NOTES
TO FINANCIAL STATEMENTS
Note
1 – BASIS OF PRESENTATION AND ORGANIZATION
2050
Motors, Inc. (“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, 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, that entity 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.” Our principal business objective is to achieve
long-term growth through 2050 Motors, Inc. and other investments (see subsequent events).
On
October 25, 2012, 2050 Motors, Inc. 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.
Note
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements were prepared in conformity with generally accepted accounting principles in the United States
of America (“US GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with US 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. Significant estimates include accounts payable, the recoverability of long-term assets, and the valuation of derivative
liabilities.
Consolidation
The
consolidated financial statements of the Company include the Company and its wholly owned subsidiary, 2050 Motors, Inc. All material
intercompany balances and transactions have been eliminated in consolidation.
Cash
Cash
consists of deposits in one large national bank. At December 31, 2018 and December 31, 2017, respectively, the Company had $1
and $499 in cash in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed
to any risks on its cash in bank accounts.
Property,
Plant & Equipment
Property,
plant and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the asset;
leasehold improvements are depreciated over the shorter of estimated useful life of the asset or over the lease term. The estimated
useful lives of our property and equipment are generally as follows: tools and equipment, five years; vehicles and parts, three
years; leasehold improvements, lesser of lease term or life of related asset; and furniture and fixtures, seven years.
As
of December 31, 2018, and December 31, 2017, Property, Plant and Equipment consisted of the following:
|
|
2018
|
|
|
2017
|
|
Furniture and furnishings
|
|
$
|
14,303
|
|
|
$
|
14,303
|
|
Leasehold improvements
|
|
|
18,104
|
|
|
|
18,104
|
|
Vehicle and parts
|
|
|
76,045
|
|
|
|
76,045
|
|
Tools and equipment
|
|
|
22,494
|
|
|
|
22,494
|
|
Total
|
|
|
131,026
|
|
|
|
131,026
|
|
Less: Accumulated depreciation
|
|
|
(131,026
|
)
|
|
|
(99,350
|
)
|
Property, plant and equipment, net
|
|
$
|
-
|
|
|
$
|
31,676
|
|
Depreciation
expense was $31,676 and $33,274 for the years ended December 31, 2018 and December 31, 2017, respectively.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash accounts payable, accrued liabilities, short-term debt and
derivative liability, the carrying amounts approximate their fair values due to their short maturities. 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 measurement) and the lowest priority to unobservable inputs
(level 3 measurements). The three levels of valuation hierarchy are defined as follows:
Level
1 input to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
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.
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
We
have recorded the conversion option on notes as a derivative liability as a result of the variable conversion price, which in
accordance with U.S. GAAP, prevents them from being considered as indexed to our stock and qualified for an exception to derivative
accounting.
We
recognize derivative instruments as either assets or liabilities on the accompanying balance sheets at fair value. We record changes
in the fair value of the derivatives in the accompanying statement of operations.
Assets
and liabilities measured at fair value are as follows as of December 31, 2018:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
876,058
|
|
|
|
-
|
|
|
|
-
|
|
|
|
876,058
|
|
Total liabilities measured at fair value
|
|
$
|
876,058
|
|
|
|
-
|
|
|
|
-
|
|
|
|
876,058
|
|
Assets
and liabilities measured at fair value are as follows as of December 31, 2017:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
1,030,132
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,030,132
|
|
Total liabilities measured at fair value
|
|
$
|
1,030,132
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,030,132
|
|
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, 2016
|
|
|
270,075
|
|
Fair value of derivative liabilities issued
|
|
|
717,999
|
|
Gain on change in derivative liabilities
|
|
|
42,058
|
|
Balance as of December 31, 2017
|
|
$
|
1,030,132
|
|
Fair value of derivative liabilities issued
|
|
|
400,078
|
|
Loss on conversions
|
|
|
(710,076
|
)
|
Gain on change in derivative liabilities
|
|
|
155,924
|
|
Balance as of December 31, 2018
|
|
$
|
876,058
|
|
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 assumes 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 years ended December 31, 2018 and December 31, 2017, the Company incurred losses. Therefore,
the effect of any common stock equivalents is anti- dilutive during those periods.
The
following table sets for the computation of basic and diluted earnings per share for the years ended December 31, 2018 and December
31, 2017:
|
|
2018
|
|
|
2017
|
|
Basic and diluted
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,931,443
|
)
|
|
$
|
(1,250,333
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares in computing basic and diluted net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
233,348,503
|
|
|
|
39,431,012
|
|
Diluted
|
|
|
233,348,503
|
|
|
|
39,431,012
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
Revenue
Recognition
Revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers
and subsequently remitted to governmental authorities.
