Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary
Note Regarding Forward-Looking Statements
This quarterly report on Form 10-Q may contain
“forward-looking statements,” within the meaning of the safe harbor provisions of the
U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “may,”
“should,” “expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “continue” and similar references to future periods.
Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Any forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans
and objectives are based, in part, on assumptions involving the continued expansion of our business, which involves judgments with respect
to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult
or impossible to predict accurately and many of which are beyond our control. Although we believe our assumptions underlying any forward-looking
statements are reasonable, they could prove to be inaccurate and therefore, there can be no assurance that forward-looking statements
included herein will prove to be accurate. In light of the significant uncertainties inherent in forward-looking statements, the inclusion
of such information should not be regarded as a representation by us that our objectives and plans will be achieved. Our actual
results may differ materially from those anticipated in any forward-looking statements as a result of various factors. There
also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive
them to be material. Such factors could cause results to differ materially from our expectations.
Forward-looking statements speak only as of the
date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review
any further disclosures we make on related subjects in our periodic filings with the SEC.
Our
Corporate History and Background
The
Company was organized in Delaware on June 21, 2016 as a limited liability company under the name “YayYo, LLC.” It subsequently
converted into a Delaware corporation and all of YayYo, LLC’s liabilities and assets were assumed by the Company. On September
11, 2020, the Company changed its name to Rideshare Rental, Inc. and on March 1, 2021, the Company again changed its name, this time
to EVmo, Inc.
The
Company is a holding company operating through its principal wholly-owned subsidiaries, Distinct Cars, LLC (“Distinct
Cars”) and Rideshare Car Rentals, LLC (“Rideshare Car Rentals”).
Rideshare
Car Rentals is an online rideshare vehicle booking platform designed
to service the ridesharing economy, i.e. the Rideshare Platform, particularly ridesharing companies such as Uber and Lyft and
delivery-gig companies like DoorDash and GrubHub. Distinct Cars maintains a fleet of standard and, increasingly, electric passenger vehicles
available for rent to drivers in both the ridesharing and delivery-gig industries. The Company seeks to turn over its entire vehicle
fleet to electric vehicles over the next several years in order to become the leading provider of electric rental vehicles to drivers
in the ridesharing and delivery-gig economies.
On
March 16, 2018, we completed an offering under Regulation A+ of the Securities Act, which was qualified by the SEC on March 15, 2017,
and sold a total of 365,306 shares of Common Stock. We received cash proceeds of $1.8 million, net of commissions and other
costs associated with the gross offering proceeds or payable by us.
On
November 15, 2019, the Company effected its IPO, selling 2,625,000 shares of Common Stock at $4.00 per share, for
gross proceeds, before underwriting discounts and commissions and expenses, of $10.5 million, and our Common Stock was then listed
on the Nasdaq Capital Market (“Nasdaq”) under the symbol “YAYO.”
On
February 10, 2020, the Company notified Nasdaq of its intent to voluntarily delist its Common Stock from Nasdaq. In connection therewith,
the Company filed a Form 25 with the SEC on February 20, 2020. The Company elected to effect the voluntary delisting of its Common
Stock after discussions with Nasdaq’s staff, and based on the determination of the Company’s board of directors that voluntarily
delisting the Common Stock from Nasdaq was in the best interests at that time of the Company and its stockholders. Following delisting
from Nasdaq, the Common Stock has traded on the Pink Open Market, still under the trading symbol, “YAYO.”
Impact
of COVID-19 on our business
On January 30, 2020,
the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International
Concern,” and on March 11, 2020, it characterized the outbreak as a “pandemic.” In response, numerous states and cities
ordered their residents to cease traveling to non-essential jobs and to curtail all unnecessary travel, and similar restrictions were
recommended by the federal government. Beginning in the first quarter of 2020, which saw the initial rapid spread of COVID-19, rideshare
companies were severely and negatively impacted, as demand plummeted. Consequently, the Company experienced a decline in revenue during
the first half of 2020, which had a negative impact on our cash flows, but we then saw a positive upward movement in revenue during the
second half of 2020, which has continued into the first half of 2021. As of the date of this quarterly report, several vaccinations for
COVID-19 have received emergency-use authorization from the Food and Drug Administration and many of the lockdown restrictions imposed
by state and local governments have abated. Still, the pandemic has not yet ended, and there have been multiple waves where infections,
hospitalizations, and deaths have sharply increased. Most recently, variants of the original virus have been identified, and many Americans
have resisted obtaining one of the vaccinations, both of which have resulted in increases in the aggregate number of infections. We therefore
cannot predict the ultimate impact that COVID-19 may have on our business over the entirety of this year, and possibly beyond.
