NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
We are a corporation originally organized under the laws of the State of Delaware in 1996, but re-incorporated in Nevada effective June 3, 2011. We formerly operated under the name GANAS Corp. (GANAS). Prior to November 2009, GANAS objective was to obtain through acquisition and/or merger transactions, assets, which could benefit our shareholders. Effective November 4, 2009, GANAS acquired Go Green USA LLC, a Nevada limited liability company organized on April 28, 2009 (Go), in a share exchange transaction pursuant to which newly issued shares of GANAS common stock were issued in exchange for all of the issued and outstanding membership interests of Go (the Go Merger). The Go Merger resulted in GANAS issuing 1,436,202 shares of its common stock with par value $0.001 for each 1% membership interest in Go, following which GANAS changed its name to Green Automotive Company Corporation. Effective September 30, 2011, we effected a Change of Domicile, re-incorporating in Nevada and simplifying our name to Green Automotive Company, among other things (the Re-Incorporation).
We are currently involved in assessing a number of All-Electric and alternate fuel vehicles including an All-Electric Intra-City and Municipal Mass Transit Bus and School Bus, for introduction to the U.S. market, to be manufactured by our subsidiary, Newport Coach Works, Inc.
Liberty Transaction
On June 28, 2012, we entered into a Stock Exchange Agreement (the Liberty Agreement) with Liberty Electric Cars Ltd., an England and Wales private company limited (LEC), and its wholly-owned subsidiary LEC 2 Limited, an England and Wales private company limited (LEC2 and together with LEC, the LEC Entities), under which our wholly-owned subsidiary, Liberty Automotive Group, Inc. (formerly GAC EV Motors Inc.), a Nevada corporation (LAG) agreed to purchase 100% of the issued and outstanding securities of LEC (the LEC Shares), that owns 100% of the issued and outstanding securities of LEC2 (the LEC2 Shares) (collectively the LEC Securities) in exchange for the transfer of Thirty Nine Million Seven Hundred Forty Two Thousand One Hundred Seventy Eight (39,742,178) shares of our common stock held by LAG to the LEC Shareholders. These shares represented approximately 8.19% of our outstanding voting control. We also issued to Mr. West and Mr. Hobday, the executives of LEC, a total of 300,000 shares of our Series A Preferred Stock in exchange for the non-competition provisions in their independent contractor agreements. This transaction closed on July 23, 2012.
Additionally, pursuant to the Liberty Agreement, we issued to GAC Automotive Services, Inc., a Nevada corporation and one of our wholly-owned subsidiaries (GAC Auto) Ten Million (10,000,000) shares of Series B Convertible Preferred Stock (the Series B Shares). The issuance of the Series B shares to GAC Auto is not part of the purchase price of the LEC Entities and is not compensation to the LEC Entities or LEC Shareholders, but is reserved for issuance to certain entities that LEC and/or LEC2 have been in negotiations with at the time of execution of the Liberty Agreement if those entities and/or assets are purchased by us or our subsidiaries. The determination as to when and if to transfer the Series B Shares from GAC Auto to a selling party must be approved by our Board of Directors. To date, all of the Series B Shares are still held by GAC Auto.
As a result of the Liberty Transaction, we acquired LEC, a company that designs and develops electric vehicle drive solutions for use in its own converted vehicles and for sale to original equipment manufacturers (OEMs) for incorporation into their production. LECs engineers have invented innovative EV drive train technologies that can be employed in a wide variety of vehicle platforms. LEC is also involved in a number of advanced research programs for developing next generation electric vehicle (EV) solutions. These programs include the prestigious Deliver project where LEC is working together with tier one automotive companies to develop a pure electric commercial vehicle, and the Motore project in which LEC has partnered with other tier one automotive companies and universities to develop a rare earth free electric motor technology. Additionally, LEC has also created after sales support for EVs, by providing a comprehensive aftermarket maintenance program throughout Europe for electric trucks and cars.
11
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS (continued)
Liberty Transaction (continued)
Due to its experience in EV technologies and in servicing EVs, LEC recently re-signed its agreement with, a large U.S. truck manufacturer, for the on-going support of electric vehicles run by its key clients in Europe. LEC will continue to take care of all warranty support when required by these customers, all of whom run fleets of electric commercial vehicles across Europe. This truck manufacturers customers include major companies such as FedEx, UPS and Veolia, who are using the first ground up electric trucks known as the Modec that were launched some 4 years ago for the purpose of making pollution free deliveries in urban areas.
Newport Coachworks Transaction (as Restated)
On October 12, 2012, we entered into an Acquisition and Stock Exchange Agreement (the NCWI Agreement) with Newport Coachworks, Inc., a California corporation (NCWI), under which we agreed to purchase 100% of the issued and outstanding securities of NCWI (the NCWI Shares) from Mr. Carter Read, NCWIs sole shareholder, in exchange for the transfer of Five Million (5,000,000) shares of our common stock due at the closing of the transaction (the GACR Closing Shares), and up to an additional Twenty Two Million (22,000,000) shares of our common stock (the GACR Additional Shares and together with the GACR Closing Shares, the GACR Shares) to vest as follows: upon NCWI obtaining bona fide, binding purchase orders, with cash down payment standard in the industry to NCWI, from third party purchasers requiring NCWI to manufacturer Sixty (60) buses with compressed natural gas engines at NCWIs manufacturing facility (each a Qualified Purchase Order) within the first twelve (12) months following the payment of one-half of the initial forecasted funding of $500,000. As discussed below GACR will issue to Mr. Read up to all of the GACR Additional Shares, which shares will either be kept in escrow and distributed, or kept in treasury and issued, to Mr. Read within ten (10) days of the end of each calendar quarter pro rata with the number of Qualified Purchase Orders received by NCWI for the applicable calendar quarter (the NCWI Transaction). The determination as to whether the shares will be issued and held in escrow or kept in treasury will be determined by the Parties in good faith and has not been determined to date. The GACR Shares, if all issued, currently represent approximately 7.6% of our outstanding common stock. This transaction closed on October 12, 2012. The shares were not issued to NCWI as of March 31, 2013. Due to administrative delays combined with the imposed restrictions placed upon our Transfer agent following the TRO as explained in Note 19 Subsequent Events the 5,000,000 shares were not issued until July 18, 2013.
Matter of Time Merger
On September 1, 2011, Green Automotive Company entered into a Stock Purchase Agreement and Escrow Agreement with Mark E. Crone (Crone) and Bosch Equities, L.P. (Bosch), under which we purchased 100% of the outstanding equity of Matter of Time I Co., a Nevada corporation (MOT), and extinguished a repayment obligation of MOT totaling $6,000, all in exchange for $30,000.
On February 10, 2012, Green Automotive Company entered into a Merger Agreement and Plan of Reorganization with Matter of Time I Co., a Nevada corporation (MOT) (the MOT Agreement). Under the MOT Agreement, at the closing of the transaction contemplated by the MOT Agreement, MOT dissolved into and became a part of Green Automotive Company, with Green Automotive Company being the surviving corporation and assuming MOTs status as a reporting issuer under the Securities Exchange Act of 1934, as amended. On December 14, 2012 the transactions contemplated by the MOT Agreement closed (the Closing). As a result of the Closing, MOT was merged out of existence and Green Automotive Company became a reporting issuer under the Securities Exchange Act of 1934, as amended.
12
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. BASIS OF PRESENTATION
The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as promulgated in the United States of America.
The unaudited condensed interim consolidated financial statements at March 31, 2013 and for the three-month periods ended March 31, 2013 and 2012 are unaudited, but include all adjustments, consisting of normal recurring entries, which our management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. The Companys operating results will fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of our operating results in future periods.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies presented below is designed to assist in understanding the Companys condensed consolidated financial statements. Such financial statements and accompanying notes are the representations of the Companys management, who is responsible for their integrity and objectivity. These accounting policies conform to GAAP in all material respects, and have been consistently applied in preparing the accompanying financial statements.
Principles of Consolidation
The Companys unaudited condensed consolidated financial statements include the assets, liabilities and operating results of majority-owned subsidiaries. The Company does not hold significant variable interests in any variable interest entities. All significant intercompany accounts and transactions have been eliminated.
Reverse Merger Accounting
The MOT Merger was accounted for as a reverse-merger and recapitalization in accordance with accounting principles generally accepted in the United States of America (GAAP). Green Automotive Company was the acquirer for financial reporting purposes and MOT was the acquired company. Consequently, the assets and liabilities and operations that are reflected in the historical financial statements prior to the Merger will be those of Green Automotive Company and will be recorded at the historical cost basis of the Company. The consolidated financial statements after completion of the Merger include the assets and liabilities of Green Automotive Company. Common stock and the corresponding capital amounts of the Company pre-merger have been retroactively restated as capital stock shares reflecting the exchange ratio in the Merger.