Cost
of Sales
Cost
of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping,
importation duties and charges, third party royalties, and product sampling.
Advertising
and Marketing Costs
Costs
incurred for producing and communicating advertising and marketing are expensed when incurred and included in selling general
and administrative expenses. Advertising and marketing expense amounted to $0 and $0 for the years ended December 31, 2018 and
December 31, 2017, respectively
Operating
Overhead Expense
Operating
overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services,
and meetings and travel.
Income
Taxes
The
Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
740 provides accounting and disclosure guidance about positions taken by an organization in its tax returns that might be uncertain.
When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties
are classified in selling, general and administrative expenses in the statements of income.
At
December 31, 2018 and December 31, 2017, the Company had not taken any significant uncertain tax positions on its tax returns
for the period ended December 31, 2018 and prior years or in computing its tax provisions for any years. Prior management considered
its tax positions and believed that all of the positions taken by the Company in its Federal and State tax returns were more likely
than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from
inception to present, generally for three years after they are filed. New management, which took control of the Company on March
5, 2019, is currently evaluating prior management’s decision to not file federal tax returns and plans on filing past returns,
and related 10-99 filings for compensation paid to prior management, employees, consultants, contractors and affiliates. The Company
does not believe it has a material tax liability due to its operating losses in these periods.
Concentration
of Credit Risk
Cash
is mainly maintained by one highly qualified institution in the United States. At various times, such amounts are in excess of
federally insured limits. Management does not believe that the Company is subject to any unusual financial risk beyond the normal
risk associated with commercial banking relationships. The Company has not experienced any losses on our deposits of cash.
Risks
and Uncertainties
The
Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated
with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of
public markets.
Recently
Issued Accounting Pronouncements
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 is 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. We are evaluating
the impact this guidance will have on our financial position and statement of operations.
In
May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) “ASU 2014-09”. ASU 2014-09
was subsequently amended by ASU No. 2016-10 and 2016-12. As amended, Topic 606 supersedes the revenue recognition requirements
in Topic 605, Revenue Recognition including most industry-specific revenue recognition guidance throughout the Industry Topics
of the Codification. In addition, the amendments create a new Subtopic 340-40, Other Assets and Deferred Costs—Contracts
with Customers
.
In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. For a public entity, the amendments to ASU 2014-09 are effective for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted
only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting
period. The new revenue standards are not expected to have a material impact on the amount and timing of revenue recognized in
our financial statements.
Reclassification
Certain
prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no
effect on the reported results of operations or cash flow.
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 ($5,960,691) as of December 31, 2018. The Company also incurred net losses of ($1,901,443) and ($1,250,333) for
the years ended December 31, 2018 and December 31, 2017, respectively and had negative working capital for the years ended December
31, 2018 and December 31, 2017. To date, these losses and deficiencies have been financed principally through the issuance of
common stock and loans from third parties.
In
view of the matters described, 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 would be forthcoming, or as to the terms of any such financings. Any
future financing may involve substantial dilution to existing investors.
Note
4 – VEHICLE DEPOSITS
Vehicle
deposit of $0 as of December 31, 2018 and $24,405, as of December 31, 2017, represented one prototype test model for delivery
into the United States when the specifications are completed for an advanced crash test known in the Automobile Safety Industry
as the “overlap crash test”. The estimated date set for this test was mid-2018. The test never occurred, the prototype
was never delivered, and we wrote-off the Vehicle deposit of $24,405 during the fourth quarter of 2018.
Note
5 – LICENSE AGREEMENT
In
2012 and 2013, the Company made a total payment of $50,000 and signed an exclusive license agreement with Aoxin to import, assemble
and manufacture the e-Go. The cost of this license agreement was recognized as a long-term asset and was evaluated, by management,
for impairment losses at each reporting period. The Company wrote-off the value of this license agreement during the three-month
period ended March 31, 2018 due to Aoxin’s inability to produce the e-Go and ship vehicles and/or auto parts to the United
States.
Note
6 – ACCOUNTS PAYABLE DUE TO RELATED PARTIES
A
related party of the Company paid $7,750 cash on behalf of the Company during the second quarter of 2016. The cash advance was
non-interest bearing and was due on August 1, 2016. The Company defaulted on the payment and the payable accrued penalties on
it. During the year ended December 31, 2017, the Company issued 140,808 shares of common stock, having a fair market value of
the shares of $8,589, for payment of the principal and penalties.
