eFleets Corp - FORM 10-Q

Attached files

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EX-4.9 - EXHIBIT 4.9 - eFleets Corp	v379068_ex4-9.htm
EX-31.1 - EXHIBIT 31.1 - eFleets Corp	v379068_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - eFleets Corp	v379068_ex32-1.htm
EX-4.10 - EXHIBIT 4.10 - eFleets Corp	v379068_ex4-10.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-54357

eFLEETS CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	26—2374319
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7660 Pebble Drive

(Address of principal executive offices)

(817) 616-3161

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months ). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £

Accelerated filer £

Non-accelerated filer £

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes £ No x

The number of shares of common stock outstanding as of May 14, 2014 was 8,758,242.

eFLEETS Corporation

Form 10-Q

For the Quarter ended March 31, 2014

Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1	Financial Statements

	Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	3

	Statements of Operations for the Three Months ended March 31, 2014 and 2013 (unaudited)	4

	Statements of Cash Flows for the Three Months ended March 31, 2014 and 2013 (unaudited)	6

	Notes to Financial Statements (unaudited)	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4	Controls and Procedures	27

PART II OTHER INFORMATION
Item 1	Legal Proceedings	29

Item 1A	Risk Factors	29

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3	Defaults Upon Senior Securities	29

Item 4	Mine Safety Disclosures	29

Item 5	Other Information	29

Item 6	Exhibits	29

SIGNATURES		30

CERTIFICATIONS

ITEM 1. Consolidated Financial Statements

eFLEETS Corporation

(A Development Stage Enterprise)

Balance Sheets

	March 31, 2014			December 31, 2013
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	9,128		$	-
Prepaid expenses		-			11,309
Accounts receivable		-			3,750
Inventory		97,402			84,501
Work in progress		22,877			-

Total current assets		129,407			99,560
Property and Equipment
Leasehold improvements		32,665			32,665
Office furniture and fixtures		119,168			117,025
Machinery and equipment		87,869			87,869
Autos and trucks		95,542			95,542
Accumulated depreciation		(173,439	)		(162,289	)

Total property and equipment – net		161,805			170,812

Deposits		6,200			6,200

Total assets	$	297,412		$	276,572

Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	1,082,148		$	1,093,983
Accrued interest		560,822			468,646
Short-term notes		175,000			197,000
Current maturities of convertible notes payable		909,272			900,110
Current maturities of long-term debt		311,520			325,675

Total current liabilities		3,038,762			2,985,414

Convertible notes payable, less current maturities		3,079,131			2,437,495
Long-term debt, less current maturities		528,140			528,140

Total long term liabilities		3,607,271			2,965,635

Total liabilities		6,646,033			5,951,049

Commitments and contingencies		-			-

Stockholders' equity (deficit)

Common stock: $0.001 par value: 75,000,000 shares authorized; 8,569,510 shares issued and outstanding at March 31, 2014 and 8,437,059 issued and outstanding at December 31, 2013		8,570			8,437
Additional paid-in capital		7,693,364			7,462,808
Deficit accumulated during the development stage		(14,050,555	)		(13,145,722	)

Total stockholders' equity (deficit)		(6,348,621	)		(5,674,477	)

Total liabilities and stockholders' equity (deficit)	$	297,412		$	276,572

See accompanying notes to the financial statements

eFLEETS Corporation

(A Development Stage Enterprise)

Statements of Operations

(unaudited)

	For the Three Months Ended March 31, 2014			For the Three Months Ended March 31, 2013			For the Period from Inception (January 30, 2006) through March 31, 2014
	(unaudited)			(unaudited)			(unaudited)
Revenues earned during the development stage	$	-		$	-		$	673,762
Cost of sales		-			-			(1,924,014	)
Gross profit/ (loss)								(1,250,252	)

Operating expenses
Professional fees		123,182			67,290			840,572
Compensation		267,171			274,635			3,577,428
Stock based compensation expense		-			-			2,192,813
Research & development		3,630			6,620			1,345,776
Inventory adjustment		223,192			-			223,192
Other operating expenses		341,850			203,880			6,595,987

Total operating expenses		788,100			552,425			14,552,576

Loss from operations		(788,100	)		(552,425	)		(15,802,828	)

Other income (expense)
Interest income		-			19			41,313
Other income (loss)		-						2,744,965
Interest expense		(116,733	)		(67,133	)		(1,034,005	)

Total other income and expense		(116,733	)		(67,114	)		1,752,273

Net loss accumulated during the development stage	$	(904,833	)	$	(619,537	)	$	(14,050,555	)

Net loss per common share:
- Basic and diluted	$	(.11	)	$	(.08	)	$	(2.38	)

Weighted average common shares outstanding
- basic and diluted		8,525,359			7,435,950			5,902,784

See accompanying notes to the financial statements.

eFLEETS Corporation

(A Development Stage Enterprise)

Statement of Stockholders' Equity (Deficit)

Three Months ended March 31, 2014 and 2013 and the Period from Inception (January 30, 2006) through March 31, 2014

(unaudited)

	Shares			Capital Stock			Additional Paid-in Capital			Deficit Accumulated During The Development Stage			Total Stockholders’ Equity (Deficit)

Balance, January 30, 2006 (Inception)		-		$	-		$	-		$	-		$	-

Issuance of common stock, January 2006		11,362,500			113,625			970,236			-			1,083,861
Issuance of common stock, July 2007		40,000			400			99,600			-			100,000
Issuance of common stock, January 2008		255,000			2,550			8,925			-			11,475
Issuance of common stock, June 2008		200,000			2,000			498,000			-			500,000
Issuance of common stock, October 2008		1,038,598			10,386			(10,386	)		-			-
Issuance of common stock, April 2009		720,000			7,200			(7,200	)		-			-
Conversion of notes payable to common stock, July 2010		1,500,000			15,000			597,099			-			612,099
Issuance of common stock, September 2010		500,000			5,000			245,000			-			250,000
Stock - based compensation expense, 2010		-			-			1,113,372			-			1,113,372
Warrants issued with debt								248,268						248,268
Net loss, January 30, 2006 through December 31, 2010		-			-			-			(5,212,366	)		(5,212,366	)

Balance, December 31, 2010		15,616,098			156,161			3,762,914			(5,212,366	)		(1,293,291	)

Stock - based compensation expense		-			-			574,343			-			574,343
Net loss		-			-			-			(474,207	)		(474,207	)

Balance, December 31, 2011		15,616,098			156,161			4,337,257			(5,686,573	)		(1,193,155	)

Conversion of notes payable to common stock, April 2012		400,000			4,000			196,000						200,000
Conversion of notes payable to common stock, December 2012		200,000			2,000			98,000						100,000
Conversion of warrants to common stock		100,000			1,000			-						1,000
Issuance of common stock, September 2012		833,333			8,333			491,667						500,000
Issuance of common stock, November 2012		833,333			8,333			491,667						500,000
Issuance of common stock, December 2012		219,375			2,194			107,494						109,688
Warrants issued with debt								93,201						93,201
Stock - based compensation expense								28,773			-			28,773
Net loss		-			-			-			(3,628,923	)		(3,628,923	)

Balance, December 31, 2012		18,202,139		$	182,021		$	5,844,059		$	(9,315,496	)	$	(3,289,416	)

