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 June 30, 2014

or

 

¨

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   ¨     No   x

 

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 August 27, 2014 was 8,879,745.

 

 

eFLEETS Corporation

Form 10-Q 

For the Quarter ended June 30, 2014

 

INDEX

 

		Page
PART I   FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	3
	Statements of Operations for the Six Months ended June 30, 2014 and 2013 (unaudited)	4
	Statements of Operations for the Three Months ended June 30, 2014 and 2013 (unaudited)	5
	Statement of Stockholders’ Equity (Deficit) for the Period from Inception (January 30, 2006) through June 30, 2014 (Unaudited)	6
	Statements of Cash Flows for the Six Months ended June 30, 2014 and 2013 (unaudited)	7
	Notes to the Financial Statements (unaudited)	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4	Controls and Procedures	28
PART II   OTHER INFORMATION
Item 1	Legal Proceedings	30
Item 1A	Risk Factors	30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3	Defaults Upon Senior Securities	30
Item 4	Mine Safety Disclosures	30
Item 5	Other Information	30
Item 6	Exhibits	31
SIGNATURES		32

  

  

ITEM 1. Financial Statements

 

 eFLEETS Corporation

(A Development Stage Enterprise)

 Balance Sheets

 

		June 30,  2014				December  31, 2013
		(unaudited)
Assets
Current assets
Cash and  cash equivalents		$	526			$	-
Prepaid expenses			104,995				11,309
Accounts receivable			167,549				3,750
Raw materials			80,057				84,501
Work in progress			37,736				-
Total current assets			390,863				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			56,665				95,542
Accumulated depreciation			(157,799	)			(162,289	)
Total property and equipment – net			138,568				170,812
Other assets			137,255				6,200
Total assets		$	666,686			$	276,572
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses		$	1,230,525			$	1,093,983
Accrued interest			667,233				468,646
Short-term notes			175,000				197,000
Advances from factoring of accounts receivable			112,639				-
Current maturities of convertible notes payable			2,522,569				900,110
Current maturities of long-term debt			763,669				325,675
Total current liabilities			5,471,635				2,985,414
Convertible notes payable, less current maturities			1,946,814				2,437,495
Long-term debt, less current maturities			59,956				528,140
Total long- term liabilities			2,006,770				2,965,635
Total liabilities			7,478,405				5,951,049
Commitments and contingencies			-				-
Stockholders' equity (deficit)
Common stock: $0.001 par value: 75,000,000 shares authorized; 8,879,745 shares issued and outstanding at June  30, 2014 and 8,437,059 issued and outstanding at December 31, 2013			8,880				8,437
Additional paid-in capital			8,762,488				7,462,808
Deficit accumulated during the development stage			(15,583,087	)			(13,145,722	)
Total stockholders' equity (deficit)			(6,811,719	)			(5,674,477	)
Total liabilities and stockholders' equity (deficit)		$	666,686			$	276,572

  

See accompanying notes to the financial statements

 

  

 eFLEETS Corporation

 (A Development Stage Enterprise)

 Statements of Operations

(unaudited)

 

		For the Six Months Ended June 30, 2014				For the Six Months Ended June 30, 2013				For the Period from  Inception (January 30, 2006)  through June 30,  2014
		(unaudited)				(unaudited)				(unaudited)
Revenues earned during the development stage		$	259,993			$	119,173			$	933,755
Cost of sales			(628,497	)			(381,113	)			(2,552,511	)
Gross profit/ (loss)			(368,504	)			(261,940	)			(1,618,756	)
Operating expenses
Professional fees			223,437				164,376				940,827
Compensation			547,289				553,404				3,857,544
Stock based compensation expense			-				147,461				2,192,813
Research & development			27,689				23,833				1,369,835
Other operating expenses			677,529				390,765				6,879,401
Total operating expenses			1,475,944				1,279,839				15,240,420
Loss from operations			(1,844,448	)			(1,541,779	)			(16,859,176	)
Other income (expense)
Interest income			-				18				41,313
Other income (loss)			17,032								2,761,997
Interest expense			(297,949	)			(148,565	)			( 1,215,221	)
Loss on modification of debt			(312,000	)							(312,000	)
Total other income and (expense)			(592,917	)			(148,547	)			1,276,089
Net loss accumulated during the development stage		$	(2,437,365	)		$	(1,690,326	)		$	(15,583,087	)
Net loss per common share:
- Basic and diluted		$	(.28	)		$	(.22	)		$	(2.60	)
Weighted average common shares outstanding
- basic and diluted			8,599,140				7,652,745				5,985,065

 

 See accompanying notes to the financial statements.