Going Concern
Our condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. However, as of March 31, 2013, we have sustained recurring operating losses and have a stockholders deficit of $35,144,602. These conditions, among others, give rise to substantial doubt about our ability to continue as a going concern. Management is continuing to seek additional equity capital to fund the acquisition or to purchase an ongoing business and improving profitability of existing operations. Until such time, we anticipate our working capital needs will be funded through the issuance of debt and equity instruments. Management believes these steps will provide us with adequate funds to sustain our continued existence. There is, however, no assurance that the steps taken by management will meet all of our needs or that we will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
13
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of the condensed consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The assumptions used by management in future estimates could change significantly due to changes in circumstances, including, but not limited to, challenging economic conditions. Accordingly, future estimates may differ significantly.
Cash and Cash Equivalents
Cash and cash equivalents consist of amounts held as bank deposits and highly liquid debt instruments purchased with an original maturity of three months or less. The Company had no cash equivalents as of March 31, 2013 and December 31, 2012.
Accounts receivable
Accounts receivable consists of trade receivables, which are recorded at the invoiced amount, net of taxes, allowances for doubtful accounts and prompt payment discounts. Trade receivables do not carry interest. The allowance for doubtful accounts represents managements estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account balances are written off against the allowance when management determines the receivable is uncollectible.
Inventories
The Companys inventories are valued at cost, as determined by the first-in, first out (FIFO) method; in aggregate such valuations are not in excess of market.
Concentrations
The Company currently maintains substantially all of its cash with major financial institutions. At times, cash balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation.
Comprehensive Income (Loss)
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05,
Presentation of Comprehensive Income
(ASU 2011-05), which amends FASB Codification Topic 220 on comprehensive income disclosures. The new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements, while eliminating the option to report other comprehensive income and its components in the statement of changes in shareholders equity. The provisions of ASU 2011-05 were adopted in 2012. The adoption of ASU 2011-05 did not impact the Companys consolidated financial position, results of operations or cash flows as it required only a change in the format of presentation.
Intangible Assets
Acquired intangible assets are amortized over their useful lives unless the lives are determined to be indefinite. Acquired intangible assets are carried at cost, less accumulated amortization and impairment.
14
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment consisting of leasehold improvements, furniture and fixtures, equipment and vehicles are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated service lives ranging from three to seven years. Maintenance and repairs are expensed as incurred and improvements are capitalized. Gains or losses on the disposition of fixed assets are recorded upon disposal.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. There were no impairment charges for the three months ended March 31, 2013 and 2012.
Derivative Instruments
The fair value of derivative instruments is recorded and shown separately under current liabilities. Changes in the fair value are recorded in the condensed consolidated statement of income under other income (expense).
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Fair Value Measurements
ASC 820,
Fair Value Measurements
, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, inputs other than level one that are either directly or indirectly observable such as quoted prices for identical or similar assets or liabilities on markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
15
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.
As a result of the implementation of certain provisions of ASC 740, Income Taxes (ASC 740), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of January 1, 2007, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We have identified the U.S. federal and California as our "major" tax jurisdictions. Generally, we remain subject to Internal Revenue Service examination of our 2007 through 2012 U.S. federal income tax returns, and remain subject to California Franchise Tax Board examination of our 2007 through 2012 California Franchise Tax Returns. However, we have certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.
We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.
Revenue Recognition
We recognize revenues related to annual membership income and service of electric vehicles in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) No. 605,
Revenue Recognition
. Revenue is recognized when we have evidence of an arrangement, a determinable fee, and when collection is considered to be probable and services are provided. In the event that final acceptance of our product by the customer is uncertain, revenue is deferred until all acceptance criteria have been met. In the event we have amounts billed or collected in accordance with contractual terms in advance of when the work is performed we treat these as deferred revenues. These advance payments primarily relate to the Company's grant project and E-Care membership scheme. The current portion of deferred revenue represents the balance the Company estimates will be earned as revenue during the next fiscal year (see note 9).
Grant Income
Grant income is not recognized until a grant claim has been submitted and approved by Government representatives.
E-tech services
Revenues from consultancy services are recognized only when all services have been rendered and collectability is reasonably assured.
E-Care services
Revenues from maintenance, repair, and overhaul services are recognized only when all services have been rendered and collectability is reasonably assured.
16
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings (Loss) per Common Share (as Restated)
The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including 555,142 (net of 300,000 forfeit shares) for March 31, 2013 and 500,000 for March 2012 Series A convertible preferred Stock, using the if-converted method, 18,000,000 for March 31, 2013 and 4,000,000 for March 31, 2012 Stock options, using the treasury stock method, and 5,551,913 shares for March 31, 2013 (nil March 2012) for convertible loan notes, using the if-converted method In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
Share-Based Payment Arrangements
Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expenses resulting from share-based payments are recorded in operating expenses in the condensed consolidated statement of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no impact on previously reported net loss.
Recent Accounting Pronouncements
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
17
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). The amendments in ASU 2011-11 require the disclosure of information on offsetting and related arrangements for financial and derivative instruments to enable users of its financial statements to understand the effect of those arrangements on its financial position. Amendments under ASU 2011-11 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after January 1, 2013. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In July 2012, the FASB issued guidance on testing for indefinite-lived intangible assets for impairment. The new guidance allows an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.
Other recent pronouncements issued by FASB (including its Emerging Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Companys present or future financial statements.
4. ACQUISITIONS (as Restated)
On June 28, 2012, we entered into a Stock Exchange Agreement (the Agreement) with Liberty Electric Cars Ltd., an England and Wales private company limited (LEC), and its wholly-owned subsidiary LEC 2 Limited, an England and Wales private company limited (LEC2 and together with LEC, the LEC Entities), under which our wholly-owned subsidiary, Liberty Automotive Group, Inc. (formerly GAC EV Motors Inc.), a Nevada corporation (LAG) agreed to purchase 100% of the issued and outstanding securities of LEC Entities in exchange for Thirty Nine Million Seven Hundred Forty Two Thousand One Hundred Seventy Eight (39,742,178) shares of our common stock held by LAG to the LEC Shareholders. The Company valued the common shares at $0.05 per share based on price paid in similar transactions involving the Companys common stock. These shares represent approximately Ten percent (10%) of our outstanding voting control. This transaction closed on July 23, 2012.
Additionally, pursuant to the Agreement, we issued to GAC Automotive Services, Inc., a Nevada corporation and one of our wholly-owned subsidiaries (GAC Auto) Ten Million (10,000,000) shares of Series B Convertible Preferred Stock (the Series B Shares). The issuance of the Series B shares to GAC Auto is not part of the purchase price of the LEC Entities and is not compensation to the LEC Entities or LEC Shareholders, but is reserved for issuance to certain entities that LEC and/or LEC2 have been in negotiations with at the time of execution of the Agreement if those entities and/or assets are purchased by us or our subsidiaries. The determination as to when and if to transfer the Series B Shares from GAC Auto to a selling party must be approved by our Board of Directors.
18
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (as Restated) (continued)
As part of the Agreement, the Company issued 300,000 shares of restricted preferred stock to two LEC Directors as a covenant not to compete. The preferred shares are fully forfeitable in the event the Directors terminated their employment before the third year anniversary. Additionally, these preferred shares were valued at $5 per share and were recorded as part of purchase price. The Company valued the preferred shares at $5.00 per share based on price paid in similar transactions involving the Companys preferred stock.
Contemporaneously with the Agreement, we entered into a Stock Purchase Agreement No.1 (the Stock Agreement) with First Market Services, a Nevada corporation (FMS), under which we may sell up to One Hundred Twenty Thousand (120,000) shares of our Series A Preferred Stock (the Series A Shares) for the purchase price of Five Dollars ($5) per share. Pursuant to the Stock Agreement, FMS has the right to purchase the Series A Shares in increments of One Thousand Dollars ($1,000) with a minimum purchase of Fifty Thousand Dollars ($50,000) per month for a minimum of twelve (12) months, with Forty Thousand Dollars ($40,000) being earmarked for the LEC Entities to fund their operations and growth, and Ten Thousand Dollars ($10,000) being earmarked to fund the costs associated with the Company being a public company.
On October 12, 2012, we entered into an Acquisition and Stock Exchange Agreement (the NCWI Agreement) with Newport Coachworks, Inc., a California corporation (NCWI), under which we agreed to purchase 100% of the issued and outstanding securities of NCWI (the NCWI Shares) from Mr. Carter Read, NCWIs sole shareholder, in exchange for the transfer of Five Million (5,000,000) shares of our common stock (The Company valued the common shares at $0.05 per share based on price paid in similar transactions involving the Companys common stock) due at the closing of the transaction (the GACR Closing Shares), and up to an additional Twenty Two Million (22,000,000) shares of our common stock (the GACR Additional Shares and together with the GACR Closing Shares, the GACR Shares) to vest as follows: upon NCWI obtaining bona fide, binding purchase orders, with cash down payment standard in the industry to NCWI, from third party purchasers requiring NCWI to manufacturer Sixty (60) buses with compressed natural gas engines at NCWIs manufacturing facility (each a Qualified Purchase Order) within the first twelve (12) months following the payment of one-half of the initial forecasted funding ($500,000). As discussed below, GACR will issue Mr. Read up to all of the GACR Additional Shares, which shares will either be kept in escrow and distributed, or kept in treasury and issued, to Mr. Read within ten (10) days of the end of each calendar quarter pro rata with the number of Qualified Purchase Orders received by NCWI for that quarter.