Note
7 – LOANS PAYABLE DUE TO RELATED PARTIES
During
the year ended December 31, 2014, the Company entered into two loans for a total amount of $100,000 due to a shareholder whose
control party, William Fowler, became our CEO and a Director during 2018. The loans charged 12% interest and matured on February
28, 2015 and March 30, 2015, respectively. Subsequently, the loans were combined, and the maturity date was extended to April
1, 2018. The outstanding balance of the loans as of December 31, 2018 and December 31, 2017 was $0 and $71,400, respectively.
During the year ended December 31, 2018, the Company recorded $8,568 of interest expense for these loans. The balance of the loans,
which included penalty interest, was paid in cash and/or converted into 53,347,701 common shares during the twelve-month period
ended December 31, 2018. Current management has been unable to confirm the details of these loans and accordingly has frozen the
shares taken for conversion of the loans during the fourth quarter of 2018.
On
July 1, 2017, the Company entered into an unsecured loan payable agreement with a related party for $14,100, due on September
15, 2017. The Company granted the related party an option to purchase up to 1,000,000 shares of common stock at an exercise price
of $0.015 per share. The Company valued the options using the Black Scholes options pricing model. The fair market value of the
options was $26,746. The value was restricted to the face value of the note and hence, $14,100 was recorded as a debt discount
which was amortized over the term of the loan. The Company also agreed to pay $1,500 as an interest on the loan. On September
27, 2017, the Company entered into a note amendment, whereby, the term of the note was extended until November 1, 2017, in exchange
for an additional $1,500 finance fee and $1,500 late fee. The Company recorded the same as interest expense in the accompanying
financials. During the year ended December 31, 2017, the Company amortized the debt discount of $14,100. During the year ended
December 31, 2017, the Company recorded $1,500 of interest expense for amortization of and another $1,500 of interest expense
for the excess derivative. During the year ended December 31, 2018, the Company recorded $14,259 of interest expense. As of December
31, 2017, the loan was in default and the outstanding balance of the loan, as of December 31, 2017 was $17,100. The Company accrued
a penalty of $1,750 plus $100 per day of default, aggregating to $7,750 in the accompanying financial statements.
On
September 27, 2017, the Company entered into another unsecured loan payable agreement with the same related party for $17,500,
due on November 1, 2017. The lender charged $1,750 as funding fee and $1,650 as processing fee for the loan, which were recorded
as debt discount, with net loan proceeds of $14,100. The Company also granted the related party an option to purchase up to 1,000,000
shares of common stock at an exercise price of $0.015 per share. The Company valued the options using the Black Scholes options
pricing model. The fair market value of the options was $22,945. The value was restricted to the net proceeds of the note and
hence, $14,100 was recorded as a debt discount which is being amortized over the term of the loan. During the year ended December
31, 2017, the Company amortized the debt discount of $14,100 and the finance fee of $3,400. As of December 31, 2017, the loan
was in default and the outstanding balance of the loan was $17,500. The Company accrued a penalty of $1,750 plus $100 per day
of default, aggregating to $7,750 in the accompanying financial statements. During the twelve-month period ended December 31,
2018, the balance of this loan and associated interest and penalties was converted into 84,770,115 shares of common stock, eliminating
the loan and accrued interest from the Company’s balance sheet.
Current
management has been unable to confirm the details of these last two loans and accordingly has issued a stop action notice to the
Company’s transfer agent freezing sales and transfers of the shares taken for conversion of the loans during the fourth
quarter of 2018.
The
Company determined the fair value of the options using the Black – Scholes model. The variables used for the Black –Scholes
model are as listed below:
●
|
Volatility:
253% - 286%
|
|
|
●
|
Risk
free rate of return: 1.24% - 1.53%
|
|
|
●
|
Expected
term: 1 -3 years
|
The
Company received an unsecured $10,000 loan during the third quarter of 2016 from a related party. The loan paid 12% interest and
on March 16, 2017, the original maturity date, an extension was granted to April 1, 2018. The outstanding balance on the loan
as of December 31, 2017 was $10,000. The Company accrued interest of $1,201 and $1,201 on the loan during the years ended December
31, 2018 and 2017.