 

  

 eFLEETS Corporation

 (A Development Stage Enterprise)

 Statements of Operations

(unaudited)

 

		For the Three Months Ended June 30, 2014				For the Three Months Ended June 30, 2013
		(unaudited)				(unaudited)
Revenues earned during the development stage		$	259,993			$	119,173
Cost of sales			(405,305	)			(381,114	)
Gross profit/ (loss)			(145,312	)			(261,941	)
Operating expenses
Professional fees			100,256				97,086
Compensation			280,118				278,769
Stock based compensation expense			-				147,461
Research & development			24,059				17,104
Other operating expenses			506,604				186,996
Total operating expenses			911,037				727,416
Loss from operations			( 1,056,349	)			(989,357	)
Other income (expense)
Other income (loss)			17,032				-
Interest expense			(181,216	)			(81,433	)
Loss on modification of debt			(312,000	)			-
Total other income (expense)			(476,184	)			(81,433	)
Net loss accumulated during the development stage		$	(1,532,533	)		$	(1,070,790	)
Net loss per common share:
- Basic and diluted		$	(.18	)		$	(.14	)
Weighted average common shares outstanding
- basic and diluted			8,672,921				7,869,539

 

 See accompanying notes to the financial statements.

 

  

eFLEETS Corporation

(A Development Stage Enterprise)

Statement of Stockholders' Equity (Deficit)

Six Months ended June 30, 2014 and 2013 and the Period from Inception (January 30, 2006) through June 30, 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											176,716								176,716
Warrants issued for debt modification											455,000								455,000
Issuance of common stock May 2014			310,236				310				468,097								468,407
Net loss accumulated during the development Stage															(2,437,365	)			(2,437,365	)
Balance, June 30, 2014 at $.001 par			8,879,745			$	8,880			$	8,762,488			$	(15,583,087	)		$	(6,811,719	)

 

See accompanying notes to the financial statements.

 

 

eFLEETS Corporation

(A Development Stage Enterprise)

 Statements of Cash Flows

(unaudited)

 

 

		For the Six Months Ended June 30, 2014				For the Six Months Ended June 30, 2013				For the Period from Inception (January 30, 2006) through June 30, 2014
		(unaudited)				(unaudited)				(unaudited)
Cash flows from operating activities:
Net loss accumulated during the development stage		$	(2,437,365	)		$	(1,690,326	)		$	(15,583,087	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			34,244				13,470				219,139
Gain on sale of assets			(17,032	)			-				(11,997	)
Impairment of long-lived assets			-				-				41,777
Loss on related party indebtedness			-				-				150,741
Loss on modification of debt			312,000								312,000
Stock-based compensation expense			-				147,461				2,192,813
Accreted interest			79,496				-				382,318
Changes in operating assets and liabilities
Accounts receivable			(163,799	)			(33,030	)			(167,549	)
Accounts receivable - related party			-				-				(250,000	)
Other receivables			-				-				-
Raw materials			4,442				(133,796	)			(80,059	)
Work in progress			(37,736	)			-				(37,736	)
Prepaid expenses			(93,686)				(950	)			(104,995)
Accounts payable and accrued expenses			136,542				489,352				1,230,525
Accounts payable - related party			-				-				99,259
Accrued interest			198,587				90,848				667,233
Advances from factoring of accounts receivable			112,639				-				112,639
Customer deposits			-								-
Net cash provided by (used) in operating activities			(1,871,668	)			(1,116,971	)			(10,826,979	)
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	)			(37,394	)			(369,374	)
Proceeds from sale of equipment			29,122				-				38,642
Deposits			-				-				(6,200	)
Purchases of patents and trademarks			-				-				(44,808	)
Net cash used in investing activities			26,979				(37,394	)			(381,740	)
Cash flows from financing activities:
Proceeds from convertible notes payable			1,229,000				150,000				5,192,878
Payments on short term notes payable			(22,000	)			-				(272,000	)
Proceeds from short- term notes			-				135,000				197,000
Proceeds from long-term debt			-				-				1,505,317
Payments on long-term debt			(30,192	)			(8,311	)			(70,572	)
Issuance of common stock			668,407				827,190				4,655,622
Warrants exercised for common stock			-								1,000
Net cash provided by financing activities			1,845,215				1,103,879				11,209,245
Change in cash and  cash equivalents			526				(50,486	)			526
CASH AND CASH EQUIVALENTS, beginning of period			-				166,820				-
CASH AND CASH EQUIVALENTS, end of period		$	526			$	116,334			$	526
NON-CASH FINANCING ACTIVITIES
Conversion of notes for common stock		$	-			$				$	912,099
Value of debt assigned to warrants		$	176,716			$	93,201			$	306,566
Non-cash debt modification costs		$	143,000			$	-			$	143,000

 

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.

