Quarterly Report (10-q)

Date : 11/19/2019 @ 10:05PM
Source : Edgar (US Regulatory)
Stock : 2050 Motors, Inc. (PC) (ETFM)
Quote : 0.0002  0.0 (0.00%) @ 3:49PM

Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File No. 001-13126

 

2050 MOTORS, INC.

(Exact name of small business issuer as specified in its charter)

 

CALIFORNIA   5511   83-3889101

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

25 N River Lane Suite 2050, Geneva, IL 60134

(Address of principal executive offices)

 

(630) 708-0750

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically 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). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ]

Smaller reporting company [X]

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

The number of shares of Common Stock (no par value) of the registrant outstanding was 1,803,560,305 at November 19, 2019. The number of shares of Series A Preferred Stock ($0.0001 par value and that each convert into one share of common stock) of the registrant outstanding was 3,000,000 at November 19, 2019. The number of shares of Series B Preferred Stock ($0.0001 par value and that each convert into 1,000 shares of common stock) of the registrant outstanding was 525,000 at November 19, 2019. The number of shares of Series C Preferred Stock ($0.0001 par value and that each convert into one share of common stock) of the registrant outstanding was 1,000,000 at November 19, 2019. The market value of common shares outstanding as of November 19, 2019 was $360,712.

 

 

 

     
 

 

2050 MOTORS, INC.

 

QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2019

 

TABLE OF CONTENTS

 

  PAGE
   
Part I. FINANCIAL INFORMATION:  
   
Item 1. Financial Statements: 3
   
Condensed Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018 4
   
Condensed Statements of Operations (unaudited) for the Three and Nine Months ended September 30, 2019 and 2018 5
   
Condensed Statement of Stockholders’ Deficit Three Months and Nine Months ended September 30, 2019 and 2018 6
   
Condensed Statements of Cash Flows (unaudited) for the Nine Months ended September 30, 2019 and 2018 7
   
Notes to Condensed Financial Statements (unaudited) 8
   
Item 2. Management’s Discussion and Analysis and Plan of Operation 16
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
   
Item 4. Controls and Procedures 19
   
Part II. OTHER INFORMATION:  
   
Item 1. Legal Proceedings 19
   
Item 1A. Risk Factors 19
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
   
Item 3. Defaults Upon Senior Securities 20
   
Item 4. Mine Safety Disclosures 20
   
Item 5. Other Information 20
   
Item 6. Exhibits 20
   
SIGNATURES 21
   
EXHIBIT INDEX 22

 

  2  
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

2050 MOTORS, INC.

 

INDEX TO FINANCIAL STATEMENTS

 

Condensed Balance Sheets, September 30, 2019 (unaudited) and December 31, 2018 4
   
Condensed Statements of Operations (unaudited), for the Three and Nine Months ended September 30, 2019 and 2018 5
   
Condensed Statements of Stockholders’ Deficit for the Three and Nine Months ended September 30, 2019 and 2018 6
   
Condensed Statements of Cash Flows (unaudited), for the Nine Months ended September 30, 2019 and 2018 7
   
Notes to Condensed Financial Statements (unaudited) 8

 

  3  
 

 

2050 Motors, Inc.

Condensed Balance Sheets

(Unaudited)

 

    As of     As of  
    September 30, 2019     December 31, 2018  
Assets                
                 
Current assets                
Cash     10,083       1  
Total current assets     10,083       1  
                 
Other assets:                
Investments     306,220          
                 
Total assets   $ 316,303     $ 1  
                 
Liabilities and stockholders’ deficit                
                 
Liabilities                
                 
Current liabilities                
Accounts payable   $ 26,800     $ 22,049  
Tax payable     -       2,864  
Accrued expenses     640,600       626,299  
Accured interest on loans payable     31,039       49,740  
Loans payable due to non-related parties, net     151,187       250,019  
Deposits     21,947       21,947  
Derivative liablity     290,380       876,058  
Total current liabilities     1,161,953       1,848,976  
                 
Total liabilities     1,161,953       1,848,976  
                 
Stockholders’ deficit                
Common stock; no par value authorized: 3,000,000,000 shares at September 30, 2019 and December 31, 2018, respectively: issued and outstanding 1,704,395,805 at September 30, 2019 and 623,964,144 at December 31, 2018, respectively     3,654,844       3,405,360  
Preferred stock Class A; $0.0001 par value authorized: 3,000,000 shares at September 30, 2019 and December 31, 2018, respectively: issued and outstanding 3,000,000 at September 30, 2019 and December 31, 2018,respectively: discretionary 1% dividend     300       45,000  
Preferred stock Class B; $0.0001 par value authorized: 6,000,000 shares at September 30, 2019 and December 31, 2018, respectively: issued and outstanding 400,000 and 0 at September 30, 2019 and December 31, 2018,respectively: discretionary 1% dividend     40       -  
Preferred stock Class C; $0.0001 par value authorized: 1,000,000 shares at September 30, 2019 and December 31, 2018, respectively: and issued and outstanding 1,000,000 and 0 at September 30, 2019 and December 31, 2018,respectively: discretionary 1% dividend     100       -  
Additional paid-in-capital     978,415       536,356  
Accumulated deficit     (5,604,349 )     (5,960,691 )
Common stock issuable     125,000       125,000  
Total stockholders’ deficit     (845,650 )     (1,848,975 )
                 
Total liabilities and stockholders’ deficit   $ 316,303     $ 1  

 

The accompanying notes are an integral part of these financial statements

 

  4  
 

 

2050 Motors, Inc.

Condense Statement of Operations

(Unaudited)

 

    Three Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
                         
Operating revenue   $ -     $ -     $ -     $ -  
                                 
Operating expenses:     51,086       23,705       122,683       193,303  
General and administrative                                
                                 
Net loss from operations     (51,086 )     (23,705 )     (122,683 )     (193,303 )
                                 