NOTE
8 - CONVERTIBLE NOTE PAYABLES
The
Company had several convertible note payables with unrelated 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 December 31, 2018, the Company had the
following third-party convertible notes outstanding:
|
|
Lender
|
|
Origination
|
|
Maturity
|
|
Amount
|
|
|
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note #1*
|
|
Auctus
|
|
1/6/17
|
|
2/6/18
|
|
$
|
71,533
|
|
|
|
22.0
|
%
|
Note #2*
|
|
JSJ
|
|
4/25/17
|
|
1/26/18
|
|
|
11,554
|
|
|
|
18.0
|
%
|
Note #3*
|
|
Crown Bridge
|
|
9/15/17
|
|
9/15/18
|
|
|
5,422
|
|
|
|
10.0
|
%
|
Note #4*
|
|
LG
|
|
11/14/17
|
|
11/14/18
|
|
|
22,754
|
|
|
|
12.0
|
%
|
Note #5*
|
|
PowerUp 5
|
|
1/24/18
|
|
10/30/18
|
|
|
6,320
|
|
|
|
22.0
|
%
|
Note #6*
|
|
PowerUp 6
|
|
2/22/18
|
|
11/30/18
|
|
|
56,235
|
|
|
|
22.0
|
%
|
Note #7*
|
|
PowerUp 7
|
|
4/11/18
|
|
1/30/19
|
|
|
22,500
|
|
|
|
22.0
|
%
|
Note #8*
|
|
PowerUp 8
|
|
4/27/18
|
|
2/15/19
|
|
|
32,250
|
|
|
|
22.0
|
%
|
Note #9*
|
|
Jabro 1
|
|
7/23/18
|
|
4/30/19
|
|
|
21,000
|
|
|
|
12.0
|
%
|
Note #10*
|
|
Jabro 2
|
|
10/01/18
|
|
7/15/19
|
|
|
11,500
|
|
|
|
12.0
|
%
|
Note #11*
|
|
PowerUp 9
|
|
11/01/18
|
|
8/30/19
|
|
|
14,700
|
|
|
|
12.0
|
%
|
Note #12*
|
|
Other
|
|
3/16/17
|
|
4/1/18
|
|
|
10,000
|
|
|
|
12.0
|
%
|
Total
|
|
|
|
|
|
|
|
$
|
285,768
|
|
|
|
|
|
less discount
|
|
|
|
|
|
|
|
|
(35,749
|
)
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
$
|
250,019
|
|
|
|
|
|
*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 $71,533 as of December 31, 2018, there are penalties totaling $616,199 relating to the default
of this note which are included in Accrued expenses. Management believes liquidated damages penalties of $2,000 per day are not
enforceable or collectible as the lender has recovered its principal and default interest through conversions of the loans into
common stock. The matter is currently being reviewed by counsel.
During
the twelve-month period ended December 31, 2018, the Company recorded conversion of $292,445 of third-party notes payable and
interest into 373,328,673 shares of common stock. The Company recorded a loss on conversion of debt of $149,980 during this period.
The
derivative liability for all the remaining convertible notes was recalculated on December 31, 2018 to be $876,058 and the loss
on change in derivative liability of $110,699 for the twelve-month period ended December 31, 2018, was recorded on the accompanying
financial statements.
The
variables used for the Binomial model are as listed below:
|
December
31, 2017
|
|
December
31, 2018
|
●
|
Volatility:
253% - 286%
|
|
Volatility:
191% - 301%
|
|
|
|
|
●
|
Risk
free rate of return: 1.28%- 1.76%
|
|
Risk
free rate of return: 1.93% - 1.99%
|
|
|
|
|
●
|
Expected
term: 1-11 months
|
|
Expected
term: 1-10 months
|
The
Company amortized a debt discount of $139,885 and $302,567 respectively, during the twelve-month period ended December 31, 2018
and December 31, 2017. The Company amortized finance fees of $18,750 and $58,239, respectively, during the twelve-month periods
ended December 31, 2018 and December 31, 2017. Interest expense accrued on non-related convertible notes was $49,740 and $26,513
for the twelve-month periods ended December 31, 2018 and December 31, 2017, respectively.
Note
9 – COMMITMENTS AND CONTINGENCIES
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 went to a month to month
basis. The lease was terminated as of June 30, 2018.
Effective
September 16, 2015, the Company renewed its residential lease agreement in California for its traveling consultants. Effective
September 2015, the Company extended the lease agreement for one more year with a new monthly amount of $2,300. As of June 30,
2016, the Company discontinued this lease, which was assumed by a consultant of the Company.
Rent
expense amounted to $13,400 and $26,156 for the years ended December 31, 2018 and 2017, respectively.
According
to the license agreement signed between the Company and Aoxin, in order to maintain rights for the United States, the Company
is required to purchase and sell certain amount of e-Go 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 model. The table
below demonstrates the required number of vehicles that the company needs to sell per year.
