YAYO YayYo Inc (CE)

RISK FACTORS

An investment in our Common Stock involves a high degree of risk. You should consider the risks, uncertainties and assumptions discussed below as well as all of the other information contained in this prospectus. It is not possible to predict or identify all such risks. Consequently, we could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. The occurrence of any of these known or unknown risks might cause you to lose all or part of your investment in the Common Stock.

Risks Related to Our Business and Industry

We have generated only limited revenue to date, have incurred net losses since inception, and may continue to incur net losses for the foreseeable future.

We are subject to all of the risks inherent in a start-up company, including the absence of a lengthy history of successful operations. There can be no assurance that we will be able to continue to successfully operate our business, including, without limitation, developing and enhancing, as applicable, our technologies, products and services.

We were initially organized in November 2016 and it was not until August 2017 that we shifted our operations into the transportation/ridesharing industry, with a focus on developing the Rideshare Platform and growing and maintaining Distinct Cars. We therefore have a limited operating history in the ridesharing and delivery gig industries. We generated $7,670,795 in revenue during the nine months ended September 30, of 2021 but had a net loss of ($11,031,665) as compared to a net loss of ($2,875,546) for the nine months ended September 30, of 2020. We generated $7,621,180 in revenue during fiscal year 2020 but had a net loss of ($3,502,077); in the previous fiscal year, our net loss was ($3,930,221). While our current net loss decreased from the previous fiscal year, and is significantly lower than that of two years ago, we have still not achieved profitability as yet and cannot predict with any certainty when we will do so, if ever. Any unanticipated increase in operating expenses, or a decline in revenues such as we experienced during the early months of the COVID-19 pandemic in 2020, or a failure by us to successfully grow our business, may result in a continuation of net losses for the foreseeable future.

More generally, operating results for future periods are subject to numerous uncertainties, several of which we address in this section, and we cannot assure you that the Company will ever achieve or sustain profitability. The Company’s prospects must be considered in light of the general risks encountered by small companies with limited operating history, particularly companies in newer and rapidly evolving markets, as well as those risks particular to us, which we describe in this section. Operating results will depend upon many factors, including our success in attracting and retaining motivated and qualified personnel, whether or not we can obtain needed financing on satisfactory terms, our ability to continue to develop and market our products and services, whether or not we can control our operating expenses, and general economic conditions. Although the Company believes that its plans to grow, expand and scale operations organically, particularly through our transition to electric vehicles, will be successful, this may in fact not be the case. Nor can there be any assurance that the Company’s revenue projections and marketing plans will be realized as anticipated and planned. The Company cannot assure either its current shareholders or any prospective investors that any such failure will not have a material adverse effect on our business.

We have incurred a significant amount of secured indebtedness in order to finance our operations and, if we are unable to timely and adequately service this debt, substantially all of our assets will be subject to seizure by our lender.

In July 2021, we entered into a Term Loan, Guarantee and Security Agreement with EICF Agent LLC, as agent for the lender, 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, against which we have borrowed $7.5 million as of the closing date of the agreement. These borrowings are guaranteed by the Company’s wholly-owned subsidiaries and are a general obligation of the Company. We have granted our lender a security interest in the right, title, and interest in the collateral identified in the agreement, which is substantially all of the Company’s property and assets other than certain leased vehicles. If, for whatever reason, we are unable to timely and adequately service this debt, these assets will be subject to seizure by our lender, and we will have very limited recourse short of satisfying our debt to delay or prevent any such seizure. This contingency would have a material adverse effect on our business, and would likely prevent us from continuing as a going concern.

We may need but be unable to obtain additional funding on satisfactory terms, which could dilute our shareholders or impose burdensome financial restrictions on our business.

While we intend to rely predominantly on revenues generated from operations, as well as the capital generated from this offering, to fund all of the cash requirements of our business for the foreseeable future, we have, in the past, relied on cash obtained from financing. If we need to raise additional capital after this offering in order to further execute our business plan and growth, it is possible that future financings may not be timely available, either in sufficient amounts or on terms acceptable to us, if at all. Any future debt financing or other financing of securities senior to our Common Stock will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose our existing sources of funding and impair our ability to secure new sources of funding.

The ongoing COVID-19 pandemic may have an adverse effect 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 prospectus, one vaccination for COVID-19 has received full approval from the Food and Drug Administration, while others have received emergency-use authorization, 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. At this time, we cannot predict the ultimate impact that COVID-19 may have on our business over the entirety of this year, and possibly beyond.

While our Rideshare Platform and related software are highly technical, they do not enjoy patent protection, and are subject to inherent challenges in measurement.