Issuance of common stock, January 2013		250,000			2,500			147,500						150,000
Issuance of common stock, January 2013		18,750			188			11,063						11,251
Issuance of common stock, January 2013		500,000			5,000			295,000						300,000
Issuance of common stock, January 2013		333,333			3,333			196,667						200,000
Record merger transaction, May 2013		1,504,998			(192,444	)		208,384						15,940
Record change in par value from $0.01 to $0.001					20,211			(20,211	)					-
Record share exchange per merger agreement, 1: .3973333		(12,541,023	)		(12,541	)		12,541						-
Issuance of common stock, June 2013		99,332			99			149,901						150,000
Issuance of common Stock, September 2013		9,930			10			14,990						15,000
Issuance of common stock, November 2013		59,600			60			89,940						90,000
Stock -based compensation expense, June 2013								147,461						147,461
Stock- based compensation expense, September 2013								148,494						148,494
Stock – based compensation expense, December 2013								180,370						180,370
Warrants issued with debt								36,649						36,649
Net loss accumulated during the development stage		-			-			-			(3,830,226	)		(3,830,226	)

Balance, December 31, 2013 at $0.001 par value		8,437,059		$	8,437		$	7,462,808		$	(13,145,722	)	$	(5,674,477	)

Issuance of common stock January 2014		132,450			133			199,867						200,000
Warrants issued with debt								30,689						30,689
Net loss accumulated during the development Stage											(904,833	)		(904,833	)

Balance, March 31, 2014 at $.001 par		8,569,510			8,570			7,693,364			(14,050,555	)		(6,348,621	)

See accompanying notes to the financial statements.

eFLEETS Corporation

(A Development Stage Enterprise)

Statements of Cash Flows

(unaudited)

	For the Three Months Ended March 31, 2014			For the Three Months Ended March 31, 2013			For the Period from Inception (January 30, 2006) through March 31, 2014
	(unaudited)			(unaudited)			(unaudited)
Cash flows from operating activities:
Net loss accumulated during the development stage	$	(904,833	)	$	(619,539	)	$	(14,050,555	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		11,150			6,735			196,045
Gain (loss) on sale of assets		-			-			5,035
Impairment of long-lived assets		-			-			41,777
Loss on related party indebtedness		-			-			150,741
Stock-based compensation expense		-			-			2,192,813
Accreted interest		21,488			-			324,311
Changes in operating assets and liabilities
Accounts receivable		3,750			28,222
Accounts receivable - related party		-			-			(250,000	)
Other receivables		-			-			-
Inventory		(12,901	)		(259,762	)		(97,402	)
Work in progress		(22,877	)		-			(22,877	)
Prepaid expenses		11,309			5,650
Accounts payable and accrued expenses		(11,835	)		101,988			1,082,148
Accounts payable - related party		-			-			99,259
Accrued interest		92,176			11,222			560,822
Customer deposits		-						-

Net cash used in operating activities		(812,573	)		(725,484	)		(9,767,883	)

Cash flows from investing activities:
Proceeds from maturity of certificate of deposit		-			-			25,000
Purchase of certificate of deposit		-			-			(25,000	)
Purchase of property and equipment		(2,143	)		(31,656	)		(369,374	)
Proceeds from sale of equipment		-			-			9,520
Deposits		-			-			(6,200	)
Purchases of patents and trademarks		-			-			(44,808	)

Net cash used in investing activities		(2,143	)		(31,656	)		(410,862	)

Cash flows from financing activities:
Proceeds from convertible notes payable		660,000			-			4,623,878
Payments on notes payable		(22,000	)		-			(272,000	)
Proceeds from short- term notes		-			-			197,000
Proceeds from long-term debt		-			-			1,505,317
Payments on long-term debt		(14,156	)		(11,655	)		(54,537	)
Issuance of common stock		200,000			668,750			4,187,215
Warrants exercised for common stock		-						1,000

Net cash provided by financing activities		823,844			657,095			10,187,873

Change in cash and cash equivalents		9,128			(100,045	)		9,128

CASH AND CASH EQUIVALENTS, beginning of period		-			166,820			-

CASH AND CASH EQUIVALENTS, end of period	$	9,128		$	66,774		$	9,128
NON-CASH FINANCING ACTIVITIES
Conversion of notes for common stock	$	-		$			$	912,099

Value of debt assigned to warrants	$	30,689		$	93,201		$	160,540

See accompanying notes to the financial statements.

eFLEETS Corporation

(A Development Stage Enterprise)

Notes to the Financial Statements

(unaudited)

Note 1 - Organization and Operations

Effective May 22, 2013, Numbeer Acquisition, Inc., our wholly-owned subsidiary, merged with and into Good Earth Energy Conservation, Inc., a Delaware corporation, organized on February 1, 2007, with Good Earth as the surviving entity (the “Merger”). We were a development-stage company organized to sell a complete beer control system designed to maximize yield from beer kegs. As a result of the Merger, we have adopted the business plan and operations of Good Earth and now we design, develop, and manufacture a zero emission three-wheeled all-electric utility vehicle, the FireFly® ESV, for use in the parking enforcement (municipalities and universities), traffic control, security patrol, airport and port terminal operations, small package delivery and other comparable utility markets. As part of the Merger, we changed our fiscal year end from May 31 to December 31. On January 30, 2014, we changed our name to eFleets Corporation (“eFLEETS”).

eFLEETS is a Fort Worth, Texas based company focused on the design, development and manufacture of an all-electric fleet vehicle for the essential services market.

Simultaneously with, and as consideration for, the Merger, on the Closing Date the former stockholders of Good Earth exchanged an aggregate of 19,304,222 shares of common stock of Good Earth, constituting all issued and outstanding capital stock of Good Earth, for 7,670,211 shares of common stock of Numbeer (the “Merger Shares”) (i.e., each share of common stock of Good Earth was exchanged for a 0.39733333 fractional share of common stock of Numbeer). Additionally, (a) 9,450,000 shares of common stock of Good Earth subject to options were exchanged by former officers, directors and stockholders of Good Earth for, and represent the right to receive, 3,754,800 shares of common stock of Numbeer, at exercise prices ranging from $0.10 to $0.45 per share; (b) 7,682,715 shares of common stock of Good Earth subject to warrants were exchanged by former officers, directors and stockholders of Good Earth for, and represent the right to receive, 3,052,599 shares of common stock of Numbeer, at exercise prices ranging from $0.01 to $0.80 per share; and (c) 5,384,615 shares of common stock of Good Earth subject to convertible promissory notes were exchanged by former stockholders of Good Earth for, and represent the right to receive, 2,139,488 shares of common stock of Numbeer, at conversion prices ranging from $0.50 to $0.65. The warrants, options and notes became exercisable for, or convertible into, shares of common stock of Numbeer on the same basis as the shares of common stock of Good Earth were exchanged for shares of common stock of Numbeer.

Immediately prior to the Merger, eFLEETS had 7,596,000 shares of common stock issued and outstanding. Contemporaneously with the Closing and as a condition to the Closing, the holder of a majority of the issued and outstanding common stock of Numbeer and sole member of its Board of Directors (the “Majority Shareholder”) delivered to the Company for retirement and cancellation 6,996,027 shares of common stock of eFLEETS and other shareholders collectively delivered to the Company for retirement and cancellation, 1,987 shares of common stock of Numbeer. Following the consummation of the Merger, the issuance of the Merger Shares, the retirement of the 6,998,014 shares of common stock of Numbeer, the Company has 8,268,197 shares of Common Stock issued and outstanding, subject to the exercise of appraisal rights by the former shareholders of Good Earth, and 8,946,887 shares of Common Stock subject to issuance pursuant to the exercise of options and warrants and the conversion of convertible notes. Following the Merger the former stockholders of Good Earth will beneficially own approximately 92.77% of the total outstanding shares of Common Stock (96.53% on a fully diluted basis).