Principles
of consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its principal wholly-owned subsidiaries,
Distinct Cars and RideShare Car Rentals. All significant intercompany transactions and balances have been eliminated.
Consolidated
Results of Operations—Three Months Ended June 30, 2021, Compared to Three Months Ended June 30, 2020
Total
Revenues.
Revenue
for the three months ended June 30, 2021 was $2,652,083, an increase of $1,071,528 or 67.8% compared to revenue for the three months
ended June 30, 2020 of $1,580,555. The increase is principally due to an increase in rentals of our vehicle fleet. During
the three months ended June 30, 2021, the average weekly rental income per vehicle placed in service was $413 compared to $292
for the same period in 2020. Our revenues declined in March-April of 2020 due to the impact of COVID-19 and began to recover
in May-June 2020. Our revenue since June 2020 has now exceeded pre-COVID-19 levels, but there is no assurance that this
trend will continue.
Cost
of Revenues.
The
principal components of costs of revenue are depreciation of our fleet vehicles, vehicle insurance, and vehicle
maintenance.
Cost
of revenues for the three months ended June 30, 2021 was $1,915,294, an increase of $620,235 or 49.9% compared to cost of revenues
for the three months ended June 30, 2020 of $1,295,059. The increase is due to higher depreciation expense and insurance expense due
to an increase in fleet size. For the three months ended June 30, 2021 and 2020 our cost of revenue was 72.2% and 81.9% of our revenue,
respectively. The decrease in the cost of revenue as a percentage of revenue is due to higher weekly rental rates.
Selling
and Marketing Expenses.
Selling
and marketing expenses for the three months ended June 30, 2021 were $64,816, representing a decrease of $14,317 or 18.1% over the three
months ended June 30, 2020 of $79,133. The decrease is due to a decrease in advertising to gig-economy drivers as we have maintained
a high utilization rate for our vehicles.
General
and Administrative Expenses.
General
and administrative expenses for the three months ended June 30, 2021 were $1,493,494, representing an increase of $632,084 or 73.4% over
the three months ended June 30, 2020 of $861,410. The increase is principally due to higher professional fees, salaries and stock option
expense during the three months ended June 30, 2021.
Total
Operating Expenses
Total
operating expenses for the three months ended June 30, 2021 were $1,609,076, representing an increase of $668,533 or 71.1% compared to
the three months ended June 30, 2020 of $940,543. The increase is due to the reasons described immediately above.
Interest
expense and financing cost
Interest
and financing expenses for the three months ended June 30, 2021 were $964,387 compared to $67,795 for the three months ended June 30,
2020. The increase in interest and financing cost for the three months ended June 30, 2021 was due to amortization of debt discounts
and issuance of additional warrants associated with the $2.250 million convertible note.
Net
Loss
The
net loss for the three months ended June 30, 2021 was $1,836,674, representing an increase of $1,113,832 or 154.1% compared to the three
months ended June 30, 2020 of $722,842. The increase is due to the higher total operating expenses described above.
Consolidated
Results of Operations—Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020
Total
Revenues.
Revenue
for the six months ended June 30, 2021 was $4,946,615, an increase of $1,618,418 or 48.6% compared to revenue for the six months ended
June 30, 2020 of $3,328,197. The increase is principally due to an increase in rentals of our vehicle fleet. During the
six months ended June 30, 2021, the average weekly rental income per vehicle placed in service was $409 compared to $309 for the
same period in 2020.
Our revenues declined in March- April of 2020
due to the impact of COVID-19 and began to recover in May-June 2020. Our revenue since June 2020 has now exceeded pre-COVID-19 levels,
but there is no assurance that this trend will continue.
Cost
of Revenues.
The
principal components of costs of revenue are depreciation of the vehicles, vehicle insurance, and vehicle maintenance.
Cost
of revenues for the six months ended June 30, 2021 was $3,696,197, an increase of $999,847 or 37.1% compared to cost of revenues
for the six months ended June 30, 2020 of $2,696,350. The increase is due to higher depreciation expense and insurance expense due to
an increase in fleet size. For the six months ended June 30, 2021 and 2020 our cost of revenues was 74.7% and 81.0% of our revenue,
respectively. The decrease in the cost of revenue as a percentage of revenue is due to higher weekly rental rates.
Selling
and Marketing Expenses.
Selling
and marketing expenses for the six months ended June 30, 2021 were $230,564, representing an increase of $19,922 or 9.5% over the six
months ended June 30, 2020 of $210,642. The increase is due to an increase in advertising our rentals to gig-economy drivers.