Other income (expenses)                                
Interest expense     (26,923 )     (343,036 )     (210,182 )     (1,010,601 )
Loss on investment     -       -       -       -  
Impairment loss     -       (24,405 )     (130,000 )     (74,405 )
Derivative liability gain (loss)     70,735       (106,385 )     590,616       (108,091 )
Debt conversion gain (loss)     -       -       -       (179,980 )
Debt settlement gain (loss)     -       -       226,299       948  
Other income, net     -       -       -       1,000  
Total other income (expenses)     43,812       (473,826 )     476,733       (1,371,129 )
                                 
Income (loss) before income taxes     (7,274 )     (497,531 )     354,050       (1,564,432 )
                                 
Provision for income taxes             -               -  
                                 
Net income (loss)   $ (7,274 )   $ (497,531 )   $ 354,050     $ (1,564,432 )
                                 
Net income (loss) per share, basic and diluted   $ (0.0000 )   $ (0.0024 )   $ 0.0004     $ (0.010 )
                                 
Weighted average common equivalent share outstanding, basic and diluted     1,353,224,099       210,277,196       927,613,724       145,315,077  

 

The accompanying notes are an integral part of these financial statements

 

  5  
 

 

2050 Motors, Inc.

Condensed Statement of Stockholders’ Deficit

(Unaudited)

 

    Common Stock     Preferred Stock                          
                Class A     Class B     Class C     Common     Additional           Total  
    Number     No     Number     $0.0001     Number     $0.0001     Number     $0.0001     Stock     paid-in     Accumulated     stockholders’  
    of Shares     par value     of Shares     par value     of Shares     par value     of Shares     par value     Issuable     capital     deficit     deficit  
Balance, December 31, 2018     623,964,144     $ 3,405,360       3,000,000     $ 45,000       -     $ -       -     $ -     $ 125,000     $ 536,356       (5,960,691 )   $ (1,848,975 )
                                                                                                 
Conversion of convertible debt     98,106,500       28,210       -       -       -       -       -       -       -       -       -       28,210  
Net loss                                                                                     (959,091 )     (959,091 )
                                                                                                 
Balance, March 31, 2019     722,070,644       3,433,570       3,000,000       45,000       -       -       -       -       125,000       536,356       (6,919,782 )     (2,779,856 )
                                                                                                 
Conversion of convertible debt     84,541,300       84,541       -       -       -       -       -       -       -       (26,601 )     -       57,940  
Preferred Stock no par returned     -       -       (3,000,000 )     (45,000 )     -       -       -       -       -       -       -       (45,000 )
Preferred CL A Stock issued for investment     -       -       3,000,000       300       -       -       -       -       -       44,700       -       45,000  
Preferred CL B Stock issued for investment     -       -       -       -       400,000       40       -       -       -       423,960       -       424,000  
Preferred CL C Stock issued for investment     -       -       -       -       -       -       1,000,000       100       -       -       -       100  
                                                                                                 
Net income     -       -       -       -       -       -       -       -       -       -       1,322,707       1,322,707  
                                                                                                 
Balance, June 30, 2019     806,611,944       3,518,111       3,000,000       300       400,000       40       1,000,000       100       125,000       978,415       (5,597,075 )     (975,109 )
                                                                                                 
Conversion of convertible debt     897,783,861       136,733       -       -       -       -       -       -       -       -       -       136,733  
                                                                                                 
Net loss     -       -       -       -       -       -       -       -       -       -       (7,274 )     (7,274 )
                                                                                                 
Balance, September 30, 2019     1,704,395,805     $ 3,654,844       3,000,000     $ 300       400,000     $ 40       1,000,000     $ 100     $ 125,000     $ 978,415     $ (5,604,349 )   $ (845,650 )
                                                                                                 
Balance, December 31, 2017     47,860,512     $ 2,474,146       -     $ -       -     $ -       -     $ -     $ 140,000     $ 94,650     $ (4,059,248 )   $ (1,350,452 )
                                                                                                 
Extinquishment of derivative liability     -       -       -       -       -       -       -       -       -       263,395       -       263,395  
Reclassification of warrants to derivative liability     -       -       -       -       -       -       -       -       -       (42,900 )     -       (42,900 )
Equity offering costs     -       -       -       -       -       -       -       -       -       (9,375 )     -       (9,375 )
Shares issued for reduction of debt     54,954,114       160,728       -       -       -       -       -       -       -       -       -       160,728  
Shares issued for services     -       -       3,000,000       45,000       -       -       -       -       -       -       -       45,000  
Net loss     -       -       -       -       -       -       -       -       -       -       (1,491,467 )     (1,491,467 )
                                                                                                 
Balance, March 31, 2018     102,814,626       2,634,874       3,000,000       45,000       -       -       -       -       140,000       305,770       (5,550,715 )     (2,425,071 )
                                                                                                 
Conversion of convertible debt     38,222,700       204,599       -       -       -       -       -       -       -       -       -       204,599  
Conversion of related party loc     24,000,000       81,600       -       -       -       -       -       -       -       -       -       81,600  
Conversion of related party loans     12,640,000       31,600       -       -       -       -       -       -       -       -       -       31,600  
Extinquishment of derivative liability     -       -       -       -       -       -       -       -       -       239,961       -       239,961  
Amortization of issuance costs     -       -       -       -       -       -       -       -       -       (9,375 )     -       (9,375 )
Common stock issued for subscription     6,000,000       15,000       -       -       -       -       -       -       -       -       -       15,000  
Shares issued for services     5,000,000       12,500       -       -       -       -       -       -       (15,000 )     -       -       (2,500 )
Net loss     -       -       -       -       -       -       -       -       -       -       424,566       424,566  
                                                                                                 