First year
|
|
|
2,000
|
|
Second year
|
|
|
6,000
|
|
Third year
|
|
|
12,000
|
|
Fourth year
|
|
|
24,000
|
|
Fifth year
|
|
|
48,000
|
|
|
|
|
92,000
|
|
As
part of the license agreement, the Company was committed to pay expenses related to any required airbag testing procedures. The
cost of these airbags could have been as little as $500,000 or as much as $2 million. Based on its assessment of its relationship
with Aoxin Motors and difficult industry conditions and a potential trade war between China and the United States, during the
three-month period ended March 31, 2018, the Company wrote-off its $50,000 license with Aoxin Motors. Further, due to failure
to deliver by Aoxin Motors, during the three-month periods ended September 30, 2018 and December 31, 2018, the Company wrote-off
its Vehicle deposit of $24,415 with Aoxin Motors.
The
Company may from time to time, become a party to various legal proceedings, arising in the ordinary course of business. The Company
investigates these claims as they arise. Management does not believe, based on current knowledge, that there were any such claims
outstanding as of December 31, 2018.
Note
10 – REVOLVING LINE OF CREDIT- RELATED PARTY
On
February 12, 2016, the Company signed a twelve months revolving line of credit agreement with a related party. The line amount
was $100,000 and carried interest at 12% per annum. In January 2017, the Company signed an amendment to extend the due date of
the loan to June 30, 2018 for a conversion option for the restricted common stock of the Company. The note carried interest at
the rate of 12% per annum and was convertible at any time starting from January 18, 2017 and ending on the later of the maturity
date or the date of payment. The note was convertible at 50% of the Average Market Price for the 15 previous trading days before
the conversion notice date. The derivative liability on the note was calculated, using the Binomial model, to be $227,760, of
which $101,400 was recorded as a debt discount and the balance $126,360 was recorded as an interest expense, at inception. During
the year ended December 31,2018, the balance on the revolving line of credit and related interest were converted to 53,347,701
shares of common stock.
The
derivative liability was recalculated on December 31, 2018 and December 31, 2017 as $0 and $177,707, respectively, on the balance
of the related party loan and the difference in the value recorded as a change in derivative liability in the income statement.
As of December 31, 2018, the balance outstanding on the related party loans was $0. The loan was due on June 30, 2018 and subsequently
converted to 53,347,701 common shares.
Current
management has been unable to confirm the details of these loans and accordingly has frozen the shares taken for conversion of
the loans during the fourth quarter of 2018.
Note
11 – INCOME TAXES
The
Company did not file its federal tax returns for fiscal years from 2012 through 2018. Management at year-end 2018 believed that
it should not have any material impact on the Company’s financials because the Company did not have any tax liabilities
due to net loss incurred during these years.
Based
on the available information and other factors, management believes it is more likely than not that the net deferred tax assets
at December 31, 2018 and December 31, 2017 will not be fully realizable. Accordingly, management has recorded a full valuation
allowance against its net deferred tax assets at December 31, 2018 and December 31, 2017. At December 31, 2018 and December 31,
2017, the Company had net operating loss carryforwards of $6,000,000 and $4,000,000, respectively.
Deferred
tax assets consist of the following components:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net loss carryforward
|
|
$
|
1,252,000
|
|
|
$
|
1,100,000
|
|
Valuation allowance
|
|
|
(1,252,000
|
)
|
|
|
(1,100,000
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Note
12 – PROMISSORY NOTE AND EQUITY PURCHASE AGREEMENT
On
June 24, 2016, the Company issued a $75,000 nonrefundable Promissory Note to an investor as a pre-condition to an Equity Purchase
Agreement. The promissory note paid 10% interest per annum with a one-year maturity date. The note was recognized as a deferred
finance charge and is being amortized over the contract period.
During
the year ended December 31, 2017, the Company issued 1,500,000 shares (See Note 13) to the note holder to convert the outstanding
principal balance of $75,000 and accrued interest of $6,574. As of December 31, 2017, the outstanding balance of the note was
$0.
Note
13 – EQUITY
During
the year ended December 31, 2016, the Company to issue 825,000 shares of common stock for marketing services at a per share price
of $0.1497 for a total consideration of $125,000. As of December 31, 2017, and December 31, 2018, these shares are yet to be issued
and have been recorded as common stock issuable.
The
Company also agreed to issue 200,000 shares of its common stock a $0.05 per share for $10,000 cash, during the year ended December
31, 2016. The shares were issued during the year ended December 31, 2017.
During
the year ended December 31, 2016, the Company recorded $44,000 as capital contribution for the fair market value of services provided
by the officer of the Company.