General
and Administrative Expenses.
General
and administrative expenses for the six months ended June 30, 2021 were $2,932,595, representing an increase of $174,979 or 6.3% over
the six months ended June 30, 2020 of $2,757,616. The increase is principally due to higher professional fees and salaries offset by
a decrease in stock option expense during the six months ended June 30, 2021.
Total
Operating Expenses
Total
operating expenses for the six months ended June 30, 2021 were $3,223,425, representing an increase of $255,167 or 8.6% compared to the
six months ended June 30, 2020 of $2,968,258. The increase is due to the reasons described immediately above.
Interest
expense and financing cost
Interest
and financing expenses for the six months ended June 30, 2021 were $4,289,330 compared to $147,651 for the six months ended June 30,
2020. The increase in interest and financing cost for the six months ended June 30, 2021 was due to the issuance of 825,000 shares
of Common Stock to Acuitas, now the Company’s largest shareholder, in connection with a settlement agreement between it
and X, LLC, a limited liability company controlled by the Company’s former CEO. The value of the shares was
$3,240,600, which was based on the market price of the Common Stock at the date of the settlement agreement. The $3,240,600 was
expensed as financing costs, as the dispute underlying the settlement agreement related to the anti-dilution of a prior investment
in the Company by Acuitas. Also, the increase is due to amortization of debt discounts and issuance of additional warrants
associated with the $2.250 million convertible note.
Gain
on Forgiveness of Debt
Gain
on forgiveness of debt for the six months June 30, 2021 was $8,000 as compared to $0 for the same period in 2020, as, during the six
months ended June 30, 2021, the remaining amount we received under the Paycheck Protection Program of the Coronavirus Aid, Relief and
Economic Security Act was forgiven.
Net
Loss
The
net loss for the six months ended June 30, 2021 was $6,254,337, representing an increase of $3,770,275 or 151.8% compared to the six
months ended June 30, 2020 of $2,484,062. The increase is due to the higher total operating expenses described above.
Liquidity,
Capital Resources and Plan of Operations
On
November 15, 2019, our IPO of 2,625,000 shares of Common Stock was effected. Our public offering price was $4.00
per share. Total gross proceeds from the offering were $10,500,000, before deducting underwriting discounts and commissions and other
offering expenses.
During
the year ended December 31, 2020, we sold an aggregate of 2,553,571 shares of Common Stock to three investors for cash proceeds of $275,000,
of which 125,000 shares was sold to a member of our Board of Directors for cash consideration of $25,000.
On
January 8, 2021, we received $500,000 from a convertible note from one of our stockholders. The note was convertible into shares
of Common Stock at $0.50 per share and was converted into 1,000,000 shares of Common Stock in February 2021.
On
April 12, 2021, we entered into a securities purchase agreement with a certain investor in connection with the issuance of a 12.5% original
issue discount convertible promissory note and a common stock purchase warrant. The note had an original principal amount of $2,250,000,
with an original issue discount of $250,000. It bore interest at a fixed rate of 10%, was convertible into shares of common
stock at a price of $3.00 per share (subject to adjustment as set forth in the note), and was to mature on January 12, 2022.
On
July 9, 2021, we entered into a Term Loan Agreement with EICF Agent LLC, as agent for the lenders, and Energy Impact Credit Fund
I, LP, as lender, providing for a secured term loan facility in an aggregate principal amount of up to $15.0 million, consisting of a
$7.5 million closing date term loan facility and up to $7.5 million of borrowings under a delayed draw term loan facility. The initial
term loan has been fully drawn, while the remainder is available upon the satisfaction of certain conditions precedent specified
in the agreement. The Term Loan Agreement matures on July 9, 2026. Borrowings under the Term Loan Agreement bear interest at the LIBOR, plus a margin of 10.0%.
During
the six months ended June 30, 2021, we sold 100,000 shares of Common Stock to a member of our Board of Directors for cash consideration
of $50,000.
Current
Assets, Liabilities and Working Capital.
At
June 30, 2021, the Company’s current assets totaled $1,014,673, current liabilities totaled $5,801,006, and working capital was
a deficit of $4,786,333. At December 31, 2020, the Company’s current assets totaled $215,990, current liabilities totaled $4,461,560,
and working capital was a deficit of $4,245,570. As of June 30, 2021, the Company had $162,727 in cash. The Company used $244,484
of cash for operating activities for the six months ended June 30, 2021.
