Aug. 2019 10Q-A
Plan of Operations
This 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.
Plan of Operation
Prior to the completion of the acquisition of 2050 Motors, Inc., a Nevada corporation, ("2050 Motors"), on May 2, 2014, the Company had nominal assets whose sole business was to identify, evaluate, and investigate various companies to acquire or with which to merge. Upon consummation of the transaction with 2050 Motors, the Company's business became the business of 2050 Motors, which is currently the Company's sole operating subsidiary. Our principal business objective for the next 12 months will be to achieve long-term growth through 2050 Motors, Inc, supplemented by the launch of new business units, subsidiaries and ventures, initially, with a business concentration in the areas of communications, electric vehicles, power over ethernet (PoE) and LED lighting, and social media.
The Company completed the acquisition of all of the issued and outstanding capital stock of 2050 Motors, Inc. on May 2, 2014. The acquisition was completed pursuant to the terms of a Plan and Agreement of Reorganization (the "Agreement") entered into on February 5, 2014, by and between the Company, 2050 Motors and Certain Shareholders of 2050 Motors. Pursuant to the terms of the Agreement, the Company acquired all of the outstanding shares of capital stock of 2050 Motors in exchange for 24,994,670 post-split shares of the Company's common stock (aggregating approximately 82% of its issued and outstanding common stock at closing).
Historically, 2050 Motors' principal activity was the importation and the marketing and selling of electric automobiles based on its good faith belief that 2050 Motors, Inc. had an exclusive and valid license, subject to minimum sales requirements, to import, market and sell in the United States, Puerto Rico, the US Territories and Peru, the "e-Go" lightweight carbon fiber all-electric vehicle design and electric light truck, manufactured by Jiangsu Aoxin New Energy Automobile Co., LTD ("Aoxin Automobile") located in the Peoples Republic of China ("PRC").
With respect to the time period covered in this report, 2050 Motors intended in the past to import vehicles completely fabricated and assembled in China from Aoxin Automobile. 2050 Motors intended to market the e-Go in designated markets and is not expected to need any raw materials, components or equipment, except spare parts which will be supplied by Aoxin Automobile. However, the e-Go and all of its parts and equipment must be DOT approved.
2050 Motors is a development stage company with no operating history and may never be able to carry out its business plan or achieve any revenues or profitability. Additionally, because we have not received adequate verification from Aoxin of the efficacy of the agreements and Aoxin's business, we may no longer pursue any business relationship with Aoxin.
2050 Motors was established in October 2012 and has not generated any revenues, nor has it realized a profit from its operations to date, and there is little likelihood that it will generate any revenues or realize any profits in the short term. Any profitability in the future from its business will be dependent upon the successful marketing and sales of the e-Go. 2050 Motors may not be able to successfully carry out its business plan. There can be no assurance that it will ever achieve any revenues or profitability. Accordingly, its prospects must be considered in light of the risks, expenses, and difficulties frequently encountered in establishing a new business, especially one in the automobile industry, and therefore it is a highly speculative venture involving significant financial risk.
Since new management was appointed in March 2019, we have expanded our mission statement to invest in, incubate and accelerate businesses in the communications, energy, electric vehicle, and Internet industries.
Costs and Resources
2050 Motors is currently pursuing additional funding resources that will potentially enable it to maintain its current and planned operations through the next 12 months. The Company anticipates that it will need to raise additional capital in order to sustain and grow its operations over the next few years. To the extent that the Company's capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders or creditors will provide any portion of the Company's future financing requirements. No assurance can be given that additional financing will be available when needed or that such financing will be available on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or terminate expenditures for certain of its programs that it would otherwise seek to develop and commercialize. This would have a material adverse effect on the Company.
Results of Operation for the Three Months Ended June 30, 2019 and 2018
During the three months ended June 30, 2019 and 2018, the Company had no operating revenues. During the three months ended June 30, 2019, the Company incurred operating expenses of $37,243, consisting primarily of G&A expenses, consulting fees and travel expenses and other general and administrative costs. For the three months ended June 30, 2019, these operating losses combined with non-operating income (expenses) of $1,359,950 resulted in net income of $1,322,707. For the three months ended June 30, 2018, the Company had operating losses of ($59,272) and non-operating income (expenses) of $483,839 leading to a net income of $424,567.
Results of Operation for the Six Months Ended June 30, 2019 and 2018
During the six months ended June 30, 2019 and June 30, 2018, the Company had no operating revenues. During the six months ended June 30, 2019, the Company incurred operating expenses of $71,597, consisting primarily of G&A expenses, consulting fees and travel expenses and other general and administrative costs. For the six months ended June 30, 2019, these operating losses combined with non-operating income (expenses) of $435,213 resulted in net income of $363,616. For the six months ended June 30, 2018, the Company had operating losses of $169,598 and non-operating income (expenses) of ($897,303) leading to a net loss of ($1,066,901). As of June 30, 2019, the Company had an accumulated deficit of $5,719,075 compared to an accumulated deficit of ($5,960,691) as of December 31, 2018. The improving of stockholders' equity for the six months ending June 30, 2019 was due to the net income of $241,616.
Equity and Capital Resources
We have incurred losses since the inception of our business and as of June 30, 2019 we had an accumulated deficit of $5,597,075. As of June 30, 2019, the Company had cash balance of $50 and a negative working capital of ($1,281,329).
To date, we have funded our operations through short-term debt and equity financing. During the six months ended June 30, 2019, the Company received $40,500 of borrowed funds from non-related parties. In addition, during this period the Company issued 182,647,500 of common stock to lenders for conversions of $28,819 of principal and interest related to third party debt.
We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of our automobile business. However, we do not expect to start generating revenues from our operations for another 12 months. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of additional capital or that our estimates of our capital requirements will prove to be accurate. As of the date of this Report we did not have any commitments from any source to provide such additional capital. Even if we are able to secure outside financing, it may be unavailable in the amounts or the times when we require. Furthermore, such financing would likely take the form of bank loans, private placement of debt or equity securities or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, leases or debt would increase our capital requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms.
As of June 30, 2019, the Company is delinquent in its payments on loans owing to several third-party lenders totaling $237,767 in principal, accrued interest and penalties. The Company is in discussions with these lenders to extend the maturity dates or to convert all or part into the company's common stock. There is no assurance that these discussions will result in amicable settlements. Any legal action by any one of the lenders could have a material adverse effect on the Company and its ability to continue operations.
On June 25, 2018, the Company received a legal notice demanding approximately $404,000, from a note holder for defaulting on the loan. During the three-month period ended June 30, 2019, this loan accrued penalties of $226,299 while the Company was not current with its SEC reporting requirements. On advice of counsel since the loan has been substantially repaid through over one dozen conversions of debt into equity since 2017, we have removed these liquidated damages related to this loan from our balance sheet as they no longer apply.
Off-balance Sheet Arrangements
Since our inception through June 30, 2019, we have not engaged in any off-balance sheet arrangements.
Aug 16, 2019 https://www.marketwatch.com/press-release/10-qa-2050-motors-inc-2019-08-16