 

Reclassifications

 

Certain reclassifications have been made to prior period’s data to conform to the current period’s presentation. These reclassifications had no impact on the reported net loss accumulated during the development stage.

  

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.

  

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 a 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 $15,240,420 and an overall net loss of ($15,583,087) accumulated through June 30, 2014. Net revenues recorded from inception (January 31, 2006) through June 30, 2014 are $933,755. 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.

 

Inventory

 

Inventory consists of parts, supplies, labor, and manufacturing overhead. Inventory is stated at the lower of cost (first-in, first-out) or market (net realizable value).

 

  

 

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 $9,118 and $1,754 for the three months ended June 30, 2014 and 2013, respectively. The amounts expensed for the six months ended June 30, 2014 and June 30, 2013 were $11,455 and $5,052, respectively. The amounts charged for the period from inception (January 30, 2006) to June 30, 2014 were $113,382.

 

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 $24,059 and $17,104 for the three months ended June 30, 2014 and 2013, respectively. The amounts charged for the six months ended June 30, 2014 and June 30, 2013 were $27,689 and $23,833, respectively. The amounts charged for the period from inception (January 30, 2006) to June 30, 2014 amounted to $1,369,835.

 

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 June 30, 2014 was $2,192,813. The stock based compensation expense for the three months ended June 30, 2014 and 2013 was $0 and $147,461, respectively. The stock based compensation expense for the six months ended June 30, 2014 and June 30, 2013 was $0 and $147,461, 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 June 30, 2014 and June 30, 2013.

  

  

Note 3. Short-term notes and advances

 

Short-term notes consisted of the following at June 30, 2014 and December 31, 2013:

 

		2014				2013
Promissory note payable to a stockholder and director of the company, due May 8, 2014, subsequently extended to September 30, 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 August 15, 2014 the holder agreed to extend the balance of the May 20, 2013 note to September 20, 2014.			150,000				172,000
Total short-term notes		$	175,000			$	197,000

 

Advances consisted of the following at June 30, 2014 and December 31, 2013:

 

			2014				2013
This amount represents amounts advanced to the Company as a part of a factoring agreement whereby the Company can draw up to 85% of the amount of each billing to its customers. When the full payment is received by the Company from its customers the factoring/financing company receives payment in the form of interest at the rate of .90% for every 15 days the amount is outstanding from the date the invoiced is financed plus the principal amount advanced.		$	112,639			$	-
Total advances		$	112,639			$	-

 

 

Note 4. Convertible Notes Payable

 

Convertible notes payable consisted of the following at June 30, 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 fair value assigned to the warrants at issuance was $312,000. 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 $53,186 and $62,505, as of June 30, 2014 and December 31, 2013, respectively, 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%. On April 14, 2014, the Company and the holders 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 deferral of interest payments 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. The fair value assigned to these warrants at issuance was $143,000. 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. Accreted interest expense 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.			1,696,814				1,687,495

 

 

		2014				2013
The Company issued a series of convertible Notes to a stockholder from the period of June 28, 2013 through April 11, 2014 aggregating $1,455,000 less accreted interest of $21,910 and $24,890 as of June 30, 2014 and December 31, 2013 respectively, accruing interest at 8%, all with maturities of 12 months from the date of the individual note’s issuance. One of the series of notes matured June 28, 2014 and was subsequently renewed and extended, along with the accrued interest, to June 28, 2015. 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.			1 ,433,090				650,110
The Company issued a series of convertible Notes to a related party from the period of April 24, 2014 through June 30, 2014 aggregating $449,000 less accreted interest of $36,507, as of June 30, 2014 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 $1.00 per share with warrants attached to purchase 449,000 shares of common stock at $1.20 per share. The fair value assigned to the warrants at issuance was $146,028.			339,479				-
A convertible promissory note payable to a stockholder, accruing interest at 8%, due August 15, 2014 which has been renewed and extended to a maturity of August 15, 2015 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, 2017.			250,000				250,000
Total convertible notes payable		$	4,469,383			$	3,337,605
Less current maturities			(2,522,569	)			(900,110	)
		$	1,946,814			$	2,437,495

 

 

Note 5. Long-term debt

 

Long-term debt consisted of the following at June 30, 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.		$	-			$	15,119
Note payable to a bank in monthly installments of $845, including interest at 3.74%, due January 2017, secured by a vehicle.			24,420				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. Effective April 1, 2014 the monthly payments were deferred, beginning April 1, 2014 and resuming on October 1, 2014. 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		$	823,625			$	853,815
Less current maturities			(763,669	)			(325,675	)
		$	59,956			$	528,140

 

 

  

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.

