginning on the six month anniversary of the issuance
date of the convertible note and continuing monthly thereafter. Pursuant to this
note, the Company recorded a debt discount of $56,522, as a result of the
embedded conversion feature being a financial derivative. The Company also
recorded a debt discount of $4,348 as a result of the 8% original issue
discount. The Company determined that the fair value of the conversion feature
was $117,086 at the issuance date. The fair value of the conversion feature in
excess of the principal amount allocated to the notes of $60,564 was expensed
immediately as additional interest expense. During the nine months ended
September 30, 2015, the Company recorded $2,174 amortization of the debt
discount on the note.
On July 9, 2015, we issued a convertible note to Redwood
Management for an additional principal amount of $141,305 with a $11,305
original issue discount ("OID") and $13,500 in deferred financing costs for
broker fees. The note earns an interest rate equal to 12% per annum and matures
on June 15, 2016. The note is convertible at the lower of $0.10 or 70% of the
lowest traded price of our common stock during the 25 trading days prior to the
date of conversion. We are obligated to make amortization payments beginning on
the six month anniversary of the issuance date of the convertible note and
continuing monthly thereafter. Pursuant to this note, we recorded a debt
discount of $130,000, as a result of the embedded conversion feature being a
financial derivative. We also recorded a debt discount of $11,305 as a result of
the 8% original issue discount. We determined that the fair value of the
conversion feature was $307,439 at the issuance date. The fair value of the
conversion feature in excess of the principal amount allocated to the notes of $194,396 was expensed immediately as additional interest expense. During the nine months ended September 30, 2015, we recorded $97,227 amortization of the debt discount on the note.
On July 10, 2015, we entered into a convertible note for an aggregate principal amount of $69,000 with $4,000 in deferred financing costs for broker fees. The note is convertible any time after 180 days from issuance at 62% of the average of
the lowest three (3) trading prices of the Company’s common stock during the thirty (30) trading days prior to the conversion date. The note earns an interest rate equal to 8% per annum and matures on April 30, 2016. During the nine months
ended September 30, 2015, the Company recorded $8,005 amortization of the debt discount on the note.
On July 27, 2015, we entered into a convertible note for an aggregate principal amount of $45,000 with $2,250 in deferred financing costs for broker fees. The note is convertible at 62% of the lowest trading price of the Company’s
common stock during the fifteen (15) trading days prior to the conversion date. The note earns an interest rate equal to 8% per annum and matures on July 27, 2016. During the nine months ended September 30, 2015, the Company recorded $3,045
amortization of the debt discount on the note.
On August 31, 2015, the Company entered into a convertible note for an aggregate principal amount of $44,000 with a $4,000 original issue discount ("OID"). The note is convertible at 60% of the lowest trading price of the Company’s
common stock during the 20 trading days prior to the conversion date. The note earns an interest rate equal to 12% per annum and matures on August 31, 2017. During the nine months ended September 30, 2015, the Company recorded $1,806
amortization of the debt discount on the note.
On September 3, 2015, the Company entered into a convertible note for an aggregate principal amount of $41,000 with a $4,000 original issue discount ("OID"). The note is convertible at 60% of the lowest trading price of the Company’s
common stock during the 20 trading days prior to the conversion date. The note earns an interest rate equal to 10% per annum and matures on September 3, 2016. During the nine months ended September 30, 2015, the Company recorded $345
amortization of the debt discount on the note.
On September 30, 2015, the Company issued entered into a convertible note with Union Capital for an aggregate principal amount of $117,476. The note was issued to settle the $112,000 Macallan Partners note and $5,476 of interest accrued
on the note. The note earns an interest rate equal to 8% per annum and matures on September 30, 2017. The note is convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the date of
conversion. During the nine months ended September 30, 2015, the Company recorded $45 amortization of the debt discount on the note.
On September 30, 2015, the Company issued entered into a convertible note with Union Capital for an aggregate principal amount of $64,674. The note earns an interest rate equal to 8% per annum and matures on September 30, 2017. The note is
convertible at 60% of the lowest trading price of the Company’s common stock during the 20 trading days prior to the date of conversion. During the nine months ended September 30, 2015, the Company recorded $27 amortization of the debt
discount on the note.