Additionally, on May 22, 2013 the Board of eFLEETS adopted the Company’s 2013 Incentive Plan (the “Plan”) and amended its bylaws to, among other things, change eFLEETS’s fiscal year end to December 31. The Plan was also approved by the Majority Shareholder. Under the Plan, 2,389,757 shares of Common Stock are reserved for issuance as incentive awards to be granted to executive officers, key employees, consultants and directors of the Company.

The Merger Agreement includes a section titled “Subsequent Equity Sales” which provides that if the Company were to sell its Common Stock or grant any right to re-price or otherwise dispose of or issue any of its Common Stock at a price below $0.20 per share (such lower price, the “Base Share Price”) prior to the first anniversary of the closing of the Merger (the “Closing”), it shall issue to holders of its Common Stock as of the date of the Closing, excluding the 6,998,014 shares of Common Stock surrendered by the Numbeer shareholders for retirement and cancellation, an additional number of shares of Common Stock so that all shares of Common Stock held by such stockholders, when multiplied by the Base Share Price, is not less than $300,000.

The Merger Agreement contains customary representations, warranties and covenants of the Company, Acquisition, and Good Earth, for like transactions. Breaches of representations and warranties are secured by customary indemnification provisions.

Following the Closing, the Company’s board of directors (the “Board”) consists of five members. In keeping with the foregoing, on the Closing Date Anthony Vaz, the sole director of eFLEETS prior to the Merger, appointed James M. Hawes, James R. Emmons, Greg Horne, Robert S. Kretschmar, and John Maguire to fill the vacancies on the Board and Anthony Vaz resigned his position as a director. Also, on the Closing Date, Anthony Vaz, the sole officer of Numbeer, resigned and James R. Emmons was appointed President, Chief Executive Officer, and Chief Financial Officer of the Company and Greg Horne was appointed Chief Technical Officer and Assistant Secretary of the Company.

The parties have taken the actions necessary to provide that the Merger is treated as a “tax free merger” under Section 368 of the Internal Revenue Code of 1986, as amended. Prior to the Closing, eFLEETS had established a fiscal year end of May 31. As a result of the Merger the Company has adopted the fiscal year end of December 31.

For financial accounting purposes, the acquisition was a reverse acquisition of the Company by Good Earth, under the purchase method of accounting, and was treated as a recapitalization with Good Earth as the acquirer. Upon consummation of the Merger, the Company adopted the business plan and operations of Good Earth. The historical financial statements of Numbeer before the Merger will be replaced with the historical financial information of Good Earth before the Merger in all future filings with the Securities and Exchange Commission (the “SEC”).

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended December 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on April 16, 2014.

Development Stage Company

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business and developing revenue generating opportunities through its planned principal operations. In the latter half of 2011 the Company’s principal sales operations began. The Company recognized revenues initially in April/May 2012. All losses accumulated since inception have been considered as part of the Company's development stage activities.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company’s significant estimates and assumptions include the fair value of financial instruments; income tax rate, income tax provision, deferred tax assets and the valuation allowance of deferred tax assets, and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments.

Based on borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of the Company’s debt obligations approximate their fair value.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Income Taxes

The Company uses the liability method of accounting for deferred income taxes. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Management's estimate regarding the realizability of the deferred tax assets in future years is based upon the weight of the available evidence that it is more likely than not (a likelihood of more than 50%) that a portion or all of the deferred tax assets would not be realized in future years. A valuation allowance is recognized, if based on the weight of available evidence, if it is more likely than not that some portion or the entire deferred tax asset will not be realized.

The Company recognizes in its financial statements the financial effect of a tax position, if that position is more likely than not to be sustained upon examination, including resolution of any appeals or litigation processes, based upon the technical merits of the position. Tax positions related to the Company’s federal and state requirements have been reviewed, and management is of the opinion that material positions taken by the Company would more likely than not be sustained by examination. Accordingly, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. As of December 31, 2013, the Company’s tax years 2010 and thereafter remain subject to examination for federal and state tax purposes.

Fiscal Year-End

In May 2013 the Company changed its fiscal year end from May 31 to December 31.

Liquidity

Historically, the Company has been dependent on debt and equity raised from individual investors to sustain its operations. The Company’s product has not sold sufficient number of units to generate significant revenue. The Company has operated as a development stage enterprise since inception with total operating expenses incurred of $14,329,384 and an overall net loss of ($14,050,555) accumulated through March 31, 2014. Net revenues recorded from inception (January 31, 2006) through March 31, 2014 are $673,762. These conditions raise substantial doubt about its ability to continue as a going concern. The Company’s December 31, 2013, fiscal year end audited financial statements contain a “going concern” opinion by our auditors. Based on the Company’s recurring losses from operations, negative cash flows from operating activities, and a working capital deficit and total stockholders’ deficit at December 31, 2013, the auditor’s opinion expresses substantial doubt about our ability to continue as a going concern. Management plans include seeking additional equity investments from private individuals as well as fund managers with a stated focus of investing in small public companies like the Company, private equity type firms, and venture capital firms. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Accounts Receivable

Management has not provided an allowance for uncollectible receivables. All receivables considered doubtful have been charged to current operations and it is management’s opinion that no additional significant amounts are doubtful of collection based on prior experience, review of accounts and other pertinent factors.

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the useful lives of the assets ranging from 3 to 7 years.

Inventory

Inventory consists of parts and supplies. Inventory is stated at the lower of cost (first-in, first-out) or market.

Impairment of Long-lived Assets

The Company reviews the carrying value of long-lived assets for impairment whenever triggering events or changes in circumstances occur, indicating that the carrying amount of any asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the assets. If triggering events or changes in circumstances occur, the impairment to be recognized is measured by the excess of the carrying amount over the fair value of the assets. During 2012, a review of the balance of the intangible assets concluded these assets were obsolete and had no future value. Therefore, the Company charged the remaining unamortized balance, $14,893, to expense. There were $41,777 of impairment losses associated with its patents and trademarks for the period from inception (January 30, 2006) to December 31, 2013.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include: (a) affiliates of the Company; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitments and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Advertising

The Company expenses advertising costs as incurred. Advertising expense was $2,337 and $3,298 for the quarter ended March 31, 2014 and 2013, respectively. The amounts charged for the period from inception (January 30, 2006) to March 31, 2014 were $104,264.

Research and Development

Research and development costs are charged to operations when incurred and are included in operating expenses. The research and development expenses were $3,630 and $6,620 for the quarter ended March 31, 2014 and 2013, respectively. The amounts charged for the period from inception (January 30, 2006) to March 31, 2014 amounted to $1,345,776.

Stock-based Compensation

The Company recognizes in its statement of operations the cost of employee services received in exchange for awards of equity instruments. The costs were based on their fair values at the time of the grant. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted to employees. Stock based compensation recognized for the period from inception (January 30, 2006) to March 31, 2014 was $2,192,813. The stock based compensation expense for the quarter ended March 31, 2014 and 2013 was $0 and $0, respectively.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangements, stock options or warrants.

There were no potentially dilutive common shares outstanding for the quarters ended March 31, 2014 and March 31, 2013.