Balance, June 30, 2018     188,677,326       2,980,173       3,000,000       45,000       -       -       -       -       125,000       536,356       (5,126,149 )     (1,439,620 )
                                                                                                 
Conversion of convertible debt     36,490,407       90,656       -       -       -       -       -       -       -       -       -       90,656  
Net loss     -       -       -       -       -       -       -       -       -       -       (497,531 )     (497,531 )
                                                                                                 
Balance, September 30, 2018     225,167,733     $ 3,070,829       3,000,000     $ 45,000       -     $ -       -     $ -     $ 125,000     $ 536,356     $ (5,623,680 )   $ (1,846,495 )

 

The accompanying notes are an integral part of these financial statements

 

  6  
 

 

2050 Motors, Inc.

Condensed Statement of Cash Flows

(Unaudited)

 

    Nine Months Ended  
    September 30, 2019     September 30, 2019  
Cash flows provided by (used for) operating activities:                
Net income (loss)   $ 354,050     $ (1,564,432 )
Adjustments to resoncile net loss to net cash provided by (used for) operating activities:                
Depreciation     -       20,274  
Amortization of debt discount     244,085       199,713  
Amortization of deferred finance costs     -       12,930  
Impairment loss     130,000       74,405  
Penalty interest expense on non-related loan payables     -       514,549  
Debt settlement (income) loss     (226,299 )     179,980  
Issuance of common stock for services     (100 )     12,500  
Issuance of preferred stock for services     -       45,000  
Derivative liability adjustment     (583,032 )     108,091  
Interest expensse from initial derivative liability     -       160,386  
Loss on investment     -       -  
Increase (decrease) in assets and liabilities:                
Accounts payable     4,751       4,243  
Income tax payable     -       (800 )
Accrued expenses     14,301       -  
Tax payable     (2,864 )     -  
Deposits             (21,920 )
Accrued interest on loans payable     -       66,081  
                 
Net cash used for operating activities     (65,108 )     (189,000 )
                 
Cash flows provided by (used for) Investing activities                
                 
Cash flows provided by (used for) Financing activities                
Proceeds from non-related loans     75,190       197,500  
Proceeds from sale of common stock     -       -  
Payments made on revolving line of credit from related party     -       (8,867 )
                 
Net cash provied by (used for) financing activities     75,190       188,633  
                 
Net (decrease increase in cash     10,082       (367 )
Cash, beginning of period     1       499  
                 
Cash, end of period   $ 10,083     $ 132  
                 
Supplemental disclosure of cash flow information                
Amortization of deferred finance cost from non-cash transaction   $ -     $ 21,730  
Common stock issued for debt   $ 28,819     $ 478,527  
Debt discount from convertible loan   $ 40,500     $ 88,389  
Reclassification of derivative liabilitiy   $ 39,852     $ 500,987  
Interest paid   $ -     $ 33,848  

 

The accompanying notes are an integral part of these financial statements

 

  7  
 

 

2050 MOTORS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1 – BASIS OF PRESENTATION AND ORGANIZATION

 

2050 Motors, Inc. (“2050 Motors” or “the Company”) is the successor to an entity incorporated on April 22, 1986 in the state of California. 2050 Motors, Inc., the Company’s sole operating subsidiary by the same name, was incorporated on October 9, 2012 in the state of Nevada to import, market, and sell electric cars manufactured in China. On May 2, 2014, 2050 Motors, Inc. (Nevada) sold its business, operations and assets to the Company, whose sole business at the time was to identify, evaluate, and investigate various companies to acquire or with which to merge. Upon consummation of the acquisition of 2050 Motors, Inc., the Company’s sole business became the business of the Company and the public Company renamed itself “2050 Motors, Inc.”

 

On October 25, 2012, 2050 Motors entered into an agreement with Jiangsu Aoxin New Energy Automobile Co., Ltd., (“Aoxin”), located in Jiangsu, China, for the distribution in the United States of a new electric automobile, known as the “e-Go”. This Agreement was amended in 2017 to exclude certain markets in Central America and South America. Our principal business objective has historically been to achieve long-term growth through 2050 Motors, Inc.

 

On or around March 6, 2019, William Fowler resigned as our CEO and Director and Bernd Schaefers resigned as our Director. On or around March 6, 2019, we appointed Vikram Grover as CEO and sole Director (for further information, refer to our Form 8-K filed on March 7, 2019 with the SEC).

 

On or around March 6, 2019, as part of its management transition plan, the Company agreed to transfer to prior Management eighty (80) percent ownership of its Nevada subsidiary, 2050 Motors (“2050 Private” or “TFPC”) in exchange for a corporate note from TFPC in the amount of fifty thousand dollars at 8% interest per annum to be paid out of net profits. 2050 Motors (2050 Public) agreed to appoint William Fowler as President of 2050 Private to raise operating capital for expenses to negotiate terms and conditions to maintain Exclusive License with Aoxin Motors. Subsequent to the change of control and based on due diligence on TFPM and the status of the Aoxin Motors relationship, on or around April 2, 2019, we terminated the transaction as we deemed that it was not in the best interests of shareholders. We continue to demand information regarding TFPC from former management but have received unresponsive and unsatisfactory responses to our inquiries.

 

On May 2, 2019, we engaged Markup Designs Pvt. Ltd. (“MDPL”; https://www.markupdesigns.com), a global Web and mobile application development company, to design and build a social network to be named “KANAB CLUB” (www.kanab.club) targeting the global cannabis market. On May 13, 2019, we completed an initial payment to MDPL, mandating them to deploy a home page with launch information and sign-up capabilities for customers and to complete a working Web platform during summer and fall 2019. After coding industry-standard social media functionality, we intend to add an online marketplace, 420 dating services, discussion forums, rewards programs/points including potential utility crypto coins, differentiated advertising and navigation capabilities, and Android/iOS mobile applications to the platform.