Given our cash position of $1,100 as of November 18, 2015, and the proceeds from our convertible debt and equity financings, management believes that our cash on hand and working capital are sufficient to meet our current anticipated cash
requirements through November 25, 2015.
During the quarter ended September 30, 2015, we funded our operations from the proceeds of private sales of equity and convertible notes and debentures. During the quarter ended September 30, 2015, we generated revenues of $0 and we received an
aggregate of $ 331,000 from financing activities.
During the quarter ended September 30, 2015, an aggregate of $ 270,877 in outstanding convertible promissory notes were converted into shares of the Company and as of September 30, 2015, convertible promissory notes in the aggregate principal
amount of $ 894,880 remained outstanding.
We have incurred an accumulated loss of $5,785,486 since inception. There is 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. We are targeting an additional $500,000 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 sufficient amounts of working capital through debt or equity offerings, as may be required to meet our short-term obligations. However, the incurrence of indebtedness would result in increased
debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Additionally, 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 and December 11, 2014, and the convertible debentures issued during 2015. Changes in our operating plans, increased expenses, acquisitions,
or other events, may cause us to seek additional equity or debt financing in the future. We anticipate continued and
additional marketing, development and distribution expenses. Accordingly, we
expect to continue to use debt and equity financing to fund operations for the
next twelve months, as we look to expand our asset base and fund marketing,
development and distribution of our products.
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.
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.
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 September 30, 2015, 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 September 30,
2015 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 September 30, 2015 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
On July 9, 2015, we issued a convertible note to Redwood
Management for a principal amount of $141,305 with a $11,305 original issue
discount. The note earns an interest rate equal to 12% per annum and matures on
June 15, 2016. The note is convertible at the lower of $0.10 or 70% of the
lowest traded price of our common stock during the 25 trading days prior to the
date of conversion.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
On August 14, 2015,
we issued seven warrants to purchase an aggregate of 12,344,002 shares of our
common stock (the Warrants). The Warrants have identical terms, except for
variations in the exercise price, and are exercisable for a period of five
years.
The issuance of the Warrants was exempt from the registration
requirements of the Securities Act pursuant to the exemption for transactions by
an issuer not involved in any public offering under Section 4(a)(2) of the
Securities Act and Rule 506 of Regulation D.
On August 31, 2015, we entered into a convertible note for an
aggregate principal amount of $44,000 with a $4,000 original issue discount
("OID"). The note is convertible at 60% of the lowest trading price of our
common stock during the 20 trading days prior to the conversion date. The note
earns an interest rate equal to 12% per annum and matures on August 31,
2017.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
On September 3, 2015, we entered into a convertible note for an
aggregate principal amount of $41,000 with a $4,000 original issue discount
("OID"). The note is convertible at 60% of the lowest trading price of our
common stock during the 20 trading days prior to the conversion date. The note
earns an interest rate equal to 10% per annum and matures on September 3,
2016.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
On September 30, 2015, we issued entered into a convertible
note with Union Capital for an aggregate principal amount of $117,476. The note
was issued to settle the $112,000 Macallan Partners note and $5,476 of interest
accrued on the note. The note earns an interest rate equal to 8% per annum and
matures on September 30, 2017. The note is convertible at 60% of the lowest
trading price of our common stock during the 20 trading days prior to the date
of conversion.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
On September 30, 2015, we entered into an additional
convertible note with Union Capital for an aggregate principal amount of $64,674
with $8,674 in deferred financing costs for broker fees. The note earns an
interest rate equal to 8% per annum and matures on September 30, 2017. The note
is convertible at 60% of the lowest trading price of our common stock during the
20 trading days prior to the date of conversion.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
Subsequent to the quarter ended September 30, 2015, on October
23, 2015, we issued an 8% Convertible Redeemable Note, in the aggregate
principal amount of $50,000. The note is convertible at 60% of the lowest
trading price of the Companys common stock during the twenty trading days prior
to the conversion date. The note earns an interest rate equal to 8% per annum
and matures on October 23, 2017.