The determination as to whether the shares will be issued and held in escrow or kept in treasury will be determined by the Parties in good faith and has not been determined to date. The GACR Shares, if all issued, would currently represent approximately 7.6% of our outstanding common stock. This transaction closed on October 12, 2012.
As noted above, we have a financing obligation to NCWI under the NCWI Agreement under which we are agreed to provide up to One Million Dollars ($1,000,000) to NCWI pursuant to the forecasted timeline set forth in the NCWI Agreement. The total funding is made up of $500,000 as the forecasted requirement for initiating an internal combustion engine based bus manufacturing and $500,000 as the forecasted requirement for reaching pre-production stage in electric bus manufacturing. Both parties to the NCWI Agreement agreed that the funding requirements are forecasted amounts which may rise or fall according to business requirements and may be modified by the parties as needed.
19
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (as Restated) (continued)
The allocation of the purchase price and the estimated fair market values of the assets acquired and liabilities assumed for the LEC and NCWI are shown below.
|
|
|
| |
|
LIBERTY
ELECTRIC
CARS
LIMITED
|
|
NEWPORT
COACHWORKS
|
Cash
|
$
|
149,497
|
|
1,000
|
Notes receivable
|
|
212,773
|
|
-
|
Other current assets
|
|
492,174
|
|
-
|
Property and equipment, net
|
|
197,469
|
|
-
|
Intangible asset (covenant not to compete)
|
|
1,500,000
|
|
-
|
Other intangible assets (Goodwill)
|
|
2,233,543
|
|
249,000
|
Total assets acquired
|
|
4,785,456
|
|
250,000
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
446,945
|
|
-
|
Deferred revenue
|
|
182,982
|
|
-
|
Notes payable
|
|
625,195
|
|
-
|
Other
|
|
43,225
|
|
-
|
Total liabilities assumed
|
|
1,298,347
|
|
-
|
|
|
|
|
|
Net assets acquired
|
$
|
3,487,109
|
|
250,000
|
|
|
|
|
|
Final Consideration
|
|
|
|
|
39,742,178 Common Stock issued for Liberty @ 5 cents
|
|
$1,987,109
|
|
|
300,000 Series A Preferred Shares issued @$5
|
|
$1,500,000
|
|
|
5,000,000 Common Stock issued for NCI @ 5 cents
|
|
|
|
$250,000
|
|
|
$3,487,109
|
|
$250,000
|
20
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (as Restated) (continued)
The following are unaudited pro-forma results of operations as if the acquisitions has occurred at the beginning of the period for the three months ended March 31, 2013 and 2012:
Pro-forma (unaudited)
|
|
|
|
| |
|
For the three months ended
March 31,
|
|
2013
|
|
2012
|
Revenues
|
$
|
218,396
|
|
$
|
317,434
|
Costs of goods sold
|
|
78,847
|
|
|
25,337
|
Gross profit
|
|
139,549
|
|
|
292,097
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
Depreciation and amortization
|
|
8,876
|
|
|
141,227
|
Loss on disposal of equipment
|
|
12,516
|
|
|
-
|
General and administrative
|
|
486,148
|
|
|
547,259
|
|
|
507,540
|
|
|
688,486
|
Loss before other expenses
|
|
(367,991)
|
|
|
(396,389)
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
Stock issued in settlement of an agreement
|
|
(214,286)
|
|
|
-
|
Change in fair value of derivative liability
|
|
38,690,539
|
|
|
(7,979)
|
Gain on conversion of debt to stock
|
|
40,749
|
|
|
-
|
Loss on conversion of preferred shares
|
|
(20,375)
|
|
|
-
|
Interest expense
|
|
(45,919)
|
|
|
(379)
|
|
|
38,450,708
|
|
|
(8,358)
|
Profit / (loss) before income taxes
|
|
38,082,717
|
|
|
(404,747)
|
Income taxes
|
|
-
|
|
|
-
|
Net income / (loss)
|
$
|
38,082,717
|
|
$
|
(453,716)
|
|
|
|
|
|
|
Net income / (loss) per share (basic)
|
$
|
0.11
|
|
$
|
(0.00)
|
Net income / (loss) per share (diluted)
|
$
|
0.07
|
|
$
|
(0.00)
|
Weighted average shares outstanding (basic)
|
|
334,804,957
|
|
|
272,838,022
|
Weighted average shares outstanding (diluted)
|
|
550,163,039
|
|
|
420,632,665
|
21
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(As Restated)
4. ACQUISITIONS (as Restated) (continued)
The acquisition method of accounting is based on ASC Subtopic 805-10,
Business Combinations
, and uses the fair value concepts defined in ASC Subtopic 820-10,
Fair Value Measurements and Disclosures
. The purchase price for the LEC and NCWI Businesses was allocated to the net tangible and intangible assets based upon their fair values as of the respective acquisition dates. The allocation of the purchase price was based upon a valuation and the estimates and assumptions were subject to change within the measurement period. The excess of the purchase price over the fair values of the net tangible assets and intangible assets, if any, was recorded as goodwill and is generally driven by our expectations of our ability to realize synergies and achieve our strategic growth objectives.
The goodwill recorded in connection with the LEC and NCWI acquisitions were $3,733,543 and $249,000, respectively, on each transaction acquisition date. and was fully written off in year ended December 31, 2012. The impairment arose because of the lowered revenue and cash flow projections.
In accordance with U.S. GAAP, impairment testing for goodwill is performed at least annually. The Company performs its annual impairment test as of December 31. Goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
The impairment test for goodwill uses a two-step approach, which is performed at the entity level as the Company has one reporting unit. Step 1 compares the fair value of the reporting unit to its carrying value including goodwill. If the carrying value exceeds the fair value, there is a potential impairment and Step 2 must be performed. Step 2 compares the carrying value of the reporting units goodwill to its implied fair value (i.e., the fair value of the reporting unit less the fair value of the units assets and liabilities, including identifiable intangible assets). If the carrying value of goodwill exceeds its implied fair value, the excess is recorded as an impairment.
The Company performed its annual test of goodwill as of December 31, 2012. The Company determined the fair value of the reporting unit exceeded the carrying value of the reporting unit.
For the quarter ended September 30, 2012, the Company concluded there were indicators of potential goodwill impairment, including the decline in the value of the Companys revenue recognition. As a result of identifying indicators of impairment, the Company performed an impairment test of goodwill as of December 31, 2012.
In performing Step 1 of the impairment test, the Company estimated the fair value of the reporting unit using the market approach for purposes of estimating the total enterprise value for the Company.
The market approach is based on the guideline publicly traded company method to determine the fair value of the reporting unit. Under this method, market multiples ratios were applied to the reporting units earnings with consideration given to the Companys size, product offerings, growth, and other relevant factors compared to those of the guideline companies. The guideline companies selected were engaged in the same or a similar line of business as the Company. Market multiples were then selected based on consideration of risk, growth, and profitability differences between the Company and the guideline companies. The selected market multiples were then multiplied by the Companys earnings streams for the twelve months ended December, 2012 and an annual 2013 forecast, with each given equal weighting, to arrive at an estimate of fair value for the Company.
Based on the above analysis, it was determined that the carrying value of the reporting unit including goodwill exceeded the fair value of the reporting unit, requiring the Company to perform Step 2 of the goodwill impairment test to measure the amount of impairment loss, if any.
In performing Step 2 of the goodwill impairment test, the Company compared the implied fair value of the reporting units goodwill to its carrying value of goodwill. This test resulted in a non-cash, goodwill impairment charge of $3,982,543 which was recognized during the year ended December 31, 2012. This charge had no impact on our cash flows or our compliance with debt covenants.
22
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(As Restated)
4. ACQUISITIONS (as Restated) (continued)
The following table sets forth the balance of the Companys goodwill as of December 31, 2011 and September 30 2012:
|
|
|
|
|
|
|
|
|
|
| |
|
December 31,
2011
|
|
Additions
|
|
Impairments
|
|
December 31,
2012
|
|
(in millions)
|
Goodwill, gross
|
$
|
|
|
$
|
3,982,543
|
|
$
|
(3,982,543)
|
|
$
|
|
Accumulated impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
Total goodwill, net
|
$
|
|
|
$
|
3,982,543
|
|
$
|
(3,982,543)
|
|
$
|
|
The fair value estimates used in the goodwill impairment analysis required significant judgment. The Companys fair value estimates for purposes of determining the goodwill impairment charge are considered Level 3 fair value measurements. We based our fair value estimates on assumptions that we believe to be reasonable but that are inherently uncertain, including estimates of future revenues and operating margins and assumptions about the overall economic climate and the competitive environment for our business. Our estimates assume that revenues will decline into the foreseeable future. There can be no assurance that our estimates and assumptions will prove to be accurate predictions of the future. If our assumptions regarding business plans, competitive environments or anticipated operating results are not correct, we may be required to record goodwill impairment charges in future periods.
5. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following: as of March 31, 2013 and December 31, 2012:
|
|
|
|
| |
Accounts Receivables
|
March 31,
2013
|
|
December 31.
2012
|
Trade receivables
|
$
|
109,586
|
|
$
|
113,429
|
Grant monies receivable
|
$
|
46,955
|
|
$
|
49,960
|
|
$
|
156,541
|
|
$
|
163,389
|
6. INVENTORIES
Inventories consist of raw materials and work In progress. These pertain to the Bus production in the NCWI facility. The Companys inventories are valued at cost, as determined by the first-in, first out (FIFO) method; in aggregate such valuations are not in excess of market. and consisted of the following as of March 31, 2013 and December 31, 2012:
|
|
|
|
| |
|
March 31,
2013
|
|
December 31.
2012
|
Raw materials
|
$
|
6,936
|
|
$
|
-
|
Work in progress
|
|
89,845
|
|
|
-
|
|
$
|
96,781
|
|
$
|
-
|
23
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following: as of March 31, 2013 and December 31, 2012:
|
|
|
|
| |
|
March 31,
2013
|
|
December 31,
2012
|
Leasehold improvements
|
$
|
9,539
|
|
$
|
10,149
|
Furniture and fixtures
|
|
7,930
|
|
|
8,086
|
Equipment
|
|
280,344
|
|
|
111,973
|
Computer hardware and software
|
|
37,779
|
|
|
32,963
|
Vehicles
|
|
26,706
|
|
|
92,938
|
|
|
362,298
|
|
|
256,109
|
Less accumulated depreciation
|
|
(75,534)
|
|
|
(92,044)
|
|
|
|
|
|
|
|
$
|
286,764
|
|
$
|
164,065
|
Our property and equipment in 2013 are located equally in terms of value in California and in the United Kingdom (the UK). The UK assets are acquired as part of LEC Entities acquisition (see Note 4). For the three months ended March 31, 2013 and March 31 2012, depreciation expense was $8,876 and $660, respectively.
8. INTANGIBLE ASSETS
Intangible assets consist of the following and were mainly related to the LEC acquisition:
|
|
|
|
| |
|
March 31,
2013
|
|
December 31,
2012
|
Go License
|
$
|
500,000
|
|
$
|
500,000
|
Crash test homologation costs
|
|
228,912
|
|
|
228,912
|
Liberty acquired technology
|
|
619,462
|
|
|
619,462
|
Assembled workforce
|
|
689,000
|
|
|
689,000
|
Trade name and website
|
|
45,000
|
|
|
45,000
|
Non-compete agreement
|
|
1,500,000
|
|
|
1,500,000
|
|
|
3,582,374
|
|
|
3,582,374
|
Less amortization and impairment
|
|
(3,582,374)
|
|
|
(3,582,374)
|
|
|
|
|
|
|
|
$
|
−
|
|
$
|
−
|
Amortization expense was $0 for the three months ended March 31, 2013 and $133,201 for the three months ended March 31, 2012. Additionally, the Company impaired the remaining basis in the intangibles during the year ended December 31, 2012 as management revised its sales forecast for the product which impaired the goodwill as of December 31, 2012.
9. DEFERRED REVENUE
Deferred revenue consists of the following: as of March 31, 2013 and December 31, 2012:
|
|
|
|
| |
Deferred Revenues
|
March 31,
2013
|
|
December 31.
2012
|
Deferred Grant Income
|
$
|
307,079
|
|
$
|
307,226
|
Deferred membership fees
|
$
|
123,707
|
|
$
|
114,956
|
Payment on account Newport Coachworks
|
$
|
3,750
|
|
$
|
-
|
|
$
|
434,536
|
|
$
|
422,182
|
24
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. SHARE LIABILITY ON PURCHASE OF NCWI
On October 12, 2012, we entered into an Acquisition and Stock Exchange Agreement (the NCWI Agreement) with Newport Coachworks, Inc., a California corporation (NCWI), under which we agreed to purchase 100% of the issued and outstanding securities of NCWI (the NCWI Shares) from Mr. Carter Read, NCWIs sole shareholder. As at March 31, 2013 the initial payment of 5 million ordinary shares has not been made.
11. FUNDS RECEIVED FROM FMS NOT CONVERTED INTO PREFERENCE SHARES
During the year 2011 and through December 21, 2011, the Company borrowed a total of $1,139,670 from FMS under the Agreement., all advances were supported individually by a Convertible Preferred Note (CPN), the notes bore interest at 18% per annum and were convertible into the Companys common stock at the rate of 0.05 limited to a ceiling of 4.99% of total outstanding shares on date of conversion.
On December 21, 2011, the Company and FMS entered into the Settlement & Conversion Agreement (SCA) whereby the parties agreed that FMS should forgive all amounts owed from the Company under the agreement including the accrued interest of $66,280 as documented under the individual CPN for a total of $1,205,950 in consideration the Company issued to FMS 500,000 shares of the Companys restricted no par value Series A Convertible Preferred Stock (CPS) (see Note 10). The CPS is convertible into Companys common stock in accordance with the following formula:
No. of common shares to be issued upon conversion of CPS =
No. of common stock outstanding on date of conversion x 0.000001 x No. of preferred shares being converted.
The Company has received advances during the three months ended March 31, 2013 in the amount of $418,639. These advances were made directly from the major shareholder. These advances are due upon demand and do not bear any interest. The Company converted $180,188 of the advances in the first quarter of 2013 to 21,841 shares of the Companys preferred stock at $8.25 per share. At March 31, 2013 $358,552 had not been converted into preferred shares.
12. SUMS DUE TO GLOBAL MARKET ADVISORS
On July 19, 2010, we entered into an Advisory Agreement (the Advisory Agreement) with Global Market Advisors, Inc., a Nevada corporation (GMAI). Under the Advisory Agreement, GMAI was retained by us to assist with a variety of services, including, but not limited to, assisting us with our filings as a public company, making the public aware of us and our business, and provide general advice to our management in order to execute our business plan and strategy. In exchange for the services we agreed to compensate GMAI and at March 31, 2013 advisory fees of $104,100 have been accrued.
13. SUMS DUE TO GLOBAL TRADE FINANCE
On January 1, 2012 the Company made and entered into a credit facility with Global Trade Finance (GTF) to provide credit up to $250,000. The Company had drawn down $79,000 of the facility through the second quarter of 2012. The effective rate of interest is 8% on the facility, and the facility was to be secured by 5,000,000 shares of Green Auto common stock, and the advances made to the Company under the credit facility were not reduced to Convertible Notes. The facility was to be due January 1, 2013, or up to twenty four months if demand for repayment is not made, however, effective June 30, 2012, the $79,000 was converted into 1,500,000 shares of Green Auto common stock. The Company recorded $4,000 gain on settlement of debt. The Company also borrowed another $25,000 on this facility that it still owes under the same terms listed above.
25
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
14. NOTES PAYABLE, NET OF DISCOUNTS
|
|
|
|
| |
Notes Payable
|
March 31,
2013
|
|
December 31,
2012
|
|
|
|
|
|
|
N Eckert - £116,625 Note Payable, 12% interest, due upon the company raising in excess of £500,000 on OTCBB market, unsecured
|
$
|
177,142
|
|
$
|
188,478
|
|
|
|
|
|
|
R Knight £38,500 Note Payable, Nil Interest, when funds permit, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
58,478
|
|
$
|
62,220
|
|
|
|
|
|
|
P Beitl £52,540 (2012: £37,983) Note Payable, Nil Interest, when funds permit, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
79,803
|
|
$
|
61,384
|
|
|
|
|
|
|
R Mcwaters £25,000 Note payable, 12% interest, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
37,973
|
|
$
|
40,403
|
|
|
|
|
|
|
D Voss £25,000 Note payable, 12% interest, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
37,973
|
|
$
|
40,403
|
|
|
|
|
|
|
M Elson £20,000 Note payable, 12% interest, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
30,376
|
|
$
|
32,322
|
|
|
|
|
|
|
N Jones £10,053 Note Payable, Nil Interest, when funds permit, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
15,270
|
|
$
|
16,247
|
|
|
|
|
|
|
I Hobday £3,525 Note payable, Nil interest, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
5,354
|
|
$
|
5,697
|
|
|
|
|
|
|
P Lilley £700 Note Payable, Nil Interest, when funds permit, convertible based on a conversion price of 50% of close price on date of notification, unsecured
|
$
|
1,064
|
|
$
|
1,130
|
|
$
|
443,433
|
|
$
|
448,284
|
Debt Discount
|
$
|
(31,888)
|
|
$
|
(63,777)
|
|
$
|
411,545
|
|
$
|
384,507
|
As part of the acquisition of Liberty Electric described in Note 4 above, the Company had $625,195 in notes payable. Most of these notes are non-interest bearing and due upon demand. Four notes with a total amount of $211,240 were converted into 1,004,180 shares of GACR common stock. One note in the amount of $5,354 has an interest rate of nil% and is due to a related party. The balance due on the other notes at March 31, 2013 is $408,601 and at December 31, 2012 $5,697 was owed to a related party and the remaining notes totaled $378,810.