Our Rideshare Platform and its related software are highly technical and complex. Although we have not identified any significant technical issues to date, the Rideshare Platform could contain software bugs, hardware errors, or other vulnerabilities as yet unknown to us, which could manifest themselves in any number of ways in our products and services, including through diminished performance or malfunctions. Further, while we regularly review key metrics related to the operation of our Rideshare Platform business, including, but not limited to, our monthly average users in order to evaluate growth trends, measure our performance, and make strategic decisions, it is important to note that these metrics are calculated using internal company data and have not been validated by an independent third party. Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of Rideshare Platform users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.

Moreover, while we developed and coded the Rideshare Platform, we did not do so using any innovative technologies or software, and therefore we have not obtained any patents for either the Rideshare Platform or its software. Anyone who wanted to duplicate the Rideshare Platform would not be subject to an action for patent infringement by us.

A security breach or other disruption to the Rideshare Platform or our internal information technology systems could result in the loss, theft, misuse, or unauthorized disclosure of driver or sensitive company information, could disrupt our operations, or could frustrate or thwart our drivers’ ability to access or use the Rideshare Platform and rent vehicles from us, which could seriously harm our business.

The Rideshare Platform and our internal information technology systems store and transmit a significant amount of personal and/or confidential information, including the license and credit card information of our drivers and our own financial, operational and strategic information. The functionality and security of the Rideshare Platform and the protection of our drivers’ and our information is therefore critically important to us. However, with the frequency, intensity, and sophistication of cyber-attacks and data security incidents significantly increasing in recent years, we are subject to such attacks, resulting in data privacy and security risks. Cyber-attacks may disrupt our drivers’ ability to either access or effectively use the Rideshare Platform, through which they secure or extend their rentals of vehicles belonging to our Distinct Cars fleet, which would interfere with our ability to generate revenue. Further, any such attack that results in the loss, theft, misuse, or unauthorized disclosure of personal, confidential, and sensitive information of either us or our drivers could lead to significant reputational or competitive harm, result in litigation, expose us to regulatory proceedings, and cause us to incur substantial liability or expenses, potentially creating a material adverse effect.

Changes in laws or regulations relating to privacy, data protection or the protection or transfer of personal data, or any actual or perceived failure by us to comply with such laws and regulations or any other obligations relating to privacy, data protection or the protection or transfer of personal data, could adversely affect our business.

We receive, transmit and store a large volume of personally identifiable information and other data relating to the users on the Rideshare Platform. Numerous local, municipal, state, and federal laws and regulations address privacy, data protection and the collection, storing, sharing, use, disclosure and protection of certain types of data, including the California Online Privacy Protection Act, the Personal Information Protection and Electronic Documents Act, the U.S. Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, Section 5(c) of the Federal Trade Commission Act, the California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act, or CPRA, which becomes operative on January 1, 2023. These laws, rules and regulations evolve frequently and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement, and may be inconsistent from one jurisdiction to another. For example, the CPRA will require new disclosures to California consumers and affords such consumers new data rights and abilities to opt-out of certain sharing of personal information. The CPRA provides for fines of up to $7,500 per violation, which can be applied on a per-consumer basis. Aspects of the CPRA and its interpretation and enforcement remain unclear. The effects of this legislation potentially are far-reaching, however, and may require us to further modify our data processing practices and policies and incur additional compliance-related costs and expenses. The CPRA and other changes in laws or regulations relating to privacy, data protection and information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, could greatly increase the cost of providing our offerings, require significant changes to our operations or even prevent us from providing certain offerings in jurisdictions in which we currently operate and in which we may operate in the future.

We are a holding company and as a result rely on payments from our subsidiaries in order to meet our cash needs and service our debt. Our subsidiaries may not be able to distribute the necessary funds to us and this could adversely affect our ability to make payments on our indebtedness.

As a holding company without independent means of generating operating revenues, EVmo depends on dividends, distributions and other payments, from our subsidiaries to fund our obligations and to meet our cash needs. If the results of our operating subsidiaries at any given time are insufficient to make distributions to us, we would be unable to make payments on our outstanding indebtedness, which would likely have a material adverse effect on our business, financial condition and future prospects.

We face intense competition that may lead to downward pricing or an inability by us to generate profits.

The transportation network and vehicle rental industries are each highly competitive. While we believe we provide an effective business model for the benefit of drivers in the ridesharing and delivery gig space, insofar as we can offer both the Rideshare Platform and vehicles in which to utilize it through Distinct Cars, we have multiple competitors, several of which are much larger and better-resourced than we are. We believe our principal competitors to be HyreCar, a publicly-traded company that also facilitates the rental of vehicles for use by drivers who work for TNCs such as Uber, Lyft, DoorDash, and Grubhub, and Lyft Express, which makes rental vehicles available to Lyft drivers. National car rental companies such as Hertz and Avis also have programs directed at ridesharing and delivery drivers. Our competitors may reduce their prices in order to, among other things, attempt to gain a competitive advantage, capture market share, or to compensate for declines in overall rental activity, such as during the early months of the COVID-19 pandemic in 2020. To the extent we do not match or remain within a reasonable competitive margin of our competitors’ pricing, our revenues and results of operations, financial condition, liquidity and cash flows could be materially and adversely affected. If competitive pressures lead us to match any of our competitors’ downward pricing and we are not able to reduce our operating expenses, then our revenues and results of operations, financial condition, liquidity and cash flows could again be materially and adversely affected.