During
the year ended December 31, 2016, the Company recorded $16,000 as additional paid in capital for the beneficial conversion feature
on four convertible notes of $10,000 each. (See Note 9)
On
June 24, 2016, the Company issued a $75,000 nonrefundable Promissory Note to an investor as a pre-condition to an Equity Purchase
Agreement. The promissory note bore 10% interest per annum with a one-year maturity date. This note resulted in a $75,000 deferred
equity issuance cost and was amortized over the contract period. During the year ended December 31, 2017 and 2016, respectively,
the Company recorded $37,500 and $18,750 in amortization of the deferred equity issuance costs for the Equity Purchase Agreement
(See Note 13). During the year ended December 31, 2017, the Company issued 1,500,000 shares for the conversion of the promissory
note along with interest accrued on the same of $6,574. The shares issued were recorded at the fair market value of $0.054 on
the date of conversion notice.
During
the year ended December 31, 2017, the Company increased the authorized share capital for common stock of the Company from 100
million to 300 million. During the year ended December 31, 2017, the Company increased the authorized share capital for preferred
stock of the Company from none to 10 million.
During
the year ended December 31, 2017, the Company issued 36,885 shares of company’s common stock, to a third party for $2,250
cash.
During
the year ended December 31, 2017, the Company issued 140,808 shares of company’s common stock, for payment of a related
party accounts payable totaling $8,589, including penalties.
During
the year ended December 31, 2017, the Company issued 177,694 shares of company’s common stock in exchange for consulting
and advisory services, valued at $10,840.
During
the year ended December 31, 2017, the Company issued 2,911,195 shares of company’s common stock, to partially convert $23,600
of a convertible note payable.
During
the year ended December 31, 2017, the Company issued 1,946,200 shares of common stock to effect conversion of accrued interest
on a convertible note of $7,006.
During
the year ended December 31, 2017, a note holder converted $35,000 of the note for 3,106,274 shares of common stock.
During
the year ended December 31, 2017, the Company issued 892,857 shares of company’s common stock, to partially convert $5,000
of a convertible note payable.
During
the year ended December 31, 2017, the Company agreed to issue 1,000,000 shares of common stock to a third party for $15,000 cash.
The shares were not issued as of December 31, 2017 and have been recorded as shares to be issued in the accompanying financial
statements.
During
the year ended December 31, 2017, the Company capitalized $48,000 as capital contribution by prior president of the Company, for
the accrued salary due to the prior president.
During
the year ended December 31, 2017, the Company entered into an unsecured loan payable agreement with a related party for $14,100,
due on September 15, 2017. The Company granted the related party an option to purchase up to 1,000,000 shares of common stock
at an exercise price of $0.015 per share. The Company valued the options using the Black Scholes options pricing model. The fair
market value of the options was $26,746. The value was restricted to the face value of the note and hence, $14,100 was recorded
as a debt discount and credited as additional paid in capital in the accompanying financials.
During
the year ended December 31, 2017, the Company entered into another unsecured loan payable agreement with the same related party
for $17,500, with net loan proceeds of $14,100. The Company also granted the related party an option to purchase up to 1,000,000
shares of common stock at an exercise price of $0.015 per share. The Company valued the options using the Black Scholes options
pricing model. The fair market value of the options was $22,945. The value was restricted to the net proceeds of the note and
hence, $14,100 was recorded as a debt discount and credited as additional paid in capital in the accompanying financials.
During
the year ended December 31, 2017, the Company entered into an unsecured convertible note agreement with a third party for $25,000.
The Company received $22,500, net of the financing fees of $2,500. The Company also granted a warrant with the convertible note
to buy 250,000 shares of common stock of the Company at an exercise price of $0.10 per share. The Company valued the warrants
using the Black Scholes option pricing model at $14,700, which was recorded as a debt discount and credited as additional paid
in capital in the accompanying financials (See Note 8).
During
the year ended December 31, 2018, the Company increased its authorized shares two times, first from 300 million to one billion,
and later from one billion to three billion.
On
January 24, 2018, the Company entered into an unsecured convertible note agreement with a third party for $35,000. The Company
received $35,000 net of financing fees.
On
February 22, 2018, the Company entered into an unsecured convertible note agreement with a third party for $43,000. The Company
received $43,000 net of financing fees.
On
April 11, 2018, the Company entered into an unsecured convertible note agreement with a third party for $15,000. The Company received
$15,000 net of financing fees.
On
April 27, 2018, the Company entered into an unsecured convertible note agreement with a third party for $21,500. The Company received
$21,500 net of financing fees.
On
July 23, 2018, the Company entered into an unsecured convertible note agreement with a third party for $21,000. The Company received
$21,000 net of financing fees.
On
October 1, 2018, the Company entered into an unsecured convertible note agreement with a third party for $11,500. The Company
received $11,500 net of financing fees.
On
November 1, 2018, the Company entered into an unsecured convertible note agreement with a third party for $14,700. The Company
received $14,700 net of financing fees.