 

Since new management was appointed in March 2019, we have expanded our mission statement to invest in, incubate and accelerate businesses in the communications, energy, electric vehicle, and Internet industries (for further information, see Note 12 - Subsequent Events, and our previously filed Form 8-K, 10-Q and 10-K filings with the Securities and Exchange Commission).

 

The condensed interim financial statements included herein, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

 

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These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not indicative of annual results.

 

Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain 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 reporting period. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

We adopted ASC Topic 820, “Fair Value Measurements and Disclosures,”, which requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of valuation hierarchy are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

The Company’s investment in Mobicard Inc., see Note 4, is actively traded on the pink sheets.

 

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs to the valuation methodology are unobservable in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Derivative Financial Instruments-Level 3

 

Derivatives are recorded on the condensed balance sheet at fair value. The conversion features of the convertible notes are embedded derivatives and are separately valued and accounted for on the balance sheet with changes in fair value recognized during the period of change as a separate component of other income/expense. We use the binomial option-pricing model for determining the fair value of our derivatives. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income.

 

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Assets and liabilities measured at fair value are as follows as of September 30, 2019

 

    Total     Level 1     Level 2     Level 3  
Assets                                    
Investments   $ 243,220     $ 243,220     $ -     $ -  
Total assets measures at fair value   $ 243,220     $ 243,220       -     $ -  
                                 
Liabilities                                
Derivative liability   $ 290,380     $ -     $ -       290,380  
Total liabilities measured at fair value   $ 290,380     $ -     $ -       290,380  

 

Assets and liabilities measured at fair value are as follows as of September 30, 2018:

 

    Total     Level 1     Level 2     Level 3  
Liabilities                                         
Derivative liability   $ 958,930     $ -     $ -     $ 958,930  
Total liabilities measured at fair value   $ 958,930     $ -     $ -     $ 958,930  

 

The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value:

 

Balance as of December 31, 2018   $ 876,058  
Fair value of derivative liabilities issued     134,115  
Loss on change in derivative liabilities     (662,464 )
Reclassify to equity upon payoff or conversion     (57,329 )
Balance as of September 30, 2019   $ 290,380  

 

Earnings Per Share (EPS)

 

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later). During the three-month periods ended September 30, 2019 and September 30, 2018, the Company generated no revenues and incurred substantial losses, of which the vast majority were due to mostly non-cash charges for accrued interest, penalties and derivative charges related to convertible debt instruments. Therefore, the effect of any common stock equivalents on EPS is anti-dilutive during those periods.

 

Concentration of Credit Risk

 

Cash is mainly maintained by one highly qualified institution in the United States. At no time were such amounts in excess of federally insured limits. Management does not believe that the Company is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Company has not experienced any losses on our deposits of cash.

 

Recently Adopted Accounting Policies:

 

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. For public companies, ASU 2016-02 was effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The implementation of ASU 2016-02 did not have a material effect on the Company’s consolidated financial statements.

 

Reclassification

 

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no material effect on the reported results of operations or cash flow.

 

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Note 3 – GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern. The Company reported an accumulated deficit of $5,604,349 as of September 30, 2019. The Company also had negative working capital of $1,151,870 at that date. To date, these losses and deficiencies have been financed principally through the issuance of common stock, loans from related parties and from third parties.

 

In view of the matters described above, there is substantial doubt as to the Company’s ability to continue as a going concern without a significant infusion of capital. We anticipate that we will have to raise additional capital to fund operations over the next 12 months. To the extent that we are required to raise additional funds to acquire properties, and to cover costs of operations, we intend to do so through additional offerings of debt or equity securities. There are no commitments or arrangements for other offerings in place, no guaranties that any such financings will be forthcoming, or as to the terms of any such financings. Any future financing will involve substantial dilution to existing investors.

 

Note 4 - INVESTMENTS

 

During the three months ended June 30, 2019, the Company issued 400,000 share of preferred class B stock in exchange for 210,000,000 shares of Mobicard Inc. The shares were valued at the market price of $0.0023 per share, or $483,000,at the acquisition date. The shares are currently valued at the market price of $0.0015 per share at September 30, 2019 for a total investment of $306,220, resulting in a loss of $176,780.

 

During the three months ended June 30, 2019, the Company received 1,000,000 shares of Kanab Corp. for consulting services provided by the Company’s CEO, Vikram Grover. The shares were valued at $0.0001 per share.

 

Note 5 – VEHICLE DEPOSITS

 

Based on recent conversations with Aoxin and former management, we took an impairment charge for the vehicle deposit of $24,405.00 and wrote this asset down to $0 in the fourth quarter of 2018. Further, during the three-month period ended June 30, 2019, we terminated all discussions and agreements with Aoxin Motors and exited the market for importation of electric vehicles from China.

 

Note 6 – LICENSE AGREEMENT

 

In 2012 and 2013, the Company made a total payment of $50,000.00 in connection with an executed exclusive license agreement with Aoxin to import, assemble and manufacture an advanced carbon fiber electric vehicle called the “e-Go”. The cost of this license agreement was recognized as a long-term asset and was evaluated for impairment losses at the end of each reporting period. As of March 31, 2018, impairment losses related to this license of $50,000 were identified by management, and as a result we wrote off the value of the Aoxin license. During the three months ended June 30, 2019, we terminated all discussions with Aoxin regarding importation of electric automobiles and related parts and equipment from China into the United States.

 

Note 7 – LOANS PAYABLE DUE TO RELATED PARTIES

 

As of December 31, 2018, all related party loans and associated interest and penalties were converted into common equity. Current management has demanded documentation of the providence of these loans. Management is reviewing legal options for recovery of these shares and has placed a stop action order on these shares with the Company’s transfer agent. At September 30, 2019 there were no outstanding loans to related parties.