Further, there are low barriers to entry in the ridesharing and delivery gig space, and we expect that competition will likely intensify in the future. We believe that numerous factors, including price, offerings, reliability, client base, brand name and general economic trends will affect our ability to compete successfully. Our existing competitors include, and our future competitors may include, large companies that have substantially greater market presence and financial, technical, marketing and other resources than we do. There can be no assurance that we will have the financial resources, technical expertise or marketing and support capabilities in which to compete successfully. Such significant competition could result in lower revenues, which could materially, and negatively, affect our future profitability.

We might incur significant expenses to develop products that are never successfully commercialized.

We have incurred and expect to continue to incur research and development and other expenses in connection with our business. The potential products to which we devote resources might never be successfully developed or commercialized by us for numerous reasons. For example, during our first year of operations, we were focused on the development and commercialization of a single sign-on metasearch ridesharing application, and allocated considerable resources toward it. While we completed development of this application, for several reasons we never commercialized it and ultimately opted to abandon it in favor of the Rideshare Platform. If we were to again incur significant expenses in connection with a product or service from which we never derive any revenue, this could have a material adverse effect on our business, financial condition and future prospects.

We rely on third-party insurance to cover auto-related risks, and our coverage may be inadequate or our current insurer could either discontinue our coverage or demand significantly higher premiums.

Our businesses expose us to claims for personal injury, death and property damage resulting from the use of the vehicles rented through us, and for employment-related injury claims by our employees. We purchase insurance through a general underwriter, American Business Insurance Services, Inc., to cover us for these claims. If the amount of one or more auto-related claims were to exceed our applicable aggregate coverage limits, we may bear the excess liability. Our business, financial condition and results of operations could be adversely affected if the cost per claim or the number of claims significantly exceeds our historical experience and coverage limits, we experience a claim in excess of coverage limits, our insurance provider fails, for any reason, to pay insurance claims, or we experience a claim for which coverage is not provided. Any exposure to uninsured liability potentially resulting in multiple payouts or otherwise, any liabilities in respect of existing or future claims that exceed the level of our insurance, any lack of availability of sufficient capital to pay any uninsured claims, or any inability by us to secure insurance on economically reasonable terms, if at all, could have a material adverse effect.

Moreover, should our general underwriter for any reason opt to discontinue our coverage, we may be unable to find an adequate replacement. The market for a general underwriter for a company such as us is limited, and it is possible that any replacement insurer could request significantly higher premiums than our current one. Since we would be unable to operate without such insurance, we would either be forced to pay such premiums, or discontinue operations. Even if we were able to negotiate a new policy with our current underwriter, a demand by it for similarly increased premiums would have the same effect.

We rely on third-party background checks to screen potential drivers, and if such checks fail to provide accurate information, or they cannot be timely obtained, or we do not maintain business relationships with background check providers, our business, financial condition and results of operations could be adversely affected.

We rely on third-party background checks to screen the records of potential drivers to help identify those that are not qualified to utilize the Rideshare Platform or rent a vehicle from Distinct Cars. To the extent that there is a failure for whatever reason to timely process or obtain the necessary background checks, or the information we receive from them is not complete or accurate, we may either fail to rent one of our vehicles to a qualified driver, thereby losing revenue, or we may rent a vehicle to an unqualified driver, which could result in liability and/or reputational damage to us. Also, if any of our third- party background check providers terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we may need to find an alternate provider, and may not be able to secure similar terms or replace such partners in an acceptable time frame. If we cannot find alternate third-party background check providers on terms acceptable to us, we may not be able to timely onboard potential drivers, and as a result, the Rideshare Platform and Distinct Cars may be less attractive to qualified drivers.

We may pursue strategic transactions which could be difficult to implement, disrupt our business or change our business profile significantly.

While our short-term preference is to continue to grow EVmo organically, using our existing operations and organizational structure, we have been and remain open to a strategic transaction that would inure to the benefit of our shareholders. Any future strategic acquisition or disposition of assets or a business could involve numerous risks, including potential disruption of our ongoing business and distraction of management, difficulty integrating the acquired business or segregating assets and operations to be disposed of, exposure to unknown, contingent or other liabilities, including litigation arising in connection with the acquisition or disposition or against any business we may acquire, changing our business profile in ways that could have unintended negative consequences, and the failure to achieve anticipated synergies.

If we enter into significant strategic transactions, the related accounting charges may affect our financial condition and results of operations, particularly in the case of an acquisition. The financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness, the servicing of which would increase our operating expenses and adverse impact our future profitability.