The issuance of the convertible note was exempt from the
registration requirements of the Securities Act pursuant to the exemption for
transactions by an issuer not involved in any public offering under Section
4(a)(2) of the Securities Act and Rule 506 of Regulation D.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Effective November 16, 2015, we increased the total number of
authorized shares of common stock from 2,000,000,000 to 4,000,000,000 through
the filing of a Certificate of Amendment to our Articles of Incorporation (the
Certificate of Amendment). As previously disclosed in our Schedule 14C
Information Statement filed with the Securities and Exchange Commission on March
20, 2015, on October 26, 2015, our board of directors approved the increase and
on October 14, 2015 two stockholders holding an aggregate of 5,000,000 shares of
our issued and outstanding Series A Convertible Preferred Stock (51% of the
voting power of the outstanding capital stock and 100% of the outstanding
preferred stock), took action by written consent for the purpose of approving
the Certificate of Amendment.
14
Item 6. Exhibits.
Exhibit |
|
No. |
Description |
|
|
3.1(a) |
Articles of
Incorporation (incorporated by reference to our Annual Report on Form 10-K
filed on April 16, 2015). |
|
|
3.1(b) |
Certificate of Amendment to Articles of Incorporation* |
|
|
3.2 |
By-laws
(incorporated by reference to our Registration Statement on Form S-1, as
filed with the SEC on June 25, 2010). |
|
|
10.1 |
Form of Warrant. * |
|
|
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: November 23, 2015 |
By: |
/s/ Lisa Ziomkowski-Boten |
|
|
|
|
|
Lisa Ziomkowski-Boten |
|
|
Treasurer (Principal Financial
Officer and Principal |
|
|
Accounting Officer)
|
Exhibit 3.1(b)
Exhibit 10.1
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS
SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
WORLD MOTO, INC.
Warrant Shares: _______ |
Initial Exercise Date: |
August 19, 2015 |
|
THIS
COMMON STOCK PURCHASE WARRANT (the Warrant) certifies that, for value
received, Aegis Capital Corp. or its assigns (the Holder) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the Initial
Exercise Date) and on or prior to the close of business on the five (5)
year anniversary of the Initial Exercise Date (the Termination Date)
but not thereafter, to subscribe for and purchase from World Moto, Inc., a
Nevada corporation (the Company), up to ___________ shares (as subject
to adjustment hereunder, the Warrant Shares) of Common Stock. The
purchase price of one share of Common Stock under this Warrant shall be equal to
the Exercise Price, as defined in Section 1(b).
Section
1. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed copy of the Notice of
Exercise form annexed hereto and within three (3) business days of the date said
Notice of Exercise is delivered to the Company, the Company shall have received
payment of the aggregate Exercise Price of the shares thereby purchased by wire
transfer or cashiers check drawn on a United States bank or, if available,
pursuant to the cashless exercise procedure specified in Section 1(c) below.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within three (3) business days of the date the
final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases. The Company
shall deliver any objection to any Notice of Exercise Form within one (1)
business day of receipt of such notice. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.
2
b) Exercise Price. The exercise price per share of the Common Stock under
this Warrant shall be $___ subject to adjustment hereunder (the
Exercise Price).
c) Cashless Exercise. If at any time after the six (6) month anniversary of
the Initial Exercise Date, there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the Warrant
Shares by the Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a cashless exercise in which the Holder shall
be entitled to receive a number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:
|
(A) = |
the volume weighted average price (VWAP) on the
business day immediately preceding the date on which Holder elects to
exercise this Warrant by means of a cashless exercise, as set forth in
the applicable Notice of Exercise; |
|
|
|
|
(B) = |
the Exercise Price of this Warrant, as adjusted
hereunder; and |
|
|
|
|
(X) = |
the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a cashless
exercise. |
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section 1(c).
d) Mechanics of Exercise.
i. Delivery of Warrant
Shares Upon Exercise. Warrant Shares purchased hereunder shall be
transmitted by the Companys transfer agent (the Transfer Agent) to the
Holder by crediting the account of the Holders prime broker with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system
(DWAC) if the Company is then a participant in such system and either
(A) there is an effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the
shares are eligible for resale by the Holder without volume or manner-of-sale
limitations pursuant to Rule 144, and otherwise by physical delivery to the
address specified by the Holder in the Notice of Exercise by the date that is
three (3) business days after the latest of (A) the delivery to the Company of
the Notice of Exercise, (B) surrender of this Warrant (if required), and (C)
payment of the aggregate Exercise Price as set forth above (including by
cashless exercise, if permitted) (such date, the Warrant Share Delivery
Date). The Warrant Shares shall be deemed to have been issued, and Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised, with payment to the Company of the Exercise Price
(or by cashless exercise, if permitted) and
all taxes required to be paid by the Holder, if any, pursuant to Section
1(d)(vi) prior to the issuance of such shares, having been paid.