Note 3. Short-term Notes

Short-term notes consisted of the following at March 31, 2014 and December 31, 2013:

	2014		2013

Promissory note payable to a stockholder and director of the company, due May 8, 2014. The unsecured note accrues interest at 8% and is payable at maturity.	$	25,000	$	25,000

The Company issued three 8% unsecured promissory notes to a company, of which one of the Company's executive officers is the chief executive officer. The dates of the notes are May 20, 2013, September 3, 2013 and December 31, 2013 in the amounts of $110,000, $40,000, and $22,000, respectively. On February 2, 2014, the Company repaid the $22,000 note in full. The notes all mature 12 months from their issuance dates with all accrued interest due at maturity. As of May 20, 2014 the holder agreed to extend the balance of the May 20, 2013 to June 20, 2014.		150,000		172,000

Total short term notes	$	175,000	$	197,000

Note 4. Convertible Notes Payable

Convertible notes payable consisted of the following at March 31, 2014 and December 31, 2013:

	2014		2013

Convertible senior secured note payable to a stockholder issued jointly with Good Earth Electric Propulsion Systems, LTD originally due November 30, 2012. The note accrued interest quarterly at LIBOR plus 2% and was convertible into shares of common stock at conversion price equal to $2.50 per share. This note was renewed, extended, and modified as of April 1, 2012 with new terms as follows: Promissory note totaling $750,000, payable to a stockholder, with a stated interest rate of 8%, convertible to common stock at the rate of $.1.26 per share, due on or before December 31, 2013. The Note is secured by fixed assets and intellectual property owned/developed by the Company. The Note was extended to March 31, 2014 at the option of the Company. Effective March 31, 2014 this note was renewed and extended to March 31, 2015. .As consideration for the renewal and extension the Company issued warrants to the holder to purchase 750,000 shares of the Company's common stock at the exercise price of $1.26 per share. The warrants expire March 31, 2019.		750,000		750,000

The Company issued a series of notes payable from the period of April to July 2012 aggregating $1,750,000 less accreted interest of $57,852, as of March 31, 2014, payable to multiple unrelated parties, bearing interest at 8% until February 28, 2013 at which time the rate increased to 12% until the reverse merger requirement was satisfied per the terms of the notes and at which time the rate reverted to 8%. The notes are convertible into common stock at the rate of $1.26 per share with warrants attached to purchase 1,390,667 shares of common stock at the rate of $1.26 per share. The fair value assigned to the warrants at issuance was $93,201. The accreted interest expense of was recorded in the statement of operations.. The notes mature on March 31, 2017 and are secured by the Company's accounts receivable and inventory.		1,692,148		1,687,495

	2014			2013

The Company issued a series of convertible Notes to a stockholder from the period of June 28, 2013 through March 28, 2014 aggregating $1,335,000 less accreted interest of $38,745, accruing interest at 8%, all with maturities of 12 months from the date of the individual note’s issuance. The notes are convertible into common stock at the rate of $1.51 per share with warrants attached to purchase 442,033 shares of common stock at $2.01 per share. The fair value assigned to the warrants at issuance was $67,339. The accreted interest expense of $11,759 and $7,673 was recorded in the statement of operations for the year ended December 31, 2013 and the quarter end March 31, 2014, respectively.		1,296,255			650,110

A convertible promissory note payable to a stockholder, accruing interest at 8%, due August 15, 2014 secured by warrants. The note is convertible into common stock at the rate of $1.64 per share with warrants attached to purchase 38,205 shares of common stock at the rate of $1.89 per share. There was no value assigned to the warrants at issuance. The warrants expire August 14, 2014.		250,000			250,000

Total convertible notes payable	$	3,988,403		$	3,337,605
Less current maturities		(909,272	)		(900,110	)
	$	3,079,131		$	2,437,495

Aggregate annual maturities of convertible notes are as follows:

2014	$	909,272
2015		1,386,983
2016		-
2017		1,692,148,

	$	3,988,403

Note 5. Long-term debt

Long-term debt consisted of the following at March 31, 2014 and December 31, 2013:

	2014		2013

Note payable to a bank in monthly installments of $540, no stated interest rate, due May 2016, secured by a vehicle.	$	13,499	$	15,119

Note payable to a bank in monthly installments of $845, including interest at 3.74%, due January 2017, secured by a vehicle.		26,956		29,491

Promissory note payable to a stockholder, accruing interest at 8%, due December 2014, secured by warrants. The warrants permit the holder to purchase 99,333 shares of the Company's stock at the exercise price of $2.52 per share or at the actual stock price at the time of issuance but not lower than $1.26. The warrants expire on December 19, 2016 and are callable by the Company if an S-1 is filed, in which case the warrants must be exercised within 20 days from the time the Company exercises this clause. There was no value assigned to the warrants at issuance.		250,000		250,000

$100,000 promissory note payable to a stockholder, accruing interest at 8%due March 2015, secured by warrants. The warrants permit the holder to purchase 100,000 shares of the Company's stock at the exercise price of $.01 per share. The warrants were exercised in 2012.		100,000		100,000

	2014			2013
The Company issued a promissory note to an outside firm in the amount of $109,205 dated December 04, 2013 payable at $5,000 per month starting on January 15, 2014 and each month thereafter until all principal and interest is paid in full. The note carries an interest rate of one-quarter of one percent (.25%) to be calculated on the unpaid principal outstanding. Payments will be credited to the accrued interest and then to reduction of principal.	$	99,205		$	109,205

Promissory note payable to a stockholder, accruing interest at 8%, due February 3, 2015, secured by warrants. The warrants permit the holder to purchase 99,333 shares of the Company's stock at the exercise price of $1.26 per share. The warrants expire on February 3, 2017.		250,000			250,000

Promissory note payable to a stockholder, accruing interest at 8%, due February 10, 2015, secured by warrants. The warrants permit the holder to purchase 39,733 shares of the Company's stock at the exercise price of $1.26 per share. The warrants expire on February 9, 2017.		100,000			100,000

Total long-term debt	$	839,660		$	853,815
Less current maturities		(311,520	)		(325,675	)
	$	528,140		$	528,140

Aggregate annual maturities of long-term debt are as follows:

2014	$	311,520
2015		515,230
2016		12,068
2017		842

	$	839,660

Note 6. Stock Warrants and Options

On December 19, 2011, the Board of Directors approved the issuance of warrants to a related party to purchase 99,333 shares of the Company's common stock. Such warrants are exercisable at $2.52 per share, or 80% of the share price of any succeeding financing transaction, whichever is lower, subject to a minimum of $1.26 per share. The warrants vest immediately upon issuance and expire within 5 total years of issuance.

On March 15, 2011, the Board of Directors issued stock options to employees to purchase an aggregate of 516,533 shares of the Company’s common stock. Such options are exercisable at $1.13 per share. The options vest 25% at the grant date and 25% each year for three years thereafter.

On March 15, 2011, the Board of Directors issued stock options to founders, directors, a consultant and a shareholder to purchase an aggregate of 1,490,000 shares of the Company’s common stock. Such options are exercisable at $1.13 per share. The options vest immediately upon issuance.

On December 15, 2011, the Board of Directors issued stock options to employees, directors and a shareholder to purchase an aggregate of 546,333 shares of the Company’s common stock. Such options are exercisable at $.25 per share. The options vest immediately upon issuance.

On December 15, 2011, the Board of Directors issued stock options to employees and directors to purchase an aggregate of 407,267 shares of the Company’s common stock.

NOTE 6. STOCK WARRANTS AND OPTIONS-CONTINUED

Such options are exercisable at $1.13 per share. The options vest 25% at the grant date and 25% each year for three years thereafter. These options became fully vested in May 2013 due to the Merger Agreement.