We may not be able to manage our growth effectively.

While we have experienced operational growth over the last two years, further growth in the absence of an increase in our ability to manage it will place a significant strain on our current managerial, operational and financial resources. As the number of our customers and business partners grows, we must effectively manage multiple relationships with them and other third parties. There can be no assurance that our systems, procedures or controls will be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully grow and scale our services, products and offerings. Our operating results will also depend on our ability to expand sales and marketing commensurate with the growth of our business and the ridesharing, delivery gig and vehicle rental industries. If we are unable to manage growth effectively, our business, results of operations and financial condition will be adversely affected.

Our ridesharing and delivery gig drivers are subject to vehicle and driver qualification requirements imposed by the major TNC providers, and our business may be adversely affected in the event that such providers restrict or limit prospective ridesharing and delivery gig drivers from utilizing or registering third-party rental vehicles with the TNC.

We rely on the major TNC businesses, such as Uber, Lyft, DoorDash and GrubHub, that presently dominate the ridesharing and delivery gig industries, and over whom we have no control. They have imposed qualification requirements on both vehicles and drivers, which we strive to help our customers, i.e. the TNC drivers, meet, as part of their employment with the major TNC ridesharing services. We cannot guarantee that each major TNC business will always permit drivers to use third-party lease or rental vehicles such as ours, and any revocation or severe limitation on drivers’ ability to obtain vehicles through Distinct Cars would have a material adverse effect on us. Nor can we guarantee that the vehicle and driver requirements they have imposed will not be made more onerous, making it more difficult for us to satisfy their vehicle requirements or find drivers who qualify under such enhanced rules and possibly shrinking our customer base, which will adversely affect our revenues.

Our commercial partnerships provide us with competitive pricing options that enable us to acquire vehicles at less than suggested retail prices, and any cancellation of or unfavorable adjustment to these partnerships will increase our operating expenses.

We have to date financed the acquisition of our vehicles under the terms extended to us by our commercial partners, such as Hyundai USA for standard internal combustion vehicles and, more recently, Tesla for electric vehicles. These partners have agreed to competitive pricing options below manufactures’ suggested retail prices (“MSRP”) on the vehicles acquired through selected dealerships, which we in turn finance through lenders who transfer title to the vehicle to us and maintain a lien until the loan is repaid. We cannot assure you that we will be able to maintain membership in these commercial partnership programs or continue receiving competitive pricing options below MSRP rates on all vehicles purchased. If either Hyundai USA, or especially, Tesla, cancels the respective commercial partnership program for whatever reason, including the failure by us to timely repay our loans, or they do not continue to offer us competitive terms and conditions, and we are not able to purchase sufficient quantities of cars from other automobile manufacturers on competitive terms and conditions or below MSRP rates, then we may be forced to purchase cars at higher prices, or on terms less competitive, than for cars purchased by our competitors. In addition, certain car manufacturers, such as Ford, have adopted strategies to de-emphasize sales to the car rental industry which they view as less profitable due to historical sales incentive and other discount programs that have tended to lower the average cost of cars for fleet purchasers such as us. Reduced or limited supplies of equipment together with increased prices are risks that we also face in our equipment rental business. We cannot offer assurance that we will be able to pass on increased costs of cars or equipment to our rental customers. Failure to pass on significant cost increases to our customers would have a material adverse impact on our results of operations and financial condition.

We are subject to a wide variety of regulatory burdens directly or indirectly related to our operations, including environmental laws and efforts to classify TNC drivers as employees instead as independent contractors.

We are subject to a variety of regulatory burdens related to our operations, and while our management believes that the success of our operations and the implementation of our growth strategies are achievable in light of current economic and legal conditions, significant changes in the regulations that apply to us may require management to make modifications that could impede our ability to generate future revenues or reduce operating expenses. For example, as a business that operates in the ridesharing and delivery gig economy, we are directly impacted by regulations imposing fuel emission standards on automobiles, and other environmental laws and rules. While our planned transition to electric vehicles will, eventually, exempt us from many of these restrictions and their resulting expense, we are still, and expect to remain for at least the near future, reliant on non-electric automobiles for the bulk of our revenue; we therefore continue to face potentially significant costs relating to claims, penalties and remediation efforts in the event of non-compliance with existing and future laws and regulations governing standard automobiles.

Another regulatory effort that could indirectly and adversely impact us is the effort by some states, including most notably our principal market, California, to classify ridesharing and delivery gig economy drivers as employees and not as independent contractors, thereby entitling them to costly labor protections and benefits, which could dampen hiring by TNC companies and make it more difficult for us to generate revenue. While the passage of Proposition 22 in California in November 2020 allows for TNC drivers to continue to be classified as independent contractors, albeit with additional benefits, a future proposition, legislative action, or judicial decision could reverse this. Also, any of the other markets in which we operate, or a potential future market, could adopt a different stance and in turn hamper our ability to generate revenue in such market or make it cost-prohibitive for us to expand into it. Recently, the U.S. Department of Labor rescinded a rule under the Fair Labor Standards Act that made it easier for businesses to classify certain workers as independent contractors and not as employees and the Secretary of Labor has publicly stated his belief that many U.S. gig workers should be classified as employees.