Regarding
current liabilities, the amounts categorized as accounts payable and accrued expenses totaled $2,377,096 and $2,119,003 as of June 30,
2021 and December 31, 2020, respectively, a decrease of $258,093 or 12.2%, due to Common Stock issued for legal settlements that were
previously included in accrued expenses.
Since
inception, our principal sources of operating funds have been proceeds from debt and equity financings, including the sale of
our Common Stock to investors known to management and principal shareholders of the Company, our IPO in November 2019, and the Term
Loan Agreement entered into in July 2021 described above. As of the date of this quarterly report, we expect that our current cash
on hand will be sufficient to fund our existing operations and future business growth for at least the next twelve months.
In addition to the July 2021 term loan, the Company is currently seeking to raise additional capital. If the Company is not
successful in raising additional capital it may be forced to scale back, perhaps significantly, its business operations and growth
plans.
Capital
Expenditures
During
the six months ended June 30, 2021, the Company had capital expenditures of $3,049,261 in leased vehicles. At June 30, 2021, most of
the Company’s vehicles were financed with leases. At June 30, 2021 the Company had $11,874,137 of rental vehicles, net of
accumulated depreciation in the amount of $3,864,087, totaling $8,010,050 in net rental vehicles. At December 31, 2020 the Company had
$9,067,885 of rental vehicles, net of accumulated depreciation in the amount of $2,871,452, totaling $6,196,433 in net rental vehicles.
The Company’s rental vehicles are depreciated over their estimated useful life of five years. The term for those rental vehicles
that we lease is generally three years and the Company has the right to purchase the vehicles for $1 each at the
end of the lease term.
Statement
of Cash Flows
Cash
Flows from Operating Activities
Net
cash used in operating activities for the six months ended June 30, 2021 totaled $244,484, which was a decrease of $94,715 or 27.9% from
the net cash used in operating activities of $339,199 for the same period in 2020. The decrease is principally due to the change in operating
assets and liabilities, and non-cash expense items.
Cash
Flows from Investing Activities
Net
cash used in investing activities for the six months ended June 30, 2021 totaled $47,051, which was an increase of $47,051 from $0 for
the same period in 2020. The change is principally due to the purchase of property and equipment.
Cash
Flows from Financing Activities
Net
cash provided by financing activities for the six months ended June 30, 2021 totaled $381,372, which was a change of $1,195,362 from
the net cash used in financing activities of $813,990 for the same period in 2020. The change is principally due to cash received from
the sale of Common Stock, the exercise of both stock options and a convertible note in 2021, offset by an
increase in payments on financing lease obligations.
Current
Plan of Operations
Our
plan of operations is currently focused on the growth and ongoing development of our operating businesses: (i) the Rideshare Platform,
offered through Rideshare Rentals, and (ii) our vehicle fleet, which is commercially available through Distinct
Cars. We expect to incur substantial expenditures in the foreseeable future for the enhanced operations of our businesses and related,
ongoing, internal research and development. Moreover, we have embarked on “EV strategy” in which we intend to replace our
entire fleet of vehicles with all electric vehicles over the next several years. At this time, we cannot reliably estimate the
timing or aggregate amount of all of the costs associated with these efforts.
The
continuation of our expansion plan may require us to raise significant additional capital within a short period of time. The cash flow
from our Rideshare Platform and particularly our Distinct Cars businesses and our existing capital resources are sufficient for us to
continue our operations, but fully executing our future business plans may require significant additional capital, which we are currently
seeking to raise.
We
continually reevaluate our plan of operations to determine the manner in which we can most effectively utilize our resources. The timing
of completion of any aspect of our plan of operations is highly dependent upon the ready availability of cash to implement that aspect
of the plan and other factors beyond our control. There is no assurance that our current capital resources will be sufficient to continue
to fund our ongoing operations, nor can there be any assurance that, if we require additional capital, we will successfully obtain it
on favorable terms, or at all. The inadequacy of our existing capital or the inability to secure additional capital could have a material
adverse effect on us, including the possibility that we would have to sell or forego a portion or all of our assets or cease operations.
If we discontinue our operations, we may not have sufficient funds to pay any amounts to our stockholders.
If
our operating businesses fail to achieve anticipated financial results,
our existing capital will likely be depleted more quickly than we anticipate and our ability to raise additional capital in the
future to fund our operations would likely be seriously impaired. If in the future we are not able to demonstrate favorable financial
results or projections from our operating businesses, we may not be able to raise the capital we need to continue operations.
Similarly,
because our working capital requirements depend upon numerous factors there can be no assurance that our current cash resources will
be sufficient to fund our operations.
Off-Balance
Sheet Arrangements
The
Company has no off-balance sheet arrangements.