 

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Note 8 – CONVERTIBLE NOTE PAYABLES

 

The Company had convertible note payables with several third parties with stated interest rates ranging between 10% and 12% and 22% default interest not including penalties. These notes have a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands; accordingly, the conversion option has been treated as a derivative liability in the accompanying interim financial statements. As of September 30, 2019, the Company had the following third-party convertible notes outstanding:

 

    Lender   Origination     Maturity     Amount     Interest  
                             
Note #1*   Auctus     1/6/17       2/6/18     $ 59,413       22.0 %
Note #2*   Crown Bridge     9/15/17       9/15/18       5,422       10.0 %
Note #4*   PowerUp 8     4/27/18       2/15/19       32,250       22.0 %
Note #5*   Jabro 1     7/23/18       4/30/19       21,000       12.0 %
Note #6*   Jabro 2      10/01/18       7/15/19       11,500       12.0 %
Note #7*   PowerUp 9     11/01/18       8/30/19       14,700       22.0 %
Note #8*   PowerUp 10     3/08/19       01/15/20       28,000       22.0 %
Note #9*   Other     3/16/17       4/1/18       10,000       12.0 %
Note #10*   Tri-Bridge     3/15/19       9/15/19       46,808       12.0 %
Note #11   PowerUp 11     7/9/19       4/30/20       35,000       12.0 %
Note #12   GS Capital     9/6/19       9/6/20       35,000       12.0 %
Total                       $ 306,828          
less discount                         (155,641 )        
Net                       $ 151,187          

 

*Note is currently in default.

 

Note #1, issued on January 6, 2017, is in default and under the terms of the convertible promissory note, the Company is liable to pay 150% of the then outstanding principal and interest plus additional penalties for certain covenants that are breached. In addition to the note balance of $58,413 as of September 30, 2019, there are potential additional penalties and damages sought by the lender, which has filed a civil lawsuit against the Company.

 

During the nine months ended September 30, 2019, third-party lenders converted $136,733.64 of principal and interest into 897,783,861 shares of common stock.

 

The variables used for the Binomial model are as listed below:

 

    December 31, 2018   September 30, 2019
  Volatility: 253% - 286%   Volatility: 191% - 301%
         
  Risk free rate of return: 1.24%- 1.53%   Risk free rate of return: 1.93% - 1.99%
         
  Expected term: 1-3 years   Expected term: 1-10 months

 

The Company amortized a debt discount of $13,476 and $58,037 respectively, during the three-month periods ended September 30, 2019 and 2018 respectively, and $165,846 and $170,980, respectively during the nine-month periods ended September 30, 2019 and 2018, respectively. Interest expense accrued on third-party convertible notes was $13,476 and $284,999 for the three-month periods ended September 30, 2019 and 2018, respectively, and $814,411 and $839,621 for the nine months ended September 30, 2019 and 2018, respectively.

 

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Note 9 – COMMITMENTS AND CONTINGENCIES

 

Industrial Lease

 

Effective March 1, 2014, the Company signed a lease for four thousand square feet of industrial space in North Las Vegas. The term of the lease was for three years and cost $2,200 per month. The lease expired on April 30, 2017 and the Company was on a month to month lease thereafter. The lease was terminated as of June 30, 2018.

 

Rent expense amounted to $0 and $0 for the three-month periods ended September 30, 2019 and 2018, respectively. Rent expenses amounted to $0 and $13,400 for the six-month periods ended September 30, 2019 and 2018, respectively.

 

Aoxin License Agreement

 

Pursuant to a 2012 license agreement and 2017 amendment executed between the Company and Aoxin, in order to maintain exclusive rights for the United States (US), the Company was required to purchase and sell certain amount of e-Go model vehicles per year for a certain period of time starting from the completion of the requirements established by the United States Department of Transportation’s protocols for the e-Go. As part of the license agreement, the Company was committed to pay expenses related to any required airbag testing procedures.

 

Aoxin has been unable to procure a license to design, test and manufacture e-Go vehicles in China. Additionally, our representatives in China have been told by Aoxin that any such agreement and amendment has expired. Given these circumstances, during the three-month period ended March 31, 2018, we wrote down the value of the Aoxin license to $0 and associated vehicle deposits were fully impaired during the fourth quarter of 2018. During the three months ended June 30, 2019, based on failure to perform including a lack of a license to manufacture and export electric vehicles under our Agreement with them, we terminated all discussions and agreements with Aoxin Motors.

 

Legal Proceedings

 

The Company may from time to time, become a party to various legal proceedings, arising in the ordinary course of business. The Company investigates these claims as they arise. A third-party lender, Auctus Fund, LLC, served the Company notice of a civil lawsuit on November 1, 2019 seeking principal, interest and penalties of $283,000.00 related to a loan provided to the Company on or around January 6, 2017. Management is in discussions with Auctus Fund’s counsel and working to resolve the matter amicably, though there can be no assurances.

 

Note 10 – REVOLVING LINE OF CREDIT- RELATED PARTY

 

During 2018, the Company had a revolving line of credit agreement with a related party. The line amount was $100,000.00 and carried interest at 12% per annum, due on December 31, 2018 with a conversion option into restricted common stock of the Company. The note was convertible at 50% of the Average Market Price for the 15 previous trading days before the conversion notice date.

 

During the three-month period ended September 30, 2019, the Company made cash payments totaling $0 to principal and accrued interest. As of June 30, 2019, the balance outstanding on the loan was $0 as all remaining principal, interest and penalties due on the loan were converted into common shares during the fourth quarter of 2018.

 

Current management has demanded documentation of the providence of these loans. Management is reviewing legal options for recovery of these shares and has placed a stop action order on these shares with the Company’s transfer agent.

 

Note 11 – EQUITY

 

During the nine months ended September 30, 2019, third-party lenders converted $249,524 of principal and interest into 1,080,431,661 shares of common stock.