We are currently party to several litigation actions, including potential securities class-action lawsuits and a lawsuit disputing the exercise price of a warrant, which, should we receive an unfavorable judgment or be compelled to enter into settlements on less-than-favorable terms, could have a negative impact on our financial results and could cause reputational damage to the Company.

As disclosed in Note 11 to the unaudited financial statements for the quarter ended September 30, 2021 included in the registration statement of which this prospectus forms a part, the Company is currently party to several litigation actions, including potential class-action lawsuits that allege misrepresentations and material omissions in the registration statement on Form S-1 that the Company filed with the SEC in connection with its initial public offering, claiming violations of Sections 11 and 15 of the Securities Act. It has been and remains the Company’s position that these lawsuits are without merit, as we have asserted in our pleadings that the Company accurately and completely disclosed all material facts and occurrences, including adverse ones, in its registration statement, related public filings and other public statements.

Mediation efforts with respect to these actions are currently underway and it is possible that a global settlement among the parties may be reached before any further proceedings commence. However, except as noted below, these mediation efforts have to date been unsuccessful and if the litigation actions proceed, we may ultimately receive unfavorable judgments. It is also possible that, even if we reach a settlement, it may be on terms that the Company views as less-than- favorable. Either of these contingencies could result in a negative impact on our financial statements and the Company suffering reputational damage. If severe enough, either the financial cost of a settlement or the damage to our reputation, or both, could have a material adverse effect on our business, financial condition and future prospects.

The parties to the In re YayYo Securities Litigation described in Note 11 have, after extensive negotiations, recently filed a “Joint Notice of Pending Settlement” with the court, which is subject to approval by the district court and which, if approved, will resolve the pending class actions upon payment by the Company of approximately $1,150,000 to the class. The Company’s Executive Chairman has provided his personal guarantee for the whole amount due to the plaintiffs, and the Board of Directors has agreed to issue 2,000,000 shares of Common Stock as consideration for the guarantee. The motion for approval of the settlement was filed with the court on November 19, 2021.

In addition, a warrant holder has sought to exercise a warrant for 4,000,000 shares, on the basis that an anti-dilution adjustment has reduced the exercise price to a nominal amount. The Company has rejected the exercise, and the holder has brought suit for damages. It is the Company’s position that the lawsuit is without merit. This lawsuit is in its earliest stages. Settlement efforts with respect to this lawsuit are currently underway and it is possible that a settlement may be reached before any further proceedings commence. However, these efforts have to date been unsuccessful and, if the lawsuit proceeds, we may ultimately receive an unfavorable judgment. It is also possible that even if we reach a settlement, it may be on terms that the Company views as less-than- favorable. Either of these contingencies could result in a negative impact on our financial statements and the Company suffering reputational damage. If severe enough, either the financial cost of a settlement or the damage to our reputation, or both, could have a material adverse effect on our business, financial condition and future prospects.

Risks Related to Our Management and Our Corporate Governance

We have had significant turnover in our senior management team since our inception and our current management team has little experience working together.

Since our inception, our senior management team has turned over several times. Most recently, during the first quarter of 2020, both our chief executive officer (“CEO”) and our president resigned, necessitating the reappointment of our founder, Ramy El-Batrawi, as CEO. In the first quarter of 2021, Mr. El- Batrawi resigned as CEO and was replaced by Stephen M. Sanchez, who previously had served as chairman of the Company’s board of directors (the “Board of Directors” or the “Board”). At the same time, Terren S. Peizer was elected to the Board of Directors as its Executive Chairman, succeeding Mr. Sanchez, who remains on the Board as a non-independent director; Mr. Peizer’s election as Executive Chairman of the Board was commensurate with a transaction in which he became the Company’s largest shareholder. At the end of the first quarter of 2021, Laurie DiGiovanni resigned as our chief operating officer (“COO”). Effective on April 1, 2021, Ms. DiGiovanni was replaced as COO by Gregory Miller.

While we believe our current senior management team is stable, experienced, and competent, Messrs. Sanchez, Peizer, Saathoff and Miller have never worked collectively together prior to their recent appointments to the executive leadership of the Company. It is possible that they may not be successful working together and the Company will suffer as a result. More generally, we depend on a small number of executive officers and other members of management to work effectively as a team, to execute our business strategy and manage our operating businesses, and to supervise employees and consultants. Our success is reliant on the efforts of our CEO, chief financial officer (“CFO”), COO, the Board of Directors and especially its Executive Chairman, and other key personnel. Any of our officers or employees can terminate his or her employment relationship, and any director may resign from the Board, at any time, and the loss of the services of such individuals could have a material adverse effect on our business and prospects.