On February 3, 2012, the Board of Directors approved the issuance of warrants to a related party to purchase 99,333 shares of the Company's common stock. Such warrants are exercisable at $1.26 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On February 10, 2012, the Board of Directors approved the issuance of warrants to a related party to purchase 39,733 shares of the Company's common stock. Such warrants are exercisable at $1.26 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

From the period of April to July 2012, the Board of Directors approved the issuance of warrants to a group of unrelated note holders to purchase 1,390,667 shares of the Company’s common stock at the rate of $1.26 per share. The warrants vest immediately upon issuance and expire within 4 years of issuance.

On April 10, 2012, the Board of Directors approved the issuance of warrants to an unrelated party to purchase 87,165 shares of the Company's common stock. Such warrants are exercisable at $1.26 per share. The warrants vest immediately upon issuance and expire within 4 years of issuance.

On August 15, 2012, the Board of Directors approved the issuance of warrants to a related party to purchase 38,205 shares of the Company’s common stock. Such warrants are exercisable at $1.89 per share. The warrants vest immediately upon issuance and expire on August 14, 2014.

On September 28, 2012, the Board of Directors approved the issuance of warrants to a stockholder to purchase 82,778 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 3 years of issuance.

On November 20, 2012, the Board of Directors approved the issuance of warrants to a stockholder to purchase 82,778 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 3 years of issuance

On January 16, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 24,833 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 3 years of issuance.

On January 16, 2013 the Board of Directors approved the issuance of warrants to a stockholder to purchase 1,862 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 3 years of issuance.

On January 29, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 49,667 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 3 years of issuance.

On March 19, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 33,111 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On June 7, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 49,667 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On June 28, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 49,667 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On June 30, 2013, the Board of Directors approved the issuance of warrants to several employees to purchase 115,612 shares in the aggregate of the Company’s common stock. Such warrants are exercisable at $.25 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On September 11, 2013, the Board of Directors approved the issuance of warrants to an unrelated party to purchase 4,967 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On September 11, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 795 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On September 26, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 43,044 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On September 30, 2013, the Board of Directors approved the issuance of warrants to several employees to purchase 116,402 shares in the aggregate of the Company’s common stock. Such warrants are exercisable at $.25 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On October 16, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 6,622 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On October 29, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 33,111 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On November 8, 2013, the Board of Directors approved the issuance of warrants to an unrelated party to purchase 29,800 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On November 8, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 4,768 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On November 13, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 24,833 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On December 17, 2013, the Board of Directors approved the issuance of warrants to a stockholder to purchase 66,222 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On December 31, 2013 the Board of Directors approved the issuance of warrants to several employees to purchase 118,203 shares in the aggregate of the Company’s common stock. Such warrants are exercisable at $.25 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On January 6, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 8,278 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On January 10, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 11,589 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On January 17, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 13,244 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On January 27, 2014, the Board of Directors approved the issuance of warrants to an unrelated party to purchase 66,222 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On February 4, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 39,733 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On February 14, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 49,667 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On February 28, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 43,044 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On March 14, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 26,489 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

On March 28, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 26,489 shares of the Company’s common stock. Such warrants are exercisable at $2.01 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

Following is a summary of the status of warrants and options for the quarter ended the March 31, 2014 and the year ended December 31, 2013:

					Weighted-Average
2014	Number of Shares				Exercise Price
	Warrants		Options		Warrants		Options
Outstanding at December 31, 2013		3,477,912		3,754,800	$	1.45	$	.96
Granted		284,755		-		2.01		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at March 31, 2014		3,762,667		3,754,800	$	1.45	$	.96

Exercisable at March 31, 2014		3,762,667		3,754,800	$	1.45	$	.96

Weighted average fair value of shares granted during 2014	$	1.51	$	-

					Weighted-Average
2013	Number of Shares				Exercise Price
	Warrants		Options		Warrants		Options
Outstanding at December 31, 2012		2,704,725		3,754,800	$	1.81	$	.96
Granted		773,187		-		1.21		-
Exercised				-				-
Forfeited		-		-		-		-
Outstanding at December 31, 2013		3,477,912		3,754,800	$	1.45	$	.96

Exercisable at December 31, 2013		3,477,912		3,754,800	$	1.45	$	.96

Weighted average fair value of shares granted during 2012	$	1.51	$	-

Following is a summary of nonvested shares as of March 31, 2014 and December 31, 2013 with changes during the year:

2014	Number of Shares
	Warrants			Options
Balance, December 31, 2013		-			461,900
Granted during the period		284,755			-
Vested during the period		(284,755	)		(461,900	)

Balance, March 31, 2014		-			-

2013	Number of Shares
	Warrants			Options
Balance, December 31, 2012		-			461,900
Granted during the year		773,187			-
Vested during the year		(773,187	)		(461,900	)

Balance, December 31, 2013		-			-

As of March 31, 2014 and 2013, there was $14,365 and $43,549, respectively of total unrecognized compensation cost related to nonvested share-based compensation arrangements, which is expected to be recognized over a weighted average period of 1 year.

The fair value of each warrant or option granted is estimated on the grant date using the Black Scholes model. The expected term of warrants and options issued during 2011 was based upon a reverse merger expected in fall of 2012 in which the options were expected to be cancelled and reissued subsequent to the merger and based on a reverse merger expected in spring 2013 for warrants and options issued during 2012. The risk-free interest rate was based upon the U.S. Treasury rate on the date of grant and ranged from .14% to .19% for instruments granted in 2012 and from .14% to 1.72% for instruments granted in 2013 and .14% and 1.73% for instruments granted during the quarter ended March 31, 2014. There is no active external or internal market for the Company's common shares. Thus, it was not possible to estimate the expected volatility of the Company's share price in estimating fair value of options and warrants granted. Accordingly, as a substitute for such volatility, the Company used the historical volatility of a small cap growth index fund, representing the business environment in which the Company operates. Volatility ranged from 9.4% to 21.1% for instruments granted in 2012 and from 6.3% to 23.2% for instruments granted in 2013 and from 6.3% to 16.3% for instruments granted during the quarter ended March 31, 2014. The expected dividend rate was zero for instruments granted in the quarter ended March 31, 2014 and in 2013 and 2012.

Compensation cost charged to operations was $0 and $0 for March 31, 2014 and March 31, 2013, respectively. There was no income tax benefit realized from share-based payment arrangements with employees and directors in 2013 and 2012 since the Company had a full valuation allowance on all deferred tax assets as of those dates.. During 2013 and 2012, there were no options or warrants exercised under share-based compensation arrangements.

Following is a summary of the status of options and warrants outstanding at March 31, 2014 and December 31, 2013:

2014
Warrants						Options
				Weighted-Average						Weighted-Average
Exercise				Remaining		Exercise				Remaining
Price		Number		Contractual Life		Price		Number		Contractual Life

$	0.03		79,467		0.25	$	1.13		2,801,200		7.21
	0.03		39,733		0.63		0.25		546,333		7.96
	2.52		566,200		5.44		1.13		407,267		7.96
	1.13		99,333		5.44
	1.26		99,333		2.97
	1.26		99,333		3.10
	1.26		39,733		3.11
	1.26		1,390,667		1.27
	1.26		87,165		2.28
	1.89		38,205		0.62
	2.01		1,862		2.04
	2.01		795		4.70
	2.01		4,768		4.86
	2.01		82,778		1.74
	2.01		82,778		2.89
	2.01		49,667		2.08
	2.01		33,111		4.21
	2.01		49,667		4.44
	2.01		24,833		2.04
	2.01		4,967		4.70
	2.01		29,800		4.86
	2.01		49,667		4.49
	2.01		43,044		4.74
	2.01		6,622		4.79
	2.01		33,111		4.83
	2.01		24,833		4.87
	2.01		66,222		4.96
	0.25		115,612		4.50
	0.25		116,402		4.75
	0.25		118,203		5.00
	2.01		66,222		4.83
	2.01		8,278		4.77
	2.01		11,589		4.78
	2.01		13,244		4.80
	2.01		39,733		4.85
	2.01		49,667		4.88
	2.01		43,044		4.92
	2.01		26,489		4.96
	2.01		26,489		4.99