 

On March 6, 2019, our Board of Directors approved, and we filed a Certificate of Determination for with the Secretary of State of California, a new class of Series C Preferred Shares with a total of one million such shares authorized. Each share converts into one common share, has 10,000 votes on every corporate matter requiring a shareholder vote, has a par value of $0.0001, and pays an annual dividend at the option of the Company of $0.01. Subsequent to the end of the three months ended March 30, 2019, the Company issued one million Series C Preferred Shares to our CEO, Vikram Grover, as consideration for the change of control of the Company.

 

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On March 8, 2019, a third-party loaned the Company $28,000.00 in a 12% debenture that matures on January 15, 2020. The transaction netted the Company $25,000.00 after legal fees and due diligence expenses.

 

On April 7, 2019, our Board of Directors approved the creation of a new class of Series B Preferred Shares. A total of six million such shares were authorized. Each share converts into 1,000 common shares, votes on an as converted basis, has a par value of $0.001, and pays a cumulative annual dividend in cash or in kind of $0.01.

 

On April 8, 2019, we amended the terms of our existing Series A Preferred stock by changing the par value from nil to $0.0001 and establishing a $0.01 per share annual dividend to be approved by our Board of Directors each year. Each share remains convertible into one common share and has 50 votes on corporate matters. As part of the management transition plan announced in March 2019, two million Series A Preferred Shares were transferred from former owners to our current CEO, Vikram Grover. A total of three million Series A Preferred Shares are authorized, all of which are currently issued and outstanding. The financial statements were retroactively adjusted to give effect to this change in par value.

 

On April 22, 2019, we executed a letter of intent (LOI) to invest in and partner with ERide Club Corp. (ECC), a Company developing an Internet-based cloud platform to enable rentals and related services for the electric vehicle (EV) market, including automobiles, eBikes and mobility products. Upon delivery of a working beta system vetted by businesses, consumers and third-party testing, we will issue ECC 100,000 Series B Preferred shares convertible into 100 million common shares in return for 10% of the equity of ECC, with a right of participation on future financings by ECC through year-end 2020. Additionally, we will become a preferred marketing partner of ECC in the United States and provide ECC with a three-year option to perform a spin-out IPO to our shareholders. ECC expects to launch a first-generation version of the platform during 2019, after which time we will vet the system with our staff and advisors. The transaction is currently on hold pending our efforts to remain current in our filings and raise capital to fund our own operations.

 

On May 5, 2019, 2050 Motors, Inc. executed a Securities Purchase Agreement with our CEO, Vikram Grover, for an investment in the Company of $483,000 in the form of 210,000,000 free-trading common shares of Peer to Peer Network aka Mobicard Inc. The transaction closed on May 15, 2019. As consideration, the Company issued the investor 400,000 newly created 1% Cumulative Series B Preferred Shares, each of which bears a RESTRICTED CONTROL STOCK legend, is convertible into 1,000 common shares, and has 1,000 votes on corporate matters.

 

On May 13, 2019, the Company borrowed $12,500.00 pursuant to a convertible note agreement bearing an interest rate of 12% per annum and with a maturity date of September 15, 2019.

 

On May 14, 2019, our Board of Directors approved the dissolution of our wholly-owned subsidiary, 2050 Motors, Inc., a Nevada corporation doing business under the same name as our publicly traded company, 2050 Motors, Inc., a California corporation. Additionally, our Board of Directors approved the termination of any and all discussions and prior agreements with Aoxin Motors regarding the importation of electric vehicles to be made by Aoxin Motors in China into the United States. Our termination was driven by Aoxin Motors’ failure to obtain the necessary license(s) to manufacture e-GO electric vehicles, which have been under development since 2012. Accordingly, on May 14, 2019, we filed paperwork with the Secretary of State of Nevada to dissolve our wholly owned subsidiary, 2050 Motors, Inc., a Nevada corporation, and that dissolution went effective on or around May 17, 2019.

 

On May 15, 2019, based on due diligence and research by management and the Company’s advisors, the Board of Directors of 2050 Motors, Inc., a California corporation, approved stop action orders on 162,846,149 common shares held by former management, employees, affiliates and representatives of the Company. Accordingly, management has directed the Company’s transfer agent to prohibit the transfer or sale of any shares associated with their certificates. Pending investigation of the providence of these shares and proof of consideration for said shares, these shares will remain frozen indefinitely and subject to the Company’s powers of enforcement and the rules of law.

 

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On July 9, 2019, a third-party lender funded the Company $35,000.00 in the form of a 12% convertible debenture that matures April 30, 2020. The transaction netted the Company $32,000.00 after legal fees and due diligence expenses.

 

On September 6, 2019, a third-party lender funded the Company $35,000.00 in the form of a 12% convertible debenture that matures September 6, 2020. The transaction netted the Company $30,500.00 after legal fees and due diligence expenses.

 

During the year ended December 31, 2016, the Company agreed to issue 3,200,000 shares for services. Additionally, the Company agreed to issue 825,000 shares of common stock for marketing services. As of September 30, 2019, these shares are yet to be issued and have been recorded as common stock issuable.

 

Note 12 – WARRANTS AND OPTIONS

 

As of September 30, 2019, the Company has thirty million warrants with an exercise price of $0.01 and a three-year expiration issued and outstanding to three members of our Advisory Board who were added to that newly created committee during March - April 2019. Additionally, we issued ten million warrants with a strike price of $0.005 and a three-year expiration to EDGE FiberNet, Inc. as compensation for strategic consulting. Further, our CEO, Vikram Grover, was to be issued 100 million warrants with a strike price of $0.001 upon bringing the Company current with its SEC reporting requirements, with an additional 100 million warrants with a strike price of $0.001 due upon our common stock closing at or above $0.01 for ten consecutive trading sessions. On July 22, 2019, the Company was brought current with regard to its SEC reporting requirements, and as a result, the initial 100 million warrants are due to be issued to Vikram Grover. Vikram Grover, our CEO, has forfeited any right to receive the 100 million warrants to be issued for bringing the company current in its filings.