26
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
15. STOCK INCENTIVE PLAN
On May 30, 2011, the Company adopted the 2011 Non-Qualified Stock Incentive Plan (the Plan). Under the Plan, participants, including both employees and nonemployees of the Company, have the opportunity to acquire common units of the Company. For awards made under the Plan, participants purchase common units at the time the award is made at (i) a stated value, or (ii) a percentage that is not less than 50% of the current fair market value of the stock. Award agreements with employees have a term of ten years and typically have a graded vesting terms over five years. If a participant ceases to be employed with the Company prior to the end of the vesting period, the participant forfeits his/her rights to any unvested units at the date of the termination.
There were 4,000,000 unvested stock options as of March 31, 2013 and December 31, 2012. The Company granted 18,000,000 and 1,000,000 stock options during the years ended December 31, 2012 and 2011, respectively. No options were granted during the three months ended March 31, 2013 The Company also did not record any stock option expense for the quarters ended March 31, 2013 and 2012.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Because the Black-Scholes option valuation model incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on historical volatilities of the Companys stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from estimates and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
|
|
|
|
| |
|
March 31,
2013
|
|
|
December 31,
2012
|
|
Expected Volatility
|
88
|
%
|
|
88
|
%
|
Expected dividends
|
−
|
%
|
|
−
|
%
|
Expected terms (in years)
|
3
|
|
|
3
|
|
Risk-free rate
|
0.36
|
%
|
|
0.36
|
%
|
Forfeiture rate
|
−
|
%
|
|
−
|
%
|
A summary of option activity as of March 31, 2013 and December 31, 2012, and changes during the periods then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Options
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value
|
Outstanding at December 31, 2011
|
|
|
4,000,000
|
|
|
$
|
0.002
|
|
|
|
1.41
|
|
|
$
|
191,500
|
Granted
|
|
|
18,000,000
|
|
|
|
0.42
|
|
|
|
2.90
|
|
|
|
−
|
Exercised
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
Forfeited or expired
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
Outstanding at December 31, 2012
|
|
|
22,000,000
|
|
|
$
|
0.34
|
|
|
|
2.44
|
|
|
$
|
191,500
|
Exercisable at December 31, 2012
|
|
|
18,000,000
|
|
|
$
|
0.42
|
|
|
|
3.00
|
|
|
$
|
−
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
Options
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value
|
Outstanding at January 2013
|
|
|
22,000,000
|
|
|
$
|
0.34
|
|
|
|
2.44
|
|
|
$
|
191,500
|
Granted
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
Exercised
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
Forfeited or expired
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
|
|
|
−
|
Outstanding at March 31,2013
|
|
|
22,000,000
|
|
|
$
|
0.34
|
|
|
|
2.19
|
|
|
$
|
191,500
|
Exercisable at March 31,2013
|
|
|
18,000,000
|
|
|
$
|
0.42
|
|
|
|
2.75
|
|
|
$
|
−
|
27
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
16. STOCKHOLDERS
DEFICIT (As Restated)
Convertible Preferred Stock and Derivative Liability
On December 21, 2011, the Company and FMS entered into the Settlement & Conversion Agreement (SCA) whereby the parties agreed that FMS should forgive all amounts owed from the Company under the agreement including the accrued interest as documented under the individual convertible promissory notes for a total of $1,205,950 in consideration the Company issued to FMS 500,000 shares of the Companys restricted no par value Series A Convertible Preferred Stock (CPS).
On July 23, 2012 and in relation with the LEC Acquisition (Note 4), the Company issued 300,000 shares of restricted preferred stock to two LEC Directors as a covenant not to compete. The preferred shares are fully forfeitable in the event the Directors terminated their employment or violated the non-compete provision before the third year anniversary. Additionally, these preferred shares were valued at $5 per share and were recorded as part of the purchase price.
On or about September 29, 2012, the Company issued an additional 30,000 CPS to FMS to settle $150,000 of advances owed to FMS (see Note 4) at a conversion rate of $5 per CPS.
On or about December 26, 2012, the Company issued an additional 53,680 CPS to FMS for cash at a price of $5 per CPS.
On or about December 26, 2012, the Company issued an additional 12,121 CPS to FMS for cash at a price of $8.5 per CPS.
On or about February 15, 2013 FMS converted 62,500 Pref A shares in to 20,437,331 shares of our common stock.
On or about March 6, 2013, the Company issued an additional 21,841 CPS to FMS for cash at a price of $8.5 per CPS in settlement of $180,188 advances from related party.
The CPS is convertible into Companys common stock in accordance with the following formula:
No. of common shares to be issued upon conversion of CPS =
No. of common stock outstanding on date of conversion x 0.000001 x No. of preferred stock being converted.
Additionally, the financial statements presented here have been restated to give effect that subsequent to the filing date of the Original Form 10-K the Company the Black Scholes calculation for Derivative Transactions relating to the Series A Convertible Preferred Stock incorrectly assumed that there was a 16.667% restriction in the number of common shares that the preferred shares could be converted into. This had the effect of understating the cost of the transactions in 2011 and 2012 and understating the liability. Please see restatement note 20 below.
Due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion option embedded in the CPS, the conversion feature is classified as derivative liabilities and recorded at fair value.
28
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
16. STOCKHOLDERS DEFICIT (As Restated) (continued)
Pursuant to ASC 815, Derivatives and Hedging, the Company initially recognized the fair value of the embedded conversion feature of the CPS on date of issuance and was charged to operations. On March 31, 2013, the Company recorded a mark-to-market adjustment based on the fair value of the derivative liability on that date which resulted in a gain of $38,690,539. The fair value of the derivative liability was determined using the Black Scholes option pricing model with a quoted market price of $0.18, a conversion price of $0.157, expected volatility of 104%, no expected dividends, an expected term of one year and a risk-free interest rate of 0.16%. As of March 31, 2013, the number of common shares that could be potentially issued to settle the conversion of the preferred stock is 191,815,170 common shares.
The following table sets forth by level with the fair value hierarchy the Companys financial assets and liabilities measured at fair value on March 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial instruments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
33,138,133
|
|
|
$
|
33,138,133
|
The following table summarizes the derivative liabilities included in the condensed consolidated balance sheet at March 31, 2013:
|
|
| |
Balance at December 31, 2011
|
|
$
|
5,731,806
|
Derivative liability related to LEC debt conversion feature
|
|
|
133,872
|
Derivative liability related to preferred stock conversion feature
|
|
|
73,866,998
|
Balance at January 1, 2013
|
|
$
|
79,732,676
|
Derivative liability related to LEC debt conversion feature
|
|
|
(40,749)
|
Derivative liability related to preferred stock conversion feature
|
|
|
(7,863,255)
|
Change in Value of Historic Derivatives
|
|
|
(38,690,539)
|
Balance at March 31, 2013 (unaudited)
|
|
$
|
33,138,133
|
Common Stock
During the quarter ended June 30, 2011, a third party individual purchased 1,000,000 shares of common stock for $10,000 cash. In addition, this third party provided services to the company valued at $40,000 based on market prices of those services.
On January 1, 2012 the Company made and entered into a credit facility with Global Trade Finance (GTF) to provide credit up to $250,000. The Company had drawn down $79,000 of the facility through the second quarter of 2012. The effective rate of interest is 8% on the facility, and the facility was to be secured by 5,000,000 shares of Green Auto common stock, and the advances made to the Company under the credit facility were not reduced to Convertible Notes. The facility was to be due January 1, 2013, or up to twenty four months if demand for repayment is not made, however, effective June 30, 2012, the $79,000 was converted into 1,500,000 shares of Green Auto common stock. The Company recorded $4,000 loss on settlement of debt. The Company has borrowed another $25,000 on this facility that it still owes under the same terms listed above.
On January 27, 2012, the Company issued 8,000,000 shares of its common stock for the settlement of $430,689 of payables due to related parties.