2013
Warrants						Options
				Weighted-Average						Weighted-Average
Exercise				Remaining		Exercise				Remaining
Price		Number		Contractual Life		Price		Number		Contractual Life

$	0.03		79,467		0.25	$	1.13		2,801,200		7.21
	0.03		39,733		0.63		0.25		546,333		7.96
	2.52		566,200		5.44		1.13		407,267		7.96
	1.13		99,333		5.44
	1.26		99,333		2.97
	1.26		99,333		3.10
	1.26		39,733		3.11
	1.26		1,390,667		1.27
	1.26		87,165		2.28
	1.89		38,205		0.62
	2.01		1,862		2.04
	2.01		795		4.70
	2.01		4,768		4.86
	2.01		82,778		1.74
	2.01		82,778		2.89
	2.01		49,667		2.08
	2.01		33,111		4.21
	2.01		49,667		4.44
	2.01		24,833		2.04
	2.01		4,967		4.70
	2.01		29,800		4.86
	2.01		49,667		4.49
	2.01		43,044		4.74
	2.01		6,622		4.79
	2.01		33,111		4.83
	2.01		24,833		4.87
	2.01		66,222		4.96
	0.25		115,612		4.50
	0.25		116,402		4.75
	0.25		118,203		5.00

Note 7. –Operating Leases

The Company entered into a lease to rent office space located in Fort Worth, Texas, under an operating lease for $3,200 per month, which expired May 31, 2012 and was subsequently amended through January 31, 2017. Under this amendment, the Company began making lease payments of $5,950 per month effective February 1, 2013. The Company incurred $2,085 in lease payments for the quarters ended March 31, 2014 and 2013.

The future minimum lease commitments under these leases for the years after December 31, 2013 are as follows:

2014	$	79,745
2015		75,173
2016		71,400
2017		5,950

Note 8. Concentrations

One customer comprised 100% of the accounts receivable balance as of December 31, 2013.

Note 9. License Agreement

During 2011, the Company entered into an exclusive license agreement to assemble, develop and manufacture any electric vehicle developed by the Company in the Asian territories, as defined by the agreement. The total purchase price received by the Company related to this agreement was $2,750,000.

Note 10. Joint Venture Agreement

The Company entered into a joint venture agreement during 2011 in which the Company is a party to the exclusive license agreement for the Asian Territories and has been assigned 49% ownership in this license agreement.

Note 11. Litigation

There are no material, pending legal proceedings that involve the Company. From time to time, the Company may be involved in legal actions in the ordinary course of its business. However, management does not believe that any such proceedings commenced through the date of these financial statements, individually or in the aggregate, will have a material adverse effect on the Company’s financial position.

Note 12. Subsequent Events

On April 4, 2014, we issued a convertible note payable to a stockholder, in the amount of $50,000. The note matures on April 4, 2015 and accrues interest at the annual rate of 8%. The note can be converted into our common stock at the rate of $1.51 per share and has warrants attached for the purchase of 16,556 shares of common stock at the rate of $2.01 per share. The warrants expire on April 4, 2019.

On April 4, 2014, the Company and the holder and stockholder of a $750,000 note dated April 1, 2012 executed a letter agreement pursuant to which they agreed that: (i) the maturity date of the Note was extended to be March 31, 2015 and (ii) all interest principal and interest due on the Note shall not be due and payable until March 31, 2015. In consideration for the extension granted by the holder, the Company will issue to the holder warrants to purchase 750,000 shares of Common Stock with an exercise price of $1.26 per share and an expiration date of March 31, 2019.

On April 10, 2014 James M. Hawes resigned from the Board of Directors of eFleets Corporation and from the board of the Company’s wholly-owned subsidiary, Good Earth Energy Conservation, Inc.,

On April 11, 2014, we issued a convertible note payable to a stockholder, in the amount of $70,000. The note matures on April 11, 2015 and accrues interest at the annual rate of 8%. The note can be converted into our common stock at the rate of $1.51 per share and has warrants attached for the purchase of 23,179 shares of common stock at the rate of $2.01 per share. The warrants expire on April 11, 2019.

On April 14, 2014, the Company and the holders of a series $1,750,000 notes dated April 1, 2012 executed a letter agreement pursuant to which they agreed that: all accrued interest due on the note and interest that will accrue going forward shall not be due and payable until October 1, 2014. In consideration for the extension granted by the holder, the Company will issue to the holder warrants to purchase 347,667 shares of Common Stock with an exercise price of $1.26 per share and an expiration date of March 31, 2019.

On April 24, 2014, we issued a convertible note payable to a stockholder, in the amount of $48,000. The note matures on April 24, 2015 and accrues interest at the annual rate of 8%. The note can be converted into our common stock at the rate of $1.00 per share and has warrants attached for the purchase of 48,000 shares of common stock at the rate of $1.20 per share. The warrants expire on April 24, 2019.

On May 2, 2014, we issued a convertible note payable to a stockholder, in the amount of $150,000. The note matures on May 2, 2015 and accrues interest at the annual rate of 8%. The note can be converted into our common stock at the rate of $1.00 per share and has warrants attached for the purchase of 150,000 shares of common stock at the rate of $1.20 per share. The warrants expire on May 2, 2019.

On May 19, 2014, the Company and the holder and stockholder of a $25,000 note dated May 8, 2013 executed a letter agreement pursuant to which they agreed that: (i) the maturity date of the Note was extended to be July 31, 2014 and (ii) all interest principal and interest due on the Note shall not be due and payable until July 31, 2014.

On May 20, 2014, the Company and the holder and stockholder of a $110,000 note dated May 20, 2013 executed a letter agreement pursuant to which they agreed that: (i) the maturity date of the Note was extended to be July 20, 2014 and (ii) all interest principal and interest due on the Note shall not be due and payable until July 20, 2014.

Note 13. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying financial statements, the Company had a deficit accumulated during the development stage through March 31, 2014, a net loss of ($14,050,555) and net cash used in operating activities of $9,767,883 since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to generate revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and raise additional funds by way of a private or public offering.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statement of Forward-Looking Information

Statements in this Quarterly Report on Form 10-Q may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above under “Risk Factors,” and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this current report and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this current report, except as required under applicable securities laws.

Overview

Effective May 22, 2013, Numbeer Acquisition, Inc., our wholly-owned subsidiary, merged with and into Good Earth Energy Conservation, Inc., with Good Earth as the surviving entity (the “Merger”). We were a development-stage company organized to sell a complete beer control system designed to maximize yield from beer kegs. As a result of the Merger, we have adopted the business plan and operations of Good Earth and now we design, develop, and manufacture a zero emission three-wheeled all-electric utility vehicle, the FireFly® ESV, for use in the parking enforcement (municipalities and universities), traffic control, security patrol, airport and port terminal operations, small package delivery and other comparable utility markets. As part of the Merger, we changed our fiscal year end to December 31. On January 30, 2014, we changed our name to eFleets Corporation.