Note
14 – SUBSEQUENT EVENTS
Corporate
Actions and Related
On
March 6, 2019, William Fowler resigned as our President, Chief Executive Officer, Chief Financial Officer and Director. His resignation
was not due to any matter relating to our operations, policies or practices. On March 6, 2019, pursuant to a Special Board of
Directors Meeting, our Board of Directors accepted his resignation.
On
March 6, 2019, Bernd Schaefers resigned as our Secretary and Director. His resignation was not due to any matter relating to our
operations, policies or practices. On March 6, 2019, pursuant to a Special Board of Directors Meeting, our Board of Directors
accepted his resignation.
On
March 6, 2019, Vikram Grover was appointed our President, Chief Executive Officer, Chief Financial Officer, Secretary and Director.
Mr. Grover’s compensation consists of $12,500 per month, of which $5,000 is payable in cash while the Company is delinquent
in its SEC filings and the balance to be accrued and payable in cash or stock on December 31 of each calendar year. Upon bringing
the Company current with its SEC filings, Mr. Grover will be compensated $12,500 per month, of which $7,500 is payable in cash
and $5,000 will be accrued and payable in cash or stock on December 31 of each calendar year. Additionally, upon bringing the
Company current with its SEC filings, Mr. Grover will be issued 100 million common stock purchase warrants with a $0.001 exercise
price and a three-year expiration. If the Company’s common stock closes over $0.01 for 10 consecutive trading sessions,
Mr. Grover shall be issued an additional 100 million common stock purchase warrants with a $0.001 strike price and a three-year
expiration.
On
April 4, 2019, we removed all Officers and/or Directors of our wholly owned subsidiary, 2050 Motors, Inc., a Nevada corporation
(“2050 Private”); thereafter, 2050 Private appointed our Chief Executive Officer, Vikram Grover, as 2050 Private’s
President and Sole Director.
On
May 14, 2019, we dissolved our 2050 Motors, Inc. Nevada subsidiary and terminated all discussions and contractual relationships
with Aoxin Automobile.
Funding
and Capital Structure
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. On March 6, 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.
On
March 8, 2019, we executed a $28,000 convertible promissory note with a third-party lender generating net funding to us of $25,000
after expenses. The note bears interest at a rate of 12% per annum and matures on January 15, 2020.
During
the three months ended March 31, 2019, a third-party lender converted $8,085.43 principal and $8,548.36 interest into 93,410,190
common shares.
On
March 27, 2019, we issued a demand letter to BKS Cambria, LLC (“BKS”) and United Biorefineries, Inc. (“United”)
to return 84,770,115 and 53,347,701 of our common stock shares in certificate form, respectively, that may have been invalidly
issued by prior management to the corporate entities they controlled. BKS and United failed to respond to our demand letter by
the demand date and we have not received the foregoing share amounts in certificate form from either BKS or United. UBC has electronically
responded, denied any wrongdoing, and refuses to return the certificates. We are evaluating our legal remedies regarding these
share issuances.
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. As of April 7, 2019, none of the shares had been issued.
On
April 10, 2019, a third-party lender converted $13,272.60 principal of a convertible debenture into 66,363,000 common shares.
On
April 15, 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.
On
May 5, 2019, 2050 Motors, Inc. executed a Securities Purchase Agreement (SPA) with our CEO, Vikram Grover, for an investment of
$483,000.00 in value of 210,000,000 common shares of Peer to Peer Network aka Mobicard Inc. (ticker PTOP) for 400,000 Series B
Convertible Preferred Shares priced at $1.2075 per share. The transaction closed on May 15, 2019. Further, on May 16, 2019, Vikram
Grover executed a one-year Lock-Up Agreement regarding all of his Convertible Preferred Shares.
On
May 13, 2019, a third-party lender funded the Company $12,500.00 in a convertible debenture that pays 12% interest.
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.
On
May 17, 2019, a third-party lender converted $4,667.74 principal and $2,413.96 interest of a convertible debenture into 39,342,800
common shares.
On
May 24, 2019, a third-party lender converted $11,700 principal of a convertible debenture into 78,000,000 common shares.
Business
Development and Related
On
March 10, 2019, Aldo Baiocchi joined the Company’s Advisory Board to guide the Company’s growth of electric vehicle
ventures. As compensation, Aldo Baiocchi was issued 10 million incentive common stock purchase warrants with a strike price of
$0.01 and three-year expiration.
On
March 10, 2019, Ted Flomenhaft joined the Company’s Advisory Board to guide the Company’s growth of technology and
communications ventures. As compensation, Ted Flomenhaft was issued 10 million incentive common stock purchase warrants with a
strike price of $0.01 and three-year expiration.