Our Chief Executive Officer and Chief Financial Officer are part-time employees and each devotes only a limited number of hours per week to the Company, which may result in either adverse effects or conflicts of interest.

Mr. Sanchez, our CEO, and Ryan Saathoff, our CFO, are not full-time employees of EVmo at present and each devotes only a limited number of hours per week to managing the Company’s operations and executing its growth strategy. Mr. Sanchez and Mr. Saathoff also serve, respectively, as the CEOs of PDQ Pickup LLC, a moving and logistics company, and RG Alliance, a back-office solutions company. On any given week, either or both may be required to spend more hours working for their other companies than for EVmo and the potential exists for either or both to be distracted as a result of their outside employment, which could result in a failure to successfully implement a key EVmo initiative, or timely address a problem within EVmo, or effectively strategize as to how best to fulfill short and long-term EVmo goals. We expect that, for the foreseeable future, these executive officers will continue to dedicate only a portion of their professional efforts to our business and operations, and there is no current contractual obligation for them to spend a specific amount of their time with us. Further, it is possible that not only could we experience an adverse effect on our operations due to the demands placed on our management team by their other professional obligations, but conflicts of interest could also arise.

If our management is unable to accurately assess current levels or estimate future levels of our Rideshare Platform or Distinct Cars activity, our results of operations, financial condition, liquidity and cash flows could suffer.

Our business is dependent upon the ability of our management to accurately assess current levels of activity or estimate future levels of activity involving the use of the Rideshare Platform and Distinct Cars rentals. We need to adequately evaluate consumer preferences to ensure that the Rideshare Platform functions as needed by ridesharing and delivery gig drivers and that they have easy access to the right mix of vehicles used in our rental operations. For example, to the extent we do not lease sufficient numbers of vehicles, or the right types of vehicles, to meet consumer demand, we may lose revenue to our competitors. Alternatively, if we lease too many vehicles, our vehicle utilization could be adversely affected and we may not be able to dispose of excess vehicles in a timely and cost-effective manner. If our management is unable to make the necessary assessments and estimations for whatever reasons, including because of changes in the competitive environment or economic factors outside of our control, our results of operations, financial condition, liquidity and cash flows could suffer.

Our Bylaws provide that we will indemnify our directors, and that we have the power to indemnify our officers and employees, to the fullest extent permitted by law, which may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties, or from bringing derivative litigation against our directors and officers.

Our Amended and Restated Bylaws (the “Bylaws”) provide that we will indemnify our directors, officers and employees to the fullest extent against expenses judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was a director of the Company, permitted by Section 145 of the DGCL. Our Bylaws also provide that the Company shall have the power (though not the obligation), to the extent and in the manner permitted by the DGCL, to indemnify each of its employees, officers, and agents (other than directors) against expenses (as defined in Section 145 of the DGCL), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any, arising by reason of the fact that such person is or was an employee, officer or agent of the Company. We believe that these Bylaw provisions are necessary to attract and retain qualified persons as directors, officers and key employees. These indemnification provisions may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our shareholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors, officers and key employees pursuant to these indemnification provisions.

Majority voting power in our Common Stock is concentrated in a handful of shareholders, including our executive officers and directors, which severely limits the ability of our other shareholders to influence corporate matters.

As of the date of this prospectus, our executive officers and directors collectively own approximately 30% of our issued and outstanding shares, the vast majority of which is held of record by the investment vehicle of our Executive Chairman, Terren S. Peizer. These shares, together with those beneficially owned by a combination of two or at most three other principal stockholders, represent a majority of our voting shares.

As a result, these shareholders, if they act together, will be able to control the management and affairs of the Company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger, acquisition or consolidation. This concentration of ownership may have the effect of delaying or preventing a change-in-control that would be to the benefit of the Company and might adversely affect the market price of our Common Stock. This concentration of ownership may therefore not be in the best interests of our other shareholders.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result investors in our Common Stock could incur substantial losses.

Our stock price has fluctuated in the past, has recently been volatile, and may be volatile in the future. From January 1, 2020 through December 31, 2020 the last reported sale price of our Common Stock on the OTC Market fluctuated between $0.08 and $1.44 per share. From January 1, 2021 through March 31, 2021 the last reported sale price of our Common Stock fluctuated between $0.53 and $5.67 per share, and from April 1, 2021 through September 30, 2021, it fluctuated between $1.00 and $3.90. The ongoing COVID-19 pandemic has caused broad stock market and industry fluctuations that have often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our Common Stock. The market price for our Common Stock may be influenced by many factors, including adverse investor reaction to our operating performance, a failure by us to timely realize our electric vehicle growth strategy, our inability to raise additional capital as needed or doing so on less-than-favorable terms, the departure of key personnel, general market conditions, external events such as the ongoing COVID-19 pandemic, and any of the other risks described in this “Risk Factors” section.