For financial accounting purposes, the acquisition was a reverse acquisition of us by Good Earth, under the purchase method of accounting, and was treated as a recapitalization with Good Earth as the acquirer. Upon consummation of the Merger, we adopted the business plan and operations of Good Earth. Our financial statements before the Merger will be replaced with the historical financial information of Good Earth before the Merger in all future filings with the SEC.

We principally generate revenue from selling our vehicles to fleets of cities, airports and universities/colleges. We have delivered and/or sold our vehicles to the fleets of the cities of Seattle and Vancouver, Washington; Santa Monica, Berkeley, and San Rafael, California; Clayton Missouri; Chattanooga, Tennessee; and several other cities around the United States; to the Northern Virginia Community College system; and to the San Francisco International Airport. We have performed demonstrations of the FireFly® ESV for the authorities of the Port of Long Beach and Lowe’s Home Centers distribution centers, which we have identified as a potential source of future revenue.

We have received sales orders for a total of 67 FireFly® ESVs through March 31, 2014 which represents total order value received of $1,819,538. The sales orders representing the 67 vehicles are spread across several market segments as shown below and were all sold at the MSRP plus additional options:

Parking enforcement – 55 units

Airport Security/Patrol – 4 units

Universities/Colleges – 8 units

RESULTS OF OPERATIONS

For the three months ended March 31, 2014 compared to the three months ended March 31, 2013.

The Company has generated revenue from its operations from inception through March 31, 2014 of $673,762. As of the quarter ended March 31, 2014 we had $9,128 of cash on hand. We incurred operating expenses in the amount of $564,908 for the three months ended March 31, 2014 and $552,425 for the same period ended March 31, 2013. From inception to March 31, 2014, total operating expenses were $14,329,384. The operating expenses consist primarily of consulting expenses, salaries and wages, and professional fees.

Sales

Net sales for the quarters ended March 31, 2014 and March 31, 2013 were $0 and $0 respectively. While the Company’s sales backlog (open orders on hand) for the quarter was maintained at $1,102,913 no vehicle shipments were completed for the three months ended March 31, 2014. This was primarily due to the changeover to new vendors for manufacturing of several major sub-assembly parts, consequently postponing shipments to the April and forward timeframe.

Cost of Sales

Inception to date cost of sales is $1,924,014. These costs include the cost of materials, direct labor, and associated overhead costs. The Company recorded $0 in cost of sales for the three months ended March 31, 2014 and $0 for the three months ended March 31, 2013. The Company’s production has been on a “build to order” basis since inception rather than a “build to stock” basis, the latter method being required for production to achieve gross margin targets of 45% to 48% of sales. The Company has been forced to operate on the “build to order” basis due to its consistent lack of working capital. Upon implementation of this method of production, the utilization of assembly labor can be maximized along with the acquisition of parts and sub-assembly parts resulting in a much lower cost per vehicle, thus realizing our target gross margins.

Gross Profit/(Loss)

The gross loss for the quarters ended March 31, 2014 and 2013 was $0 and $0, respectively with inception to date gross loss of $1,250,252. The gross loss amounts from inception to date was a result of two major factors, production operated in a “build to order” basis which incurs a higher rate of direct labor cost per unit as well as the purchase of raw material parts and sub-assembly parts on a limited quantity basis without any benefit of volume purchase discounts. As noted above, the Company currently purchases inventory on a build to order basis thus incurring much higher cost per unit as compared to purchasing on a volume discount basis.

Selling, General and Administrative Expenses (Operating Expenses)

Operating expenses are engineering, selling, and general/administrative in nature and are principally salary and payroll associated expenses, travel, legal & professional fees and expenses, and advertising. Operating expenses for the quarter ended March 31, 2014 was $788,100 compared to $552,425 for the same quarter of 2013. The inception to date operating expenses were $14,552,576. While overall selling, general and administrative expenses were relatively the same for the March 31, 2014 quarter end as compared to the same quarter ended March 31, 2013, two accounts had a large variance on a comparison basis described as follows:

	2014		2013
Professional fees	$	123,182	$	67,290
Inventory adjustment	$	223,192	$	0

Professional fees increased from 2013 to 2014 as a result of increased legal fees related to being a public company. The Inventory adjustment amount is a result of adjusting the inventory down to net realizable value. The remainder of the small variance was spread among various operating accounts and were insignificant on an account by account basis.

Loss from Operations

Loss from operations was ($788,100) for the quarter ended March 31, 2014, compared to ($552,425) for the same quarter ended in 2013. The primary changes in 2014 as compared to the same period in 2013 was due to the adjustment to inventory in order to account for the estimated realizable value. Again, the loss from operations was a result of two major factors, production operated in a “build to order” basis which incurs a higher rate of direct labor cost per unit as well as the purchase of raw material parts and sub-assembly parts on a limited quantity basis without any benefit of volume purchase discounts. As noted above, the Company currently purchases inventory on a build to order basis thus incurring much higher cost per unit as compared to purchasing on a volume discount basis.

Other Income (expense)

Interest expense incurred for the quarter ended March 31, 2014 was $116,733 as compared to $67,133 for the same period ended March 31, 2013. The interest expense increase of $49,600 was a result of the increase in accreted interest expense related to the convertible notes incurred for the year as well as the amortization of the accreted interest. The interest expense incurred from inception to date was $1,034,004.

Net Loss

Net loss for the quarter ended March 31, 2013 was ($904,833) as compared to ($619,539) for the same quarter in 2013. The changes were due to interest expense related to new convertible notes, professional fees, cost of sales (adjustment recorded to reduce inventory values to net realizable value). The inception to date net loss incurred is ($14,050,555).

Liquidity and Capital Resources

Our current cash of $9,128 will not satisfy our liquidity requirements and we will require additional financing to pursue our planned business activities. We are in the process of seeking equity financing to fund our operations over the next twelve months; however there cannot be any assurance that we will be able to raise any capital.

We have funded our past operations through the private placement of debt and equity securities with outside investors. The funds have been exclusively used to complete the development of our vehicle, to introduce our vehicle to the market through our sales & marketing efforts of the Company, and deliver a production vehicle to the market.

For the quarters ended March 31, 2014 and 2013 the Company used cash of $812,573 and $725,484, respectively, for operations and used $9,767,883 from inception to date. Such cash used and accumulated losses have resulted primarily from costs related to personnel, consulting and professional fees For the quarter ended March 31, 2014, the net cash provided by financing activities was $823,843 and from inception to date of $10,187,873 primarily from the sale of the Company’s common stock and receipts of cash from the proceeds of new convertible notes.

The Company estimates $3,000,000 is needed over the next 12 months to fund our operations including the servicing of $3,988,403 of convertible debt, funding the marketing plan, and paying its general obligations such as accounts payable. The Company paid quarterly interest payments through December 31, 2012 on $1,750,000 in original principal amount of secured convertible promissory notes due March 31, 2017. Effective March 31, 2013, the holders of those notes consented to extend the date on which quarterly interest payments re-commence to January 1, 2014 and subsequently to October 1, 2014. The accrued interest due on these convertible notes was $176,944 as of March 31, 2013. No principal payments have been applied on any of the convertible notes as of March 31, 2014.

The ability of the Company to achieve its business objectives is contingent upon its success in raising additional capital until adequate revenues are realized from operations. The potential sources of this additional capital are high net worth individuals, private equity funds, venture capital firms, hedge funds, and other fund management companies that invest in companies such as the Company. We have targeted our efforts to several firms which have a large clientele of high net worth individuals as well as fund managers who have monies of their own to invest and have a stated focus on small public companies like us. There can be no assurance that the Company will be successful in raising additional capital from these sources. As a contingency, on August 1, 2013 the Company entered into a factoring agreement with Catalyst Finance, L.P. pursuant to which the Company will sell certain accounts receivable and related rights to Catalyst. There are risks that our plans for raising the needed capital will not be successful, which could adversely affect the ongoing business of the Company.