3
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the
Company fails to cause the Transfer Agent to transmit to the Holder the Warrant
Shares pursuant to Section 1(d)(i) by the second business day following the
Warrant Share Delivery Date, then the Holder will have the right to rescind such
exercise.
iv. Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In addition
to any other rights available to the Holder, if the Company fails to cause the
Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an
exercise on or before the second business day following the Warrant Share
Delivery Date, and if after such date the Holder is required by its broker to
purchase (in an open market transaction or otherwise) or the Holders brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a Buy-In), then the Company shall (A) pay in cash
to the Holder the amount, if any, by which (x) the Holders total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case
such exercise shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In
and, upon request of the Company, evidence of the amount of such loss. Nothing
herein shall limit a Holders right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Companys
failure to timely deliver shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
v. No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. As to any fraction of a share which
the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the Exercise
Price or round up to the next whole share.
vi. Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in respect of the issuance of Warrant
Shares, all of which taxes and expenses shall be paid by the Company, and such
Warrant Shares shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in
the event that Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be accompanied by
the Assignment Form attached hereto duly executed by the Holder and the Company
may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto. The Company shall pay all
Transfer Agent fees required for same-day processing of any Notice of Exercise.
4
e) Holders Exercise
Limitations. The Company shall not effect any exercise of this Warrant, and
a Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section 1 or otherwise, to the extent that after giving effect to
such issuance after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holders affiliates, and any other persons acting
as a group together with the Holder or any of the Holders affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the Holder
or any of its affiliates, and (ii) exercise or conversion of the unexercised or
non-converted portion of any other securities of the Company (including, without
limitation, any other any securities of the Company or its subsidiaries which
would entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock, or
Common Stock Equivalents) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially owned by
the Holder or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 1(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
Exchange Act), it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 1(e) applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holders determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 1(e), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
reflected in (A) the Companys most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two business days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its affiliates since the
date as of which such number of outstanding shares of Common Stock was reported.
The Beneficial Ownership Limitation shall be 4.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant. The
Holder, upon not less than 61 days prior notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 1(e),
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this Section 1(e) shall continue to
apply. Any such increase or decrease will not be effective until the
61st day after such notice is delivered to the Company. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 1(e) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
5
Section
2. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 2(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Pro Rata Distributions.
During such time as this Warrant is outstanding, if the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a Distribution), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the
extent that the Holders right to participate in any
such Distribution would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of
Common Stock as a result of such Distribution to such extent) and the portion of
such Distribution shall be held in abeyance for the benefit of the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).
6
c) Fundamental Transaction. If,
at any time while this Warrant is outstanding, (i) the Company, directly or
indirectly, in one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its assets in one
or a series of related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer is completed pursuant to which holders of
Common Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more
of the outstanding Common Stock, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another person or
group of persons whereby such other person or group acquires more than 50% of
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the other person or other persons making or party to, or associated or
affiliated with the other persons making or party to, such stock or share
purchase agreement or other business combination) (each a Fundamental
Transaction), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and any additional consideration (the
Alternate Consideration) receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 1(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a Rule 13e-3
transaction as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, the Company or any Successor Entity (as defined below)
shall, at the Holders option, exercisable at any time concurrently with, or
within 30 days after, the consummation of the Fundamental Transaction, purchase
this Warrant from the Holder by paying to the Holder an amount of cash equal to
the Black Scholes Value of the remaining unexercised portion of this Warrant on
the date of the consummation of such Fundamental Transaction. Black Scholes
Value means the value of this Warrant based on the Black and Scholes Option
Pricing Model obtained from the OV function on Bloomberg, L.P.