 

On April 4, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 16,556 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 April 11, 2014, the Board of Directors approved the issuance of warrants to a stockholder to purchase 23,179 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 April 24, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 48,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

On May 2, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 150,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

On May 23, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 82,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

On June 4, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 69,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

On June 11, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 50,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

On June 26, 2014, the Board of Directors approved the issuance of warrants to a related party to purchase 50,000 shares of the Company’s common stock. Such warrants are exercisable at $1.20 per share. The warrants vest immediately upon issuance and expire within 5 years of issuance.

 

Compensation cost charged to operations was $0 and $147,461 for the three and six months ended June 30, 2014 and June 30, 2013, respectively. There was no income tax benefit realized from share-based payment arrangements with employees and directors for the six months ended June 30, 2014 and 2013 since the Company had a full valuation allowance on all deferred tax assets as of those dates. During the six months ended June 30, 2014 and 2013, there were no options or warrants exercised under share-based compensation arrangements.

 

  

Note 7. Concentrations

 

One customer comprised approximately 61% and 81% of the accounts receivable balance as of June 30, 2014 and 2013, respectively.

 

Note 8. 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 9. 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 10. 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 11. Subsequent Events

 

On July 7, 2014, we issued a convertible note payable to a stockholder, in the principal amount of 44,675 swiss francs of which the Company received $50,000. The note matures on July 7, 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 50,000 shares of common stock at the rate of $1.20 per share. No value was assigned to the warrants at issuance. The warrants expire on July 7, 2019.

 

On July 11, 2014, we issued a convertible note payable to a stockholder, in the amount of 38,335 swiss francs of which the Company received $43,000. The note matures on July 11, 2015 and accrues interest at the annual rate of 8%. The note can be converted into our common stock at the rate of $1.00 per share and has warrants attached for the purchase of 43,000 shares of common stock at the rate of $1.20 per share. No value was assigned to the warrants at issuance. The warrants expire on July 11, 2019.

 

On July 18, 2014, we issued a convertible note payable to a stockholder, in the amount of 30,525 swiss francs of which the Company received $34,000. The note matures on July 18, 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 34,000 shares of common stock at the rate of $1.20 per share. No value was assigned to the warrants at issuance. The warrants expire on July 18, 2019.

 

On August 1, 2014, we issued a convertible note payable to a stockholder, in the amount of 90,790 swiss francs of which the Company received $100,000. The note matures on August 1, 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 100,000 shares of common stock at the rate of $1.20 per share. No value was assigned to the warrants at issuance. The warrants expire on August 1, 2019.

 

On August 15, 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 September 30, 2014 and (ii) all interest principal and interest due on the Note shall not be due and payable until September 30, 2014.

 

On August 15, 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 September 20, 2014 and (ii) all interest principal and interest due on the Note shall not be due and payable until September 20, 2014.

 

On August 15, 2014, the Company and the holder and stockholder of a $150,000 note dated June 28, 2013 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.

 

On August 22, 2014, the Company and the holder of a $250,000 note dated August 15, 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 August 15, 2015. In consideration for the extension granted by the holder, the Company will issue to the holder warrants to purchase 50,000 shares of Common Stock with an exercise price of $1.20 per share and an expiration date of August 15, 2019 and agreed to extend the expiration on the previously awarded warrants to August 15, 2019 and adjust their exercise price downward to $1.20 per share.

 

Note 12. 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 June 30, 2014, a net loss of ($15,583,087) and net cash used in operating activities of $10,826,979 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 69 FireFly® ESVs through June 30, 2014 which represents total order value received of $1,906,174.  The sales orders representing the 69 vehicles are spread across several market segments as shown below and were all sold at the MSRP plus additional options:

 

·

Parking enforcement – 57 units

 

·

Airport Security/Patrol – 4 units

 

·

Universities/Colleges – 8 units

 

  

RESULTS OF OPERATIONS

 

For the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

 

Revenues

 

The Company has generated revenue from its operations from inception through June 30, 2014 of $933,755. As of the quarter ended June 30, 2014 we had $526 of cash on hand. We incurred operating expenses in the amount of $911,037 for the three months ended June 30, 2014 and $727,416 for the same period ended June 30, 2013. From inception to June 30, 2014, total operating expenses were $15,240,420. The operating expenses consist primarily of consulting expenses, salaries and wages, and professional fees.