Any of these factors, or others that we have not described or even contemplated as yet, may seriously harm the market price of our Common Stock, regardless of our operating performance. Since the stock price of our Common Stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our Common Stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation against us is already pending, as described herein, and if additional litigation is instituted against us, it could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

Risks Related to this Offering

Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a significant return.

Our management will have total discretion over the use of proceeds from this offering. We currently intend to allocate the net proceeds from the sale of shares of our Common Stock offered through this prospectus to, among other things, the redemption of 230,375 shares of Series B Preferred Stock issued in July 2021, the acquisition of a number of electric vehicles as part of our transition plan to become a wholly electric vehicle ridesharing and delivery gig industry company, and working capital. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, products or assets. However, our management could spend the proceeds of the offering in ways that do not improve our results of operations or enhance the value of our Common Stock. The failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our Common Stock to decline and delay the development of our product candidates.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

Because the assumed public offering price per share is substantially higher than the book value per share of our Common Stock, you will suffer substantial dilution in the net tangible book value of the Common Stock you purchase in this offering. After giving effect to the sale by us of shares of our Common Stock at an Assumed Offering Price of $0.90 per share, and after deducting the underwriting discount and estimated offering expenses payable by us, you will suffer immediate and substantial dilution of $ per share in the pro forma as adjusted net tangible book value of the Common Stock you purchase in this offering. To the extent outstanding options, warrants or other derivative securities are ultimately exercised or converted, or if we issue equity-based awards to our employees under our 2016 Equity Incentive Plan, there will be further dilution to investors who purchase shares in this offering. In addition, if we issue additional equity securities or derivative securities, investors purchasing shares in this offering will experience additional dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution” on page 25.

Sales of a substantial number of shares of our Common Stock, or the perception that such sales may occur, may adversely impact the price of our Common Stock.

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. These sales, or the perception that such sales may occur, may adversely impact the price of our Common Stock, even if there is no relationship between such sales and the performance of our business. As of November 19, 2021, we had 35,758,149 shares of Common Stock outstanding, as well as stock options to purchase an aggregate of 778,125 shares of our Common Stock at a weighted-average strike price of $0.44 per share, and outstanding warrants to purchase up to an aggregate of 3,825,000 shares of our Common Stock at a weighted-average exercise price of $2.87 per share. The exercise of these outstanding derivative securities may result in further dilution of your investment.

Risks Relating to Ownership of Our Securities

Our Common Stock is currently quoted and traded on the Pink Open Market and thus may have a limited market and lack of liquidity.

Our Common Stock is currently quoted and traded on the Pink Open Market, which may have an unfavorable impact on our stock price and liquidity. The Pink Open Market is a significantly more limited market than a national securities exchange such as the New York Stock Exchange or Nasdaq. The quotation of our shares on such a marketplace may result in a less liquid market available for existing and potential shareholders to trade shares of our Common Stock, could depress the trading price of our Common Stock, and could have an adverse impact on our ability to raise capital. Until such time as our Common Stock is again listed on a national securities exchange, there can be no assurance that there will be an active market for it, either now or in the future, or that our shareholders will be able to successfully divest their shares, particularly at a price that reflects the true value of the Company.

Our Common Stock is a penny stock under current SEC rules.

Our Common Stock is, as of the date of this prospectus, a “penny stock,” which, as defined by the SEC in Rule 15g-9 promulgated under the Exchange Act, is any equity security that has a market price (as defined in Rule 15g-9) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse or spousal equivalent, as well as to institutions and individuals who qualify under certain specified non-financial metrics. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.

Our continuing failure to maintain effective disclosure controls and procedures due to a material weakness in our internal control over financial reporting could have an adverse impact on us.

During the preparation of our consolidated financial statements for the fiscal year ended December 31, 2020, we provided our management’s assessment of the effectiveness of our disclosure controls and procedures as of December 31, 2020, as well as management’s report on the Company’s internal control over financial reporting. The conclusion stated therein is that such disclosure controls and procedures were not effective at that time and that, relatedly, our internal control over financial reporting contained a material weakness.

The basis for these conclusions is our failure to maintain sufficient segregation of duties within our accounting functions, which is considered a basic internal control. While, due to our current size and the nature of our operations, segregation of all duties may not always be possible and may not be economically feasible, to the extent possible, the initiation of transactions, the custody of assets, and the recording of transactions should be performed by separate individuals.

We reached a similar conclusion in connection with the preparation of our consolidated financial statements for the quarter ended September 30, 2021 and the fiscal year ended December 31, 2019 and, while we are working to implement remedial measures, including the recent hiring of additional accounting personnel, it is possible that we may not be able to make them fully effective prior to the end of the current fiscal year or that, even if we are successful in implementing them, they will be inadequate to cure our material weakness. For that reason, it is possible that our management’s assessment of our disclosure controls and procedures will remain unchanged for the foreseeable future. A chronic failure to establish effective controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Should that happen, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.