29
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Common Stock (Continued)
On June 28, 2012, we entered into a Stock Exchange Agreement (the Agreement) with Liberty Electric Cars Ltd., an England and Wales private company limited (LEC), and its wholly-owned subsidiary LEC 2, Limited, an England and Wales private company limited (LEC2 and together with LEC, the LEC Entities), under which our wholly-owned subsidiary, Liberty Automotive Group, Inc. (formerly GAC EV Motors Inc.), a Nevada corporation (LAG) agreed to purchase 100% of the issued and outstanding securities of LEC (the LEC Shares), and LEC owns 100% of the issued and outstanding securities of LEC2 (the LEC2 Shares) (collectively the LEC Securities) in exchange for the transfer of Thirty Nine Million Seven Hundred Forty Two Thousand One Hundred Seventy Eight (39,742,178) shares of our common stock held by LAG to the LEC Shareholders. These shares represent approximately Ten percent (10%) of our outstanding voting control. This transaction closed on July 23, 2012.
On or about November 13, 2012, we issued an aggregate of 1,004,180 shares of our common stock to four non-affiliate investors in exchange for $211,240 owed by Liberty under debt instruments. The issuances were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was either accredited or sophisticated and familiar with our operations.
On or about November 13, 2012, we issued 300,000 shares of our common stock to one non-affiliate investor in exchange for $47,038 owed by Liberty for services performed. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was either accredited or sophisticated and familiar with our operations.
On or about February 15, 2013 FMS converted 62,500 Pref A shares in to 20,437,331 shares of our common stock.
On or about February 15, 2013, we issued 375,000 shares of our common stock to Kodiak Capital Group LLC worth $150,000 as part of the Kodiak Funding Agreement. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was either accredited or sophisticated and familiar with our operations.
On or about February 15, 2013, we issued 160,715 shares of our common stock to Colin Manners (part of Kodiak Capital Group LLC) worth $64,286 as part of the Kodiak Funding Agreement. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was either accredited or sophisticated and familiar with our operations.
On March 18, 2013, the Company entered into a funding agreement for up to $3 million with Kodiak Capital Group LLC
, a Newport Beach-based institutional investor. The Company has agreed to file a registration statement with the U.S. Securities & Exchange Commission (SEC) covering the shares that may be issued to Kodiak under the terms of the common stock purchase agreement. After the SEC has declared the registration statement related to the transaction effective, the Company has the right at its sole discretion over a period of one year to sell up $3 million of its common stock to Kodiak under the terms set forth in the agreement. Proceeds from this transaction will be used to fund the Companys business development and for general corporate purposes.
30
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
17. INCOME TAXES
Our provisions for income taxes for the three months ended March 31, 2013 and for the three months ended March 31, 2012 , respectively, were as follows (using our blended effective Federal and State income tax rate of 35.0%):
|
|
|
|
| |
|
2013
|
|
2012
|
Current Tax Provision:
|
|
|
|
|
|
Federal and state
|
|
|
|
|
|
Taxable income
|
$
|
-
|
|
$
|
-
|
Total current tax provision
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
Deferred Tax Provision:
|
|
|
|
|
|
Federal and state
|
|
|
|
|
|
Net loss carryforwards
|
$
|
(13,328,950)
|
|
$
|
29,591,783
|
Change in valuation allowance
|
|
13,328,950
|
|
|
(29,591,783)
|
Total deferred tax provision
|
$
|
-
|
|
$
|
-
|
Deferred tax assets for the three months ended March 31, 2013 and year ended December 31, 2012 consisted of the following:
|
|
|
|
| |
|
2013
|
|
2012
|
Deferred tax assets:
|
|
|
|
|
|
Net operating loss carryforwards
|
$
|
(38,082,717)
|
|
$
|
84,547,954
|
|
|
|
|
|
|
Valuation allowance
|
|
38,082,717
|
|
|
(84,547,954)
|
|
|
|
|
|
|
Net deferred tax assets
|
$
|
-
|
|
$
|
-
|
Internal Revenue Code Section 382 and similar California rules place a limitation on the amount of taxable income that can be offset by net operating loss carryforwards (NOL) after a change in control (generally greater than a 50% change in ownership). Transactions such as planned future sales of our common stock may be included in determining such a change in control. These factors give rise to uncertainty as to whether the net deferred tax assets are realizable. We have approximately $12,615,000 in NOL at December 31, 2012 that will begin to expire in 2030 for federal and state purposes and could be limited for use under IRC Section 382. We have recorded a valuation allowance against the entire net deferred tax asset balance due because we believe there exists a substantial doubt that we will be able to realize the benefits due to our lack of a history of earnings and due to possible limitations under IRC Section 382.
A reconciliation of the expected tax benefit computed at the U.S. federal and state statutory income tax rates to our tax benefit for the three months ended March 31, 2013 and year ended December 31, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
| |
|
3 month ended and Year ended December 31,
|
|
|
2013
|
|
|
2012
|
|
Federal income tax rate at 35%
|
$
|
13,328,950
|
|
35.0
|
%
|
|
$
|
(29,591,783)
|
|
35.0
|
%
|
State income tax, net of federal benefit
|
|
-
|
|
-
|
%
|
|
|
-
|
|
-
|
%
|
Change in valuation allowance
|
|
(13,328,950)
|
|
(35.0)
|
%
|
|
|
29,591,783
|
|
(35.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit for income taxes
|
$
|
-
|
|
-
|
%
|
|
$
|
-
|
|
-
|
%
|
31
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
17. INCOME TAXES (Continued)
We file income tax returns in the U.S. with varying statutes of limitations. Our policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2012 and 2011. We have no unrecognized tax benefits and thus no interest or penalties included in the financial statements.
18. CONTINGENCIES
Our predecessor, Go Green USA, LLC (Go Green) was a defendant, along with other defendants in a civil action filed in Marshall County, West Virginia by Glen Dale Motor Co. and Tomsic Motor Co, Civil Action no. 11-C-104 H. This undefended and previously unknown action resulted in a default judgment order in the amount of $3,717,615 with interest accruing at 7% per annum from and after February 13, 2012. There is no active effort to enforce this action against Go Green and we believe there are numerous defenses to the asserted judgment and any such enforcement effort. Moreover, the existence of the liability pre-existed our acquisition of Go Green and its existence was not disclosed as a part of the acquisition.
Management has not accrued for this event in the financial statements as its not determinable whether the Company is liable for this as Steve Wells is no longer with the Company. The Company expects that if they are served that the expected loss could be between zero to $3,717,615.
19. SUBSEQUENT EVENTS
On January 31, 2013, the Company signed a binding agreement to buy UK-based electric vehicle distributor Going Green Limited (www.goingreen.co.uk
). Trading under the brand name, GoinGreen, it has sold over 1400 of the highly successful G-Wiz electric vehicles, making it one of Europes largest single retailers of electric vehicles. Going Green Ltd was founded in 2002 and in the early days, set itself the mission to minimize the effects of climate change by encouraging carbon-neutral motoring. The company pioneered electric vehicles in the UK with the G-Wiz, an electric vehicle designed in California and manufactured in India by the Indo-Reva Electric Car Company, making London the capital of the electric vehicle (EV). The deal was completed on April 1, 2013 when 1,562,498 shares of GACR common stock was exchanged for 100% of the issued and outstanding securities of Going Green Limited (an England and Wales private limited company).
On April 15, 2013, the Companys subsidiary, Newport Coachworks Inc. (NCI), delivered the first one of the 432 buses ordered from its major customer Don Brown Bus Sales Inc.
On March 22, 2013 GACR filed an Ex Parte Motion For Temporary Restraining Order against TBG in the Utah District Court in Salt Lake City, Utah (the Utah TRO) requesting the Court for permission to instruct the GACR Transfer Agent to put a Rule 144 Legend on two (2) certificates (representing 1,000,000 shares of GACR Common Stock - the TBG Shares) which had been submitted by TBG to MTG Trading (a registered NASD Broker-Dealer) for deposit in street name for future sale into the public market. After a brief hearing on March 22, 2013, the Court, decided that there was enough evidence presented by GACR to justify a Temporary Restraining Order, and granted GACR's motion.
The following week the Court held a Hearing with all parties to settle on a form of order for the permanent injunction requested by GACR, or allow the GACR Transfer Agent to re-issue the TBG Shares in the name of Cede & Co. (effectively allowing the TBG Shares to be sold as Free-Trading shares in the public market): the Court decided to let the Temporary Restraining Order stand, which served to prevent Action Stock Transfer from re-issuing the TBG Shares in the name of Cede & Co. but left open for additional briefing and consideration the issue of whether the amount of the bond for the injunction should be increased to the difference between the current estimated free market value of the TBG Shares ($250,000 give or take) and the value on the day of the Courts decision. The Court determined that the possible loss to TBG, if it was decided that the TBG Shares should not have been held by the GACR Transfer Agent and re-legended, was $50,000 and ordered GACR to post a $50,000 Bond, which we posted.