 

Sales

 

Net sales for the quarters ended June 30, 2014 and June 30, 2013 were $259,993 and $119,173 respectively. With the changeover to new vendors for manufacturing of several major sub-assembly parts in the 1^st quarter of 2014 the Company began to ramp up production in June 2014. As a result of the ramp up of shipments during the quarter, the sales order shipments exceeded the quantity of new sales orders received by a small amount, resulting in a sales backlog of $916,567 for the quarter ended June 30, 2014.

 

Cost of Sales

 

Inception to date cost of sales is $2,552,511. These costs include the cost of materials, direct labor, and associated overhead costs. The Company recorded $405,305 in cost of sales for the three months ended June 30, 2014 and $381,114 for the three months ended June 30, 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 June 30, 2014 and 2013 was ($145,312) and ($261,941), respectively with inception to date gross loss of ($1,618,756). 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 June 30, 2014 were $911,037 compared to $727,416 for the same quarter of 2013. In the 1^st quarter of 2014 the Company recorded an adjustment to inventory resulting in adjusting the value down to net realizable value, subsequently, in the 2^nd quarter of 2014 reclassifying that adjustment to cost of sales. The inception to date operating expenses were $15,240,420. Overall selling, general and administrative expenses increased by $183,607 for the quarter ended June 30, 2014 as compared to the same quarter ended June 30, 2013; four accounts had produced the majority of the variance on a comparison basis described as follows:

 

		2014				2013
Consulting fees		$	122,726			$	19,383
Stock compensation expense		$	0			$	147,461
Sales marketing tradeshows/conference		$	92,875				19,811
Other		$	167,395				16,706

 

The company had zero stock compensation expense for the quarter June 30, 2014 as compared to $147,461 for the same quarter ended in 2013. This reduction of expense was offset by the increase in consulting fees for the quarter. The increase was a result of the engagement of a consultant for a one year term to function as support for the processes of being a public company. The expense was recorded in one lump sum amount and paid in the form of issuance of the company’s common stock. In addition, the Company recorded an increase in expense related to sales/marketing services and tradeshow activity during the quarter. The balance of the variance was recorded as other expense representing costs associated with the termination of two agreements. These expenses (consulting, sales/marketing, & other) were recorded in one lump sum amount and paid in the form of issuance of the company’s common stock.

 

 

Loss from Operations

 

Loss from operations was ($1,056,349) for the quarter ended June 30, 2014, compared to ($989,357) for the same quarter ended in 2013. 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. Upon implementation of the “build to stock” 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.

 

Other Income (expense)

 

Interest expense incurred for the quarter ended June 30, 2014 was $181,216 as compared to $81,433 for the same period ended June 30, 2013. The interest expense increase of $99,783 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. Other expense increased due to the charge of $312,000 for loss on modification of debt which was a result of issuing warrants to two of the convertible note holders as an incentive for their agreement to renew and extend their respective notes and/or agreement to defer payment of accrued interest to the future. The interest expense incurred from inception to date was $1,215,221.

 

Net Loss

 

Net loss for the quarter ended June 30, 2014 was ($1,532,533) as compared to ($1,070,790) for the same quarter in 2013. The changes were due to interest expense related to new convertible notes and other non-recurring operating expenses, many of which decreased for the current quarter and contributed to offset the increase in the other expenses mentioned above. The inception to date net loss incurred is ($15,583,087).

 

For the six months ended June 30, 2014 and June 30, 2013

 

Revenues

 

Net sales for the six months ended June 30, 2014 were $259,993 as compared to the same six month period in 2013 of $119,173. During the six month period the Company shipped five additional vehicles in 2014 versus the same period in 2013. The average sales price per vehicle remained relatively the same in the 2^nd quarter of 2014 as compared to the same quarter in 2013. The continued increased level of the average sales price is due to the broad purchase of our vehicle options such as air-conditioning and the new extended range (“ER”) features. 