The Company will need to raise additional capital in the immediate future in order to provide adequate operating capital to carry the Company’s operations through 2014, at which time significant revenues are expected to be generated through operations.

Should our capital raising efforts be successful, the funds will be used to invest in new inventory, purchase capital equipment, and finance accounts receivable. However, we cannot be assured that such financing will be available to us on favorable terms, if at all, and this may delay the acquisition of cost effective parts and components and place the Company into a potential position of cash flow shortfalls and force the Company to cease operations.

As the Company expands its production capabilities and growth from sales, the cash flow cycle from operations is expected to become more predictable based on actual results. However, based on industry experience, it is expected that cash receipts from sales/accounts receivables will be received generally on a net 30 day basis from date of invoice and in turn to pay the Company’s accounts payable on a net 30 day basis as well.

We believe that if we have adequate equity financing, we will generate a higher volume of sales revenue during the following twelve months. However, additional equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

If we are unsuccessful in raising the equity financing, we will then have to seek additional funds through debt financing, which would be very difficult for a new development stage company to secure. However, if such financing were available, because we are a development stage company, it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise adequate capital we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.

Critical Accounting Policies and Estimates

The summary of our significant accounting policies is presented to assist in understanding our financial statements. The financial statements and notes are representations of our management, who is responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

Nature of Business - We were incorporated in February 2007 in the State of Delaware as a manufacturing company for the purpose of developing and producing electric utility vehicles in order to provide an alternative fuel vehicle for use in parking enforcement and other multiple applications as a utility vehicle. Prior to February 2007, we operated as Good Earth Conservation, LLC, a Delaware limited liability company, which was formed on January 30, 2006. Our financial statements have been prepared assuming we will continue as a going concern. Our ability to continue as a going concern is dependent on our ability to successfully take our vehicles and technology to market and raise additional capital, as necessary, to fund our business model. Our financial statements do not include any adjustments that might be necessary if we are unable to accomplish these business objectives. In accordance with accounting principles generally accepted in the United States of America, as a development stage enterprise with no significant revenue generated from planned principal operations, we are required to present our cumulative results of operations since inception, stockholders’ equity (deficit), and cash flows through the end of the reporting period.

Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid instruments with an original maturity of three months or less at the date of purchase to be cash equivalents.

Accounts Receivable - Management has not provided an allowance for uncollectible receivables. All receivables considered doubtful have been charged to current operations and it is management’s opinion that no additional significant amounts are doubtful of collection based on prior experience, review of accounts and other pertinent factors.

Property and Equipment - Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the useful lives of the assets ranging from three to seven years.

Inventory - Inventory consists of parts and supplies. Inventory is stated at the lower of cost (first-in, first-out) or market.

Long-lived Assets - We review the carrying value of long-lived assets for impairment whenever triggering events or changes in circumstances occur, indicating that the carrying amount of any asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the assets. If triggering events or changes in circumstances occur, the impairment to be recognized is measured by the excess of the carrying amount over the fair value of the assets.

Fair Value of Financial Instruments - Financial instruments, other than short-term investments and debt obligations, that potentially subject us to interest and credit risk consist of cash and cash equivalents, certificates of deposit, accounts and other receivables, accounts payable and accrued expenses, the carrying value of which is a reasonable estimate of their fair values due to their short maturities. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of the debt obligations approximate fair value. We place its cash and cash equivalents with a limited number of high quality financial institutions which, at times, may exceed the amount of insurance provided on such deposits. Due to the soundness of the financial institution where cash and cash equivalents are held, management believes the risk of loss of amounts in excess of federally insured limits is limited.

Income Taxes - We use the liability method of accounting for deferred income taxes. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management's estimate regarding the realizability of the deferred tax assets in future years is based upon the weight of the available evidence that it is more likely than not (a likelihood of more than 50%) that a portion or all of the deferred tax assets would not be realized in future years. A valuation allowance is recognized, if based on the weight of available evidence, if it is more likely than not that some portion or the entire deferred tax asset will not be realized. We recognize in our financial statements the financial effect of a tax position, if that position is more likely than not to be sustained upon examination, including resolution of any appeals or litigation processes, based upon the technical merits of the position. Tax positions related to our federal and state requirements have been reviewed, and management is of the opinion that material positions taken by us would more likely than not be sustained by examination. Accordingly, we had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

Revenue Recognition - We recognize revenue when the customer takes title to the vehicles and the related risks and rewards of ownership have transferred to the customer.

Advertising - We expense advertising costs as incurred.

Research and Development - Research and development costs are charged to operations when incurred and are included in operating expenses.

Stock-based Compensation - We recognize in our statement of operations the cost of employee services received in exchange for awards of equity instruments. The costs were based on their fair values at the time of the grant. We use the Black-Scholes option pricing model to determine the fair value of stock options granted to employees.

Basic Net Income (Loss) per Share - Basic earnings per share is calculated using the weighted average number of shares outstanding during the year. We have adopted ASC Topic 260-10, Earnings per Share - Overall , and use the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. Diluted loss per share is equal to basic loss per share as any possible dilutive instruments are anti-dilutive.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for Smaller Reporting Companies.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on our evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective.

Limitations on the Effectiveness of Internal Controls.

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

Changes in Internal Controls.

There were no changes in our internal controls over financial reporting during the fiscal quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

None.

ITEM 1A. Risk Factors

In addition to other information set forth in this Report, you should carefully consider the risk factors previously disclosed in “Item 1A to Part 1” of our Annual Report on Form 10-K for the year ended December 31, 2013. There were no material changes from the risk factors during the three months ended March 31, 2014.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Issuer Repurchases of Equity Securities

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

4.1	Form of 8% Unsecured Convertible Promissory Note between Numbeer, Inc. and Zeus Corp(1)

4.2	Form of 8% Unsecured Promissory Note between eFleets Corporation and John Maguire(1)

4.3	Form of 8% Unsecured Promissory Note between eFleets Corporation and Advanced Microcontrols Incorporated(1)

4.4	Form of Warrant Certificate issued to Zeus Corp. by eFleets Corporation(1)

4.5	Form of 8% Unsecured Convertible Promissory Note between eFleets Corporation and Zeus Corp.(2)

4.6	Form of Warrant Certificate issued to Zeus Corp. by eFleets Corporation(2)

4.7	Form of 8% Unsecured Convertible Promissory Note between eFleets Corporation and Zeus Corp.(3)

4.8	Form of Warrant Certificate issued to Zeus Corp. by eFleets Corporation(3)

4.9	Form of agreement to extend short term note to John Maguire

4.10	Form of agreement to extend short term note to Advanced Microcontrols, Inc.

31.1	Certification of principal executive officer and principal financial officer pursuant to Sarbanes Oxley Section 302.

32.1	Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350.

(1)

Incorporated by Reference to the Registrant’s Current Report on Form 8-K filed on March 7, 2014.

(2)

Incorporated by Reference to the Registrant’s Current Report on Form 8-k filed on March 20, 2014.

(3)

Incorporated by Reference to the Registrant’s Current Report on Form 8-K file d on April 3, 2014.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 20 day of May 2014.

	eFLEETS CORPORATION

	By:	/s/ James R. Emmons
		James R. Emmons
		Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer)

eFleets Corp - FORM 10-Q - May 20, 2014

Attached files

eFleets Corp Reports