32
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
19. SUBSEQUENT EVENTS (continued)
However, on May 9, 2013 the Court issued its Memorandum Decision and Order in favor of GACR placing a Permanent Injunction on the re-issuance of the TBG Shares without a Rule 144 Legend until such shares were eligible under Rule 144 for the removal of the restrictive Legend, which is on or about December 24, 2013. As a result, GACRs Bond will be cancelled and, while TBG has the right to appeal the Memorandum Decision and Order. In managements view it is more likely than not that TBG will not do so and, failing an appeal by TBG, GACR is released from the terms of the Utah TRO as to the restriction on issuance of additional shares to meet pre-TRO agreements and other agreements to which we are a party which require the issuance of additional shares of our stock. See Memorandum Decision and Order attached as Exhibit 99.1 to our First Amended Quarterly Report on Form 10-Q/A for the period ended June 30, 2013.
20. RESTATEMENT
The Black Scholes calculation for Derivative Transactions relating to preferred A shares incorrectly assumed that there was a 16.667% restriction in the number of ordinary shares that they could be converted in to. This had the effect of understating the income in the Statement of Operations derived reversing change in value of historic derivatives and understating the level of Derivative liability on the balance sheet.
The original Valuation for 2012 was based on 595,801 Series A Preferred shares (Convertible to Common Stock) converting to a restricted 54,092,993 of common stock at a Black Scholes value of $0.39 per share giving a total liability of $21,114,932. The revised valuation was based on an unrestricted 193,368,089 of common stock at a Black Scholes value of $0.41 per share giving a total liability of $79,598,804. This gave rise to a further $58,483,872 of derivative liability to date
500,000 Series A preferred shares were issued to FMS on February 8, 2012
30,000 Series A preferred shares were issued to FMS on September 29, 2012
12,121 Series A preferred shares were issued to FMA on December 17, 2012
30,000 Series A preferred shares were issued to FMA on December 17, 2012
23,680
Series A preferred shares were issued to FMS on December 26, 2012
595,801
The original Valuation for three months ended 2013 was based on 555,142 Series A Preferred shares (Convertible to Common Stock) converting to a restricted 57,588,571 of common stock at a Black Scholes value of $0.158 per share giving a total liability of $9,090,814 and a movement for the three months of $12,024,118. The revised valuation was based on an unrestricted 191,815,170 of common stock at a Black Scholes value of $0.172 per share giving a total liability of $33,044,939 and a movement for the three months of $46,553,865. This gave rise to a net change of $34,529,747 of derivative liability for the quarter.
595,801 Series A preferred shares as at January 1
st
, 2012
(62,500) Series A preferred shares converted to ordinary shares on February 15, 2013
21,841
Series A preferred shares were issued to FMS on March 6, 2013
555,142
33
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restated Condensed Consolidated Balance Sheets
March 31, 2013
|
|
|
|
|
|
|
| |
|
Balance Sheets
|
|
as at March 31, 2013
|
|
March 31,
|
|
Adjustments
|
|
Restated
|
|
(Unaudited)
|
|
|
|
|
|
|
Total Current Assets
|
$
|
397,328
|
|
$
|
-
|
|
$
|
397,328
|
Property and equipment, net
|
|
286,764
|
|
|
-
|
|
|
286,764
|
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
684,092
|
|
$
|
-
|
|
$
|
684,092
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
$
|
932,603
|
|
$
|
-
|
|
$
|
932,603
|
Deferred revenue
|
|
434,536
|
|
|
-
|
|
|
434,536
|
Credit facility and other advances
|
|
87,125
|
|
|
-
|
|
|
87,125
|
Derivative liability
|
|
9,184,008
|
|
|
23,954,125
|
|
|
33,138,133
|
Share liability on purchase of NCWI
|
|
250,000
|
|
|
-
|
|
|
250,000
|
Funds received from FMS not converted into Preference Shares
|
|
358,552
|
|
|
-
|
|
|
358,552
|
Sums due to Global Market Advisors
|
|
104,100
|
|
|
-
|
|
|
104,100
|
Accrued value added taxes
|
|
37,543
|
|
|
-
|
|
|
37,543
|
Sums due to global trade finance
|
|
25,000
|
|
|
-
|
|
|
25,000
|
Lease payable
|
|
11,347
|
|
|
-
|
|
|
11,347
|
Other payables
|
|
38,210
|
|
|
-
|
|
|
38,210
|
Total Current Liabilities
|
|
11,463,024
|
|
|
23,954,125
|
|
|
35,417,149
|
|
|
|
|
|
|
|
|
|
Total Long-term Liabilities
|
|
411,545
|
|
|
-
|
|
|
411,545
|
Total Liabilities
|
|
11,874,569
|
|
|
23,954,125
|
|
|
35,828,694
|
|
|
|
|
|
|
|
|
|
Contingencies
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholder's Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, Class A Convertible Preferred Stock 100,000,000 shares authorized at March 31, 2013 and December 31, 2012, respectively, $.001 par value, 855,142 and 895,801 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively.
|
|
855
|
|
|
-
|
|
|
855
|
Preferred stock, Class B Convertible Preferred Stock 10,000,000 shares authorized at March 31, 2013 and December 31, 2012 respectively, $.001 par value, 10,000,000 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively.
|
|
10,000
|
|
|
-
|
|
|
10,000
|
Common stock, 900,000,000 shares authorized $.001 par value, 345,524,514 and 324,551,468 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
|
|
345,524
|
|
|
-
|
|
|
345,524
|
Additional paid-in capital
|
|
20,957,575
|
|
|
-
|
|
|
20,957,575
|
Accumulated other comprehensive loss
|
|
(13,379)
|
|
|
-
|
|
|
(13,379)
|
Accumulated deficit
|
|
(32,491,052)
|
|
|
(23,954,125)
|
|
|
(56,445,177)
|
|
|
|
|
|
|
|
|
|
Total Stockholder's Deficit
|
|
(11,190,477)
|
|
|
(23,954,125)
|
|
|
(35,144,602)
|
Total Liabilities and Stockholders' Deficit
|
$
|
684,092
|
|
$
|
-
|
|
$
|
684,092
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
|
|
|
|
Opening 2012
|
|
(36,044,022)
|
|
|
(58,483,872)
|
|
|
(94,527,894)
|
Comprehensive Income for 2013
|
|
3,552,970
|
|
|
34,529,747
|
|
|
38,082,717
|
Closing
|
|
(32,491,052)
|
|
|
(23,954,125)
|
|
|
(56,445,177)
|
34
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restated Condensed Consolidated Statements of Operations
For The Three Months Ended March 31, 2013
Unaudited
|
|
|
|
|
|
|
| |
|
3 Months ended March 31, 2013
|
|
As Reported
|
|
Adjustments
|
|
Restated
|
Gross profit
|
|
139,549
|
|
|
|
|
|
139,549
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
8,876
|
|
|
|
|
|
8,876
|
Loss on disposal of equipment
|
|
12,516
|
|
|
|
|
|
12,516
|
Stock based compensation
|
|
-
|
|
|
214,286
|
|
|
214,286
|
General and administrative
|
|
700,434
|
|
|
(214,286)
|
|
|
486,148
|
|
|
721,826
|
|
|
|
|
|
721,826
|
|
|
|
|
|
|
|
|
|
(Loss) before other expenses
|
|
(582,277)
|
|
|
-
|
|
|
(582,277)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability
|
|
4,160,792
|
|
|
34,529,747
|
|
|
38,690,539
|
Gain on conversion of debt to stock
|
|
40,749
|
|
|
-
|
|
|
40,749
|
Loss on conversion of preferred shares
|
|
(20,375)
|
|
|
-
|
|
|
(20,375)
|
Interest expense
|
|
(45,919)
|
|
|
-
|
|
|
(45,919)
|
|
|
4,135,247
|
|
|
34,529,747
|
|
|
38,664,994
|
|
|
|
|
|
|
|
|
|
Profit before income taxes
|
|
3,552,970
|
|
|
34,529,747
|
|
|
38,082,717
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
Net income
|
$
|
3,552,970
|
|
$
|
34,529,747
|
|
$
|
38,082,717
|
|
|
|
|
|
|
|
|
|
Net income per share (basic)
|
$
|
0.01
|
|
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
Net income per share (diluted)
|
$
|
0.01
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (basic)
|
|
335,037,991
|
|
|
(233,034)
|
|
|
334,804,957
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (diluted)
|
|
638,827,910
|
|
|
(88,664,871)
|
|
|
550,163,039
|
35
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restatement Condensed Consolidated Statements of Cash Flows