 

Cost of Sales

 

Cost of Sales for the six months ended June 30, 2014 and 2013 was $628,497 and $381,113, respectively. While the total Cost of sales increased for the six months ended June 30, 2014 as compared to the same quarter ended 2013, the cost of sales per vehicle decreased substantially in the quarter ended June 30, 2014. The reduction is attributed to the improved utilization of direct labor for assembly of vehicles which was due to the realization of the production ramp up of our sub-assembly parts received from our vendors. 

 

Gross Profit/(Loss)

 

The gross loss for the six months ended June 30, 2014 and 2013 was ($368,504) and ($261,940) respectively. The gross loss amount for 2014 and 2013 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, thus creating higher material costs per unit.

 

Loss from Operations

 

Loss from operations was ($1,844,448) for the six month period ended June 30, 2014, compared to ($1,541,779) for the same period of 2013. The primary changes in the six month of 2014 as compared to the same period in 2013 was an increase of the consulting costs and professional fees as a result of being a public company of $129,985 and non-recurring costs related to the termination of two agreements ($164,947) which was in large part offset by a decrease in the stock compensation costs by $147,461.

 

Net Loss

 

Net loss for the six months period ended June 30, 2014 was ($2,437,365) as compared to ($1,690,326) for the same period of 2013. The changes were due to increased consulting costs, legal/professional costs and interest expense.

 

From the Inception Date of January 30, 2006 through June 30, 2014

 

The Company operated as a development stage enterprise since inception with total operating expenses incurred of $15,240,420 and an overall net loss of ($15,583,087) accumulated through June 30, 2014. Net revenues recorded from inception (January 31, 2006) through June 30, 2014 are $933,755.

 

 

Capital Expenditures

 

Total capital equipment purchases for the six months ended June 30, 2014 were $2,143 as compared to $37,394 for the same period in 2013. The 2013 purchases were the result of higher than normal acquisition of new molds for various parts. Many of these molds were consumed throughout the 2013/2014 calendar year.

 

Liquidity and Capital Resources

 

Our current cash of $19,759 as of August 26, 2014 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 six months ended June 30, 2014 and 2013 the Company used cash of $1,871,668 and $1,116,971, respectively, for operations and used $10,826,979 from inception to date. Such cash used and accumulated losses have resulted primarily from costs related to personnel, consulting and professional fees. For the six months ended June 30, 2014, the net cash provided by financing activities was $1,845,215 and from inception to date of $11,209,245 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 $4,654,000 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 $530,426 as of June 30, 2014. No principal payments have been applied on any of the convertible notes as of June 30, 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. 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 June 30, 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 June 30, 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

 

On August 15, 2014, the Company and Zeus Corp. executed a letter agreement regarding the $25,000 note the Company issued to Zeus Corp. on May 8, 2013 (as disclosed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2014), pursuant to which they agreed that: (i) the maturity date of said note was extended to be September 30, 2014 and (ii) all interest principal and interest due on said note shall not be due and payable until September 30, 2014.

 

On August 15, 2014, the Company and Advanced Microcontrols, Inc. executed a letter agreement regarding the $110,000 note issued to Advanced Microcontrols, Inc. by the Company on May 20, 2013 (as disclosed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2014), pursuant to which they agreed that: (i) the maturity date of said note was extended to be September 20, 2014 and (ii) all interest principal and interest due on said note shall not be due and payable until September 20, 2014.

 

On August 15, 2014, the Company and John Maguire executed a letter agreement regarding the $150,000 note issued to Mr. Maguire dated June 28, 2013 (as disclosed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2014), pursuant to which they agreed that: (i) the maturity date of said note was extended to be March 31, 2015 and (ii) all interest principal and interest due on said note shall not be due and payable until March 31, 2015.

 

On August 22, 2014, the Company and New September, LLC executed a letter agreement regarding the $250,000 note issued to New September, LLC on August 15, 2012 (as disclosed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 23, 2013), 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 August 15, 2015. In consideration for the extension granted by the holder, the Company will issue to the holder warrants to purchase 50,000 shares of Common Stock with an exercise price of $1.20 per share and an expiration date of August 15, 2019 and agreed to extend the expiration on the previously awarded warrants to August 15, 2019 and adjust their exercise price downward to $1.20 per share.

 

 

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.
4.11	Form of letter agreement to extend convertible note to Zeus Corp.
4.12	Form of letter agreement to extend short term note to Advanced Microcontrols, Inc.
4.13	Form of agreement to extend short term note to John Maguire
4.14	Form of letter agreement to extend note to New September, LLC
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.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

  

(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 28^th day of August 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)