On
March 19, 2019, we engaged EDGE FiberNet, Inc. for consulting, support and back office services to assist us in development of
our planned businesses in communications, electric vehicles, lighting, including power over Ethernet and LED, and other mediums.
As part of the Agreement, we received an option on 4,000 square feet of office/retail space at EDGE FiberNet’s headquarters
in Industry City, Brooklyn, New York. As compensation, we issued EDGE FiberNet 10 million common stock purchase warrants with
a strike price of $.005 and a three-year expiration.
On
April 12, 2019, Michael Shevack joined the Company’s Advisory Board to guide the formation of an Environmental, Social and
Governance (“ESG”) Division. As compensation, Shevack was issued 10 million incentive common stock purchase warrants
with a strike price of $0.01 and three-year expiration.
As
part of its management transition plan, on or around March 6, 2019, 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
April 18, 2019, we agreed to purchase a 50% interest in CLEC Networks, Inc., a Delaware corporation, from EDGE FiberNet Inc.,
a Delaware corporation. As consideration, we agreed to issue EDGE FiberNet 100,000 newly created Series B Preferred Shares convertible
into 100 million common shares of our Company. Additionally, we made a funding commitment of $150,000 over seven months to CLEC
Networks, to be renamed 2050Tel Corp. or similar such corporate name. The transaction was originally expected to close by April
30, 2019, but the closing deadline was extended to allow both parties to complete corporate actions, including requisite state
approvals of share issuances and other.
On April 22, 2019, we executed a letter of intent (LOI) to invest in and partner with ERide Club Corp. (“ECC”;
www.erideclub.com
), a California corporation 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 no later than August 1, 2019, 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.
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 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
(
www.linkstorm.net
), and Android/iOS mobile applications to the platform.
On
May 14, 2019, to eliminate any confusion regarding the future direction of the Company and to provide transparency and clarity
for our investors, 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 26, 2019, we extended the closing deadline from May 17, 2019 to June 28, 2019 for our definitive agreement to acquire 50%
of CLEC Networks, Inc (“CLEC”), a Delaware Corporation currently 100%-owned by EDGE FiberNet, Inc., a Delaware Corporation.
This represents the second such extension to the original Agreement that was executed on April 18, 2019. We are currently discussing
further extensions to this Agreement pending our return to current filing status with the SEC. After the planned closing, CLEC
Networks intends to change its name to 2050Tel and deploy a facilities-based competitive telecommunications carrier in the Northeast
providing Origination Carrier Services, including DIDs, ports and hosting to providers of VoIP (Voice over Internet Protocol)
and UCaaS (Unified Communications as a Service). 2050Tel will also introduce services directly to consumers and businesses. The
2050tel planned offering, which has been successfully deployed and proven by management in another entity, will target a market
currently dominated by Level 3 (CenturyLink) and Bandwidth.com.
On
June 7, 2019, 2050 Motors, Inc. aka 2050 Corp. executed a Letter of Intent (“LOI”) with LVG1, an LLC d/b/a UNDERground
Villas & Hotels (“LVG1” or “UVH”;
https://undergroundvh.com/
), under which 2050 will purchase
10% of LVG1’s equity or similar economic interest in exchange for 100,000 1% Series B Preferred Shares of 2050 convertible
into 100,000,000 restricted common shares of 2050. Under the terms, LVG1 shall be issued a right to spin-off or spin-out via a
public offering to 2050 shareholders during the three years subsequent to execution of closing documents. Meanwhile, 2050 shall
be issued a right of participation in future UNDERground funding rounds through year-end 2022 at its 10% ownership threshold.
UVH is owner and operator of a branded portfolio of consumer products and services targeting the global travel and entertainment
industries, with access to over 33,000 villas and resort properties worldwide using a wholesale e-commerce platform. UVH has active
engagements today in the travel, tourism, eSports, and cannabidiol (“CBD”) markets, with contracts signed or under
negotiation with well-known operators, teams, consumer brands and distributors targeting multiple nationwide retailers with tens
of thousands of points of sale. It is 2050’s intent to leverage the UVH name across its cannabis social network currently
under development @
www.kanab.club
including embedding UVH on a co-branded or similar basis into its planned Kanab Club
e-commerce marketplace. UVH’s substantial branding and consumer traffic are expected to provide a natural complement to
Kanab Club by populating its platform with users. Concurrently with the signing of the LOI, 2050 has extended an offer to LVG1’s
owner, James Donnellan (
https://www.linkedin.com/in/jamesdonnellan/
), an experienced businessman in the trade, travel,
media and CBD industries, to join its Advisory Board.