(Bloomberg) determined as of the day of consummation of the applicable
Fundamental Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
time between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the business day immediately following the public announcement
of the applicable Fundamental Transaction, (C) the underlying price per share
used in such calculation shall be the sum of the price per share being offered
in cash, if any, plus the value of any non-cash consideration, if any, being
offered in such Fundamental Transaction and (D) a remaining option time equal to
the time between the date of the public announcement of the applicable
Fundamental Transaction and the Termination Date. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company is not the
survivor (the Successor Entity) to assume in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 2(c) pursuant to
written agreements in form and substance reasonably satisfactory to the Holder
and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Warrant a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this
Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares
of Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into account the
relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares
of capital stock and such exercise price being for the purpose of protecting the
economic value of this Warrant immediately prior to the consummation of such
Fundamental Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents referring to the Company
shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company
under this Warrant and the other Transaction Documents with the same effect as
if such Successor Entity had been named as the Company herein.
7
d) Calculations. All calculations under this Section 2 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 2, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.
Section
3. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities
laws and the conditions set forth in Section 3(d) hereof, this Warrant and all
rights hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. The Warrant, if properly assigned
in accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
8
b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 3(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall
be dated the Exercise Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the Warrant
Register), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
d) Representation by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the
Securities Act.
Section 4. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle
the Holder to any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section 1(d)(i), except
as expressly set forth in Section 3.
b) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a business day,
then, such action may be taken or such right may be exercised on the next
succeeding business day.
9
d) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered and the Holder does not
utilize cashless exercise, will have restrictions upon resale imposed by state
and federal securities laws.
e) Notices. Any notice required
or permitted by this Warrant shall be in writing and shall be deemed sufficient
upon receipt, when delivered personally or by courier, overnight delivery
service or confirmed facsimile, or forty-eight (48) hours after being deposited
in the regular mail as certified or registered mail (airmail if sent
internationally) with postage prepaid, addressed (a) if to the Holder, to the
address of the Holder most recently furnished in writing to the Company and (b)
if to the Company, to the address set forth below or subsequently modified by
written notice to the Holder.
f) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
g) Successors and Assigns.
Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors and permitted assigns of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are intended to be
for the benefit of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
h) Amendment. This Warrant may
be modified or amended or the provisions hereof waived with the written consent
of the Company and the Holder.
i) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.
j) Headings. The headings used
in this Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
10
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized as of the date first above
indicated.
WORLD MOTO, INC.
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By: |
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Name: Paul Giles |
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Title: Chief Executive Officer |
11
NOTICE OF EXERCISE
TO: WORLD MOTO, INC.
(1) The undersigned hereby elects to purchase
________ Warrant Shares of the Company pursuant to the terms of the attached
Warrant (only if exercised in full), and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable
box):
[ ] in lawful money of the
United States; or
[ ] [if permitted the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 1(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 1(c).
(3) Please issue said Warrant Shares in the name of the
undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC
Account Number:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an accredited investor as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity: __________________________________________________
Signature of Authorized
Signatory of Investing Entity: ____________________________
Name of Authorized Signatory: ______________________________________________
Title
of Authorized Signatory: _______________________________________________
Date: __________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and
supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of
or [_______] shares of the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address
is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holders Signature:
_____________________________
Holders Address:
_____________________________
_____________________________
Signature Guaranteed:
___________________________________________
NOTE: The signature to this Assignment Form must correspond
with the name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.
Exhibit 31.1
OFFICERS CERTIFICATE
PURSUANT TO SECTION 302
I, Paul Giles, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of
World Moto, Inc. for the period ended September 30, 2015; |
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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; |
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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; |
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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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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: November 23, 2015
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 Quarterly Report on Form 10-Q of
World Moto, Inc. for the period ended September 30, 2015; |
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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; |
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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; |
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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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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: November 23, 2015
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 Quarterly
Report on Form 10-Q of World Moto, Inc. (the Company) for the period ended
September 30, 2015 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:
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1. |
The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
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2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: November 23, 2015
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 Quarterly
Report on Form 10-Q of World Moto, Inc. (the Company) for the period ended
September 30, 2015 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 |
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2. |
The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operation
of the Company. |
Date: November 23, 2015
By: /s/ Lisa Ziomkowski-Boten
Name:
Lisa Ziomkowski-Boten
Title: Treasurer (Principal Financial
Officer and Principal Accounting Officer)