 

Note 13 – SUBSEQUENT EVENTS

 

On November 1, 2019, a third-party lender served us with a civil complaint seeking $283,000.00 in principal, interest and penalties for a loan provided to the Company on or around January 6, 2017 in the amount of $78,750.00. We are currently in discussions with the lender’s counsel to resolve this matter, though there can be no assurances we will be able to negotiate a favorable outcome.

 

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Item 2. Management’s Discussion and Analysis or Plan of Operation

 

Plan of Operations

 

This 10−Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

 

Plan of Operations

 

Prior to the completion of the acquisition of 2050 Motors, Inc., a Nevada corporation, (“2050 Motors”), on May 2, 2014, the Company had nominal assets whose sole business was to identify, evaluate, and investigate various companies to acquire or with which to merge. Upon consummation of the transaction with 2050 Motors, the Company’s business became the business of 2050 Motors, which is currently the Company’s sole operating subsidiary. Our principal business objective for the next 12 months will be to achieve long-term growth through 2050 Motors, Inc, supplemented by the launch of new business units, subsidiaries and ventures, initially, with a business concentration in the areas of communications, electric vehicles, power over ethernet (PoE) and LED lighting, and social media.

 

The Company completed the acquisition of all of the issued and outstanding capital stock of 2050 Motors, Inc. on May 2, 2014. The acquisition was completed pursuant to the terms of a Plan and Agreement of Reorganization (the “Agreement”) entered into on February 5, 2014, by and between the Company, 2050 Motors and Certain Shareholders of 2050 Motors. Pursuant to the terms of the Agreement, the Company acquired all of the outstanding shares of capital stock of 2050 Motors in exchange for 24,994,670 post-split shares of the Company’s common stock (aggregating approximately 82% of its issued and outstanding common stock at closing).

 

Historically, 2050 Motors’ principal activity was the importation and the marketing and selling of electric automobiles based on its good faith belief that 2050 Motors, Inc. had an exclusive and valid license, subject to minimum sales requirements, to import, market and sell in the United States, Puerto Rico, the US Territories and Peru, the “e-Go” lightweight carbon fiber all-electric vehicle design and electric light truck, manufactured by Jiangsu Aoxin New Energy Automobile Co., LTD (“Aoxin Automobile”) located in the Peoples Republic of China (“PRC”).

 

With respect to the time period covered in this report, 2050 Motors intended in the past to import vehicles completely fabricated and assembled in China from Aoxin Automobile. 2050 Motors intended to market the e-Go in designated markets and is not expected to need any raw materials, components or equipment, except spare parts which will be supplied by Aoxin Automobile. However, the e-Go and all of its parts and equipment must be DOT approved.

 

  16  
 

 

2050 Motors is a development stage company with no operating history and may never be able to carry out its business plan or achieve any revenues or profitability. Additionally, because we have not received adequate verification from Aoxin of the efficacy of the agreements and Aoxin’s business, we may no longer pursue any business relationship with Aoxin.

 

2050 Motors was established in October 2012 and has not generated any revenues, nor has it realized a profit from its operations to date, and there is little likelihood that it will generate any revenues or realize any profits in the short term. Any profitability in the future from its business will be dependent upon the successful marketing and sales of the e-Go. 2050 Motors may not be able to successfully carry out its business plan. There can be no assurance that it will ever achieve any revenues or profitability. Accordingly, its prospects must be considered in light of the risks, expenses, and difficulties frequently encountered in establishing a new business, especially one in the automobile industry, and therefore it is a highly speculative venture involving significant financial risk.

 

Since new management was appointed in March 2019, we expanded our mission statement to invest in, incubate and accelerate businesses in the communications, energy, electric vehicle, and Internet industries.

 

Costs and Resources

 

2050 Motors is currently pursuing additional funding resources that will potentially enable it to maintain its current and planned operations through the next 12 months. The Company anticipates that it will need to raise additional capital in order to sustain and grow its operations over the next few years. To the extent that the Company’s capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders or creditors will provide any portion of the Company’s future financing requirements. No assurance can be given that additional financing will be available when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company.

 

Results of Operation for the Three Months Ended September 30, 2019 and 2018

 

During the three months ended September 30, 2019 and 2018, the Company had no operating revenues. During the three months ended September 30, 2019, the Company incurred operating expenses of $51,086, consisting primarily of G&A expenses, consulting fees and travel expenses and other general and administrative costs. For the three months ended September 30, 2019, these operating losses combined with non-operating income (expenses) of $43,812 resulted in net losses of $7,274. For the three months ended September 30, 2018, the Company had operating losses of $23,705 and non-operating income (expenses) of ($473,826) leading to net losses of $497,531.

 

  17  
 

 

Results of Operation for the Nine Months Ended September 30, 2019 and 2018

 

During the nine months ended September 30, 2019 and September 30, 2018, the Company had no operating revenues. During the nine months ended September 30, 2019, the Company incurred operating expenses of $122,683, consisting primarily of G&A expenses, consulting fees and travel expenses and other general and administrative costs. For the nine months ended September 30, 2019, these operating losses combined with non-operating income (expenses) of $476,733 resulted in net income (loss) of $354,050. For the nine months ended September 30, 2018, the Company had operating losses of $193,303 and non-operating income (expenses) of ($1,371,129) leading to a net loss of $1,564,432. As of September 30, 2019, the Company had an accumulated deficit of $5,604,349 compared to an accumulated deficit of $5,960,691as of December 31, 2018. The improving of stockholders’ equity for the nine months ending September 30, 2019 was due to the net income (loss) of $354,050.