For The Quarter Ended March 31, 2013
|
|
|
|
|
|
|
| |
|
3 Months ended March 31, 2013
|
|
As Reported
|
|
Adjustments
|
|
Restated
|
|
(Unaudited)
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
3,552,970
|
|
$
|
34,529,747
|
|
$
|
38,082,717
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
8,876
|
|
|
-
|
|
|
8,876
|
Loss on conversion of Preferred Shares
|
|
20,375
|
|
|
-
|
|
|
20,375
|
Loss on disposal of assets
|
|
12,516
|
|
|
-
|
|
|
12,516
|
(Gain)/loss on conversion of debt to stock
|
|
(40,749)
|
|
|
-
|
|
|
(40,749)
|
Change in fair value of derivative liability
|
|
(4,160,792)
|
|
|
(34,529,747)
|
|
|
(38,690,539)
|
Share based compensation
|
|
214,286
|
|
|
-
|
|
|
214,286
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
-
|
Accounts receivable
|
|
6,848
|
|
|
-
|
|
|
6,848
|
Inventories
|
|
(96,781)
|
|
|
-
|
|
|
(96,781)
|
Other assets
|
|
(19,917)
|
|
|
-
|
|
|
(19,917)
|
Prepaid expenses
|
|
(48,505)
|
|
|
-
|
|
|
(48,505)
|
Accounts payable and accrued expenses
|
|
(1,275)
|
|
|
-
|
|
|
(1,275)
|
Deferred revenue
|
|
12,354
|
|
|
-
|
|
|
12,354
|
|
|
|
|
|
|
|
|
|
Net cash (used in) operating activities
|
|
(539,794)
|
|
|
-
|
|
|
(539,794)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
(142,328)
|
|
|
-
|
|
|
(142,328)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
525,297
|
|
|
-
|
|
|
525,297
|
|
|
|
|
|
|
|
|
|
Effect of change in exchange rate on cash
|
|
107,495
|
|
|
-
|
|
|
107,495
|
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash
|
|
(49,330)
|
|
|
-
|
|
|
(49,330)
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING PERIOD
|
|
87,325
|
|
|
-
|
|
|
87,325
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
$
|
37,995
|
|
$
|
-
|
|
$
|
37,995
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
Cash paid for income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING TRANSACTIONS
|
|
|
|
|
|
|
|
|
Share based compensation
|
$
|
214,286
|
|
$
|
-
|
|
$
|
214,286
|
Common shares issued in exchange for preferred shares
|
$
|
7,883,630
|
|
$
|
-
|
|
$
|
7,883,630
|
Common shares issued to settle liabilities
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
Preferred shares issued to settle debt
|
$
|
180,188
|
|
$
|
-
|
|
$
|
180,188
|
36
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restated Condensed Consolidated Statements of Operations
For The Three Months Ended March 31, 2012
Unaudited
|
|
|
|
|
|
|
| |
|
3 Months ended March 31, 2012
|
|
As Reported
|
|
Adjustments
|
|
Restated
|
|
|
|
|
|
|
|
|
|
Loss before other expenses
|
$
|
(684,160)
|
|
$
|
-
|
|
$
|
(684,160)
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
Change in fair value of derivative liability
|
|
-
|
|
|
(7,979)
|
|
|
(7,979)
|
Gain on conversion of debt to stock
|
|
430,689
|
|
|
-
|
|
|
430,689
|
Interest expense
|
|
(379)
|
|
|
-
|
|
|
(379)
|
|
|
430,310
|
|
|
(7,979)
|
|
|
422,331
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before income taxes
|
|
(253,850)
|
|
|
(7,979)
|
|
|
(261,829)
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
Net income / (loss)
|
$
|
(253,850)
|
|
$
|
(7,979)
|
|
$
|
(261,829)
|
|
|
|
|
|
|
|
|
|
Net income / (loss) per share Basic
|
$
|
(0.00)
|
|
|
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
Net income / (loss) per share Diluted
|
$
|
(0.00)
|
|
|
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
272,838,022
|
|
|
-
|
|
|
272,838,022
|
|
|
|
|
|
|
|
|
|
Weighted average shares (fully diluted)
|
|
420,632,665
|
|
|
-
|
|
|
420,632,665
|
37
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restatement Condensed Consolidated Statements of Cash Flows
For The Quarter Ended March 31, 2012
|
|
|
|
|
|
|
| |
|
3 Months ended March 31, 2012
|
|
As Reported
|
|
Adjustments
|
|
Restated
|
|
(Unaudited)
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(253,850)
|
|
$
|
(7,979)
|
|
$
|
(261,829)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
133,861
|
|
|
-
|
|
|
133,861
|
(Gain)/loss on conversion of debt to stock
|
|
430,689
|
|
|
-
|
|
|
430,689
|
Change in fair value of derivative liability
|
|
-
|
|
|
7,979
|
|
|
7,979
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(385,953)
|
|
|
-
|
|
|
(385,953)
|
Net cash (used in) operating activities
|
|
(75,253)
|
|
|
-
|
|
|
(75,253)
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
89,310
|
|
|
-
|
|
|
89,310
|
|
|
|
|
|
|
|
|
|
Effect of change in exchange rate on cash
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash
|
|
14,057
|
|
|
-
|
|
|
14,057
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING PERIOD
|
|
906
|
|
|
-
|
|
|
906
|
CASH AT END OF PERIOD
|
$
|
14,963
|
|
$
|
-
|
|
$
|
14,963
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
Cash paid for income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING TRANSACTIONS
|
|
|
|
|
|
|
|
|
Common shares issued to settle liabilities
|
$
|
430,689
|
|
$
|
-
|
|
$
|
430,689
|
38
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company Corporation)
Restated Consolidated Balance Sheet
December 31, 2012
|
|
|
|
|
|
|
| |
|
Balance Sheets
|
|
as at December 31, 2012
|
|
December 31,
|
|
Adjustments
|
|
Restated
|
Current Assets
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
463,697
|
|
$
|
-
|
|
$
|
463,697
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
872,086
|
|
|
-
|
|
|
872,086
|
Due to related parties
|
|
-
|
|
|
-
|
|
|
-
|
Deferred revenue
|
|
422,182
|
|
|
-
|
|
|
422,182
|
Current portion of notes payable
|
|
-
|
|
|
-
|
|
|
-
|
Credit facility and other advances
|
|
73,916
|
|
|
-
|
|
|
73,916
|
Derivative liability
|
|
21,248,804
|
|
|
58,483,872
|
|
|
79,732,676
|
Shares owed to Carter Read on purchase of NCI
|
|
250,000
|
|
|
-
|
|
|
250,000
|
Funds received from FMS not converted into Preference Shares
|
|
120,102
|
|
|
-
|
|
|
120,102
|
Sums due to Global market Advisors
|
|
104,100
|
|
|
-
|
|
|
104,100
|
Value added Taxes owed
|
|
39,944
|
|
|
-
|
|
|
39,944
|
Sums due to Equity Market D
|
|
25,000
|
|
|
-
|
|
|
25,000
|
Lease creditor
|
|
15,062
|
|
|
-
|
|
|
15,062
|
Sundry Creditors
|
|
27,474
|
|
|
-
|
|
|
27,474
|
Total Current Liabilities
|
|
23,198,670
|
|
|
58,483,872
|
|
|
81,682,542
|
Total Long-term Liabilities
|
|
384,507
|
|
|
-
|
|
|
384,507
|
Total Liabilities
|
|
23,583,177
|
|
|
58,483,872
|
|
|
82,067,049
|
|
|
|
|
|
|
|
|
|
Contingencies
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Stockholder's Deficit
|
|
|
|
|
|
|
|
|
Preferred stock, Class A Convertible Preferred Stock 100,000,000 shares and 1 share authorized at March 31, 2013 and December 31, 2012, respectively, $.001 par value, 855,142 and 895,801 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively.
|
|
896
|
|
|
-
|
|
|
896
|
Preferred stock, Class B Convertible Preferred Stock 10,000,000 shares authorized at March 31, 2013 and December 31, 2012 respectively, $.001 par value, 10,000,000 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively.
|
|
10,000
|
|
|
-
|
|
|
10,000
|
Common stock, 900,000,000 shares authorized $.001 par value, 345,524,514 and 324,551,468 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
|
|
324,551
|
|
|
-
|
|
|
324,551
|
Additional paid-in capital
|
|
12,700,403
|
|
|
-
|
|
|
12,700,403
|
Accumulated other comprehensive loss
|
|
(111,308)
|
|
|
-
|
|
|
(111,308)
|
Accumulated deficit
|
|
(36,044,022)
|
|
|
(58,483,872)
|
|
|
(94,527,894)
|
Total Stockholder's Deficit
|
|
(23,119,480)
|
|
|
(58,483,872)
|
|
|
(81,603,352)
|
Total Liabilities and Stockholders' Deficit
|
$
|
463,697
|
|
$
|
-
|
|
$
|
463,697
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
|
|
|
|
Opening 2012
|
|
(5,621,179)
|
|
|
(4,358,761)
|
|
|
(9,979,940)
|
Comprehensive Loss for 2012
|
|
(30,422,843)
|
|
|
(54,125,111)
|
|
|
(84,547,954)
|
Closing
|
|
(36,044,022)
|
|
|
(58,483,872)
|
|
|
(94,527,894)
|
39
ITEM 2