Moreover, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision- making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Our status as an “emerging growth company” under the JOBS Act enables us to provide reduced disclosure and to delay our adoption of new or revised accounting standards, which may make it more difficult to raise capital as and when we need it and this will not change for so long as we also remain a “smaller reporting company.”

We are considered an “emerging growth company” as that term is defined in the JOBS Act. For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. For a reporting company such as us, these provisions include: (i) an exemption from the auditor attestation requirement in the assessment of the company’s internal controls over financial reporting; (ii) an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies; (iii) an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the company; and (iv) reduced disclosure about the company’s executive compensation.

We will remain an emerging growth company upon the earliest of the following: (i) the last day of our first fiscal year following the fifth anniversary of our initial public offering; (ii) the last day of our fiscal year during which our total annual gross revenue is equal to or more than $1.07 billion; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt securities, or (iv) the date on which we are deemed to be a “large accelerated filer,” as that term is defined in Rule 12b-2 of the Exchange Act. Even at such time as we cease to be an emerging growth company, we may retain our present status as a “smaller reporting company,” as also defined in Rule 12b-2 of the Exchange Act, in which case many of the same exemptions and scaled disclosure requirements would still be available to us.

These exemptions from various reporting requirements, and the extended transition period for complying with new or revised financial accounting standards, may make us less attractive to investors and it may be more difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other competitors. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

The requirements of being a public company, including compliance with the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as our future obligation to meet exchange listing requirements, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we have to comply with the federal securities laws, rules and regulations, including those of the Exchange Act, as well as certain corporate governance provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, and related rules and regulations of the SEC, none of which a private company is required to do. Complying with these laws, rules and regulations occupies and will continue to occupy a significant amount of the time of our Board of Directors and management and significantly increases our costs and expenses. Among other things, we must maintain a system of internal control over financial reporting and disclosure controls and procedures in compliance with the requirements of Section 404 of the Sarbanes- Oxley Act, prepare periodic public reports in accordance with our obligations under the federal securities laws, retain outside counsel and accountants to assist in our compliance, and provide investor relations services. Although we strive to meet these obligations in a timely and cost-effective manner, there is no guarantee that we will be able to continue to do so, and any failure by us in this regard will expose the Company to regulatory action, including fines and other sanctions, would likely cause reputational damage, and could cause the price of our Common Stock to suffer.

We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

We have never paid cash dividends on our Common Stock and do not anticipate doing so in the foreseeable future. We currently intend to retain any future earnings to support the development of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including, but not limited to, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our Common Stock may be limited by Delaware state law. Accordingly, investors must rely on sales of their Common Stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our Common Stock.

Our Bylaws include an “exclusive forum” provision, which could limit your ability to obtain a favorable judicial forum for any disputes you have with the Company or its directors, officers or employees.

Our Bylaws provide that unless the Company consents in writing to the selection of an alternative forum, a court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for claims with respect to any derivative action or proceeding brought on behalf of the Company, any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Company to the Company or the Company’s stockholders, any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Delaware General Corporation Law, our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) or the Bylaws (in each case, as they may be amended from time to time), or any action asserting a claim against the Company or any director or officer or other employee of the Company governed by the internal affairs doctrine. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that he, she or it finds favorable for disputes with the Company or its directors, officers, other employees or agents, which may discourage such lawsuits against the Company and its directors, officers, other employees and agents. Alternatively, if a court were to find the choice of forum provision contained in our Bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on the Company’s business, results of operations, and financial condition.

We have several outstanding warrants that are exercisable into shares of Common Stock and are contractually obligated to issue additional warrants until such time as we redeem all of our outstanding shares of Series B Preferred Stock.

As described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 8 to the financial statements, we have entered into transactions that have obligated us to issue multiple warrants exercisable into shares of Common Stock. These include the issuance of a warrant exercisable into 187,500 shares of Common Stock in April 2021 as part of a term loan financing and subsequent issuances of a warrant exercisable into 93,750 shares of Common Stock each month following; this obligation is continuing and will not terminate until such time as we have redeemed all outstanding shares of our Series B preferred stock, which we are required to do shortly after completion of this offering. Moreover, a separate contractual obligation required us to issue a warrant exercisable into 900,000 shares of Common Stock as a result of our inability to complete an equity offering by early October 2021. As of November 19, 2021, there are outstanding warrants to purchase up to an aggregate of 3,825,000 shares of our Common Stock at a weighted-average exercise price of $2.87 per share.

These warrants will remain outstanding after this offering, and should their holders choose to exercise the warrants at or around the same time, you will likely experience dilution in your interest in our Common Stock, in addition to the dilution you will experience immediately after the offering, as described in the “Dilution” section.