 

Equity and Capital Resources

 

We have incurred losses since the inception of our business and as of September 30, 2019 we had an accumulated deficit of $5,604,349. As of September 30, 2019, the Company had cash balance of $10,083 and a negative working capital of $1,151,870.

 

To date, we have funded our operations through short-term debt and equity financing. During the nine months ended September 30, 2019, the Company received $75,190 of borrowed funds from non-related parties. In addition, during this period the Company issued 897,783,861 of common stock to lenders for conversions of $136,734 of principal and interest related to third-party debt.

 

We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of our automobile business. However, we do not expect to start generating revenues from our operations for another 12 months. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of additional capital or that our estimates of our capital requirements will prove to be accurate. As of the date of this Report we did not have any commitments from any source to provide such additional capital. Even if we are able to secure outside financing, it may be unavailable in the amounts or the times when we require. Furthermore, such financing would likely take the form of bank loans, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, leases or debt would increase our capital requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.

 

Delinquent Loans

 

As of September 30, 2019, the Company is delinquent in its payments on loans owing to several third-party lenders totaling $229,093 in principal, accrued interest and penalties. The Company is in discussions with these lenders to extend the maturity dates or to convert all or part into the company’s common stock. There is no assurance that these discussions will result in amicable settlements. Any legal action by any one of the lenders could have a material adverse effect on the Company and its ability to continue operations.

 

  18  
 

 

On June 25, 2018, the Company received a legal notice demanding approximately $404,000, from a note holder for defaulting on the loan. During the three-month period ended June 30, 2019, this loan accrued penalties of $226,299 while the Company was not current with its SEC reporting requirements. On advice of counsel since the loan has been substantially repaid through over one dozen conversions of debt into equity since 2017, we have removed these liquidated damages related to this loan from our balance sheet as they no longer apply.

 

On November 1, 2019, the same note holder served us notice of a civil lawsuit seeking $283,000.00 in principal, interest and penalties for a loan made to the Company on or around January 6, 2017 in the amount of $78,750.00. Management is in discussions with the lender to resolve the matter, though there can be no assurances.

 

Off-balance Sheet Arrangements

 

Since our inception through September 30, 2019, we have not engaged in any off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

As a “small reporting company” we are not required to provide this information under this item pursuant to Regulation S-K.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report on Form 10-Q, our President and Chief Financial Officer performed an evaluation of the effectiveness of and the operation of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our President and Chief Financial Officer concluded that as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures are not effective in timely alerting them to material information relating to 2050 Motors, Inc. required to be included in our Exchange Act filings.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

On May 21, 2018, the Company received, from one of its lenders, a notice of default based upon the Company’s failure to timely file its Form 10-Q for the quarter ended March 31, 2018. Under the default provisions of the Note, the immediate payment of the entire principal of the Note together with accrued interest and accrued default interest is due and payable. The Company is negotiating with the lender to withdraw the demand notice for immediately payment based at least in part upon the filing of this Report and to become current in the Company’s reporting obligations by filing all other delinquent filings. However, there is no assurance that the lender will withdraw the demand. Failure of the lender to withdraw such notice may cause severe and material damage to the Company’s ability to continue in business.

 

On November 1, 2019, this third-party lender served the Company notice of a civil lawsuit seeking $283,000.00 in principal, interest and penalties for a loan provided to the Company on or around January 6, 2017 in the amount of $78,750.00. Management has contacted the lender’s counsel and is negotiating a settlement of this matter, though there can be no assurances of a favorable outcome.

 

Item 1A. Risk Factors.

 

As a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.

 

  19  
 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the nine months ended September 30, 2019, third-party lenders converted $249,524 of principal and interest into 1,080,431,661 shares of common stock.

 

We relied upon Section 4(2) and Regulation D of the Securities Act of 1933, as amended, for the issuances of the securities listed above. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend or required legal opinions supporting the issuance of free trading shares.

 

Item 3. Defaults Upon Senior Securities.

 

As of September 30, 2019, the Company was delinquent in its payments on loans due to third-party lenders in the aggregate amount of $229,093 including principal and accrued interest. Though none of these loans are secured by any assets of the Company, they do rank as senior to other claims and, in some cases, have certain rights preventing asset sales or other corporate actions

 

The Company is in discussions with its lenders to extend the maturity dates or to convert all or part of the notes into the Company’s common stock. There is no assurance that these discussions will result in amicable settlements. Any legal action by any one of the lenders could have a material adverse effect on the Company and its ability to continue operations.

 

The Company does not currently have sufficient liquidity to repay the indebtedness. While the Company does not expect the noteholders to accelerate the indebtedness, the noteholders may do so at any time, or may initiate foreclosure actions, or seek any other remedies permitted by the terms of the notes and applicable law. Should the holders of the Company’s indebtedness seek to accelerate the indebtedness upon an event of default, the Company could be required to discontinue or significantly reduce the scope of its operations if no other means of financing its operations are or become available.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None

 

Item 6. Exhibits.

 

(a) Exhibits.

 

Exhibit   Item
     
10.1*  

Convertible Loan Agreement PowerUp Lending – July 9, 2019

 

10.2*   Convertible Loan Agreement GS Capital - September 6, 2019
     
31.1*   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2*   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

*Filed herewith.

 

  20  
 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  2050 MOTORS, INC.
   
Date: November 19, 2019 /s/ Vikram Grover
  Vikram Grover, President
  (Principal Executive Officer)
   
Date: November 19, 2019 /s/ Vikram Grover
  Vikram Grover, Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

  21  
 

 

EXHIBIT INDEX

 

Exhibit   Item
     
10.1*  

Convertible Debenture Agreement PowerUp Lending – July 9, 2019

 

10.2*  

Convertible Debenture Loan Agreement with GS Capital – September 6, 2019

 

31.1*   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2*   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1*   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

*Filed herewith.

 

  22  
 

 

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