UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Amendment No. 1)
(Mark One)
☒
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 UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from_____________
to _____________.
Commission file number 000-54049
GREEN AUTOMOTIVE COMPANY
(Exact name of registrant as specified
in its charter)
|
|
Nevada |
22-3680581 |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
|
5495 Wilson Street
Riverside, California |
92509 |
(Address of principal executive offices) |
(Zip Code) |
(800) 863 - 9098
Registrant’s telephone number,
including area code
(Former address, if changed since
last report)
(Former fiscal year, if changed since
last report)
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 ☒
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 (or for such shorter period that the registrant was required to submit and post such files). Yes ☒
No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large
accelerated filer,”
“accelerated
filer”
and “smaller
reporting company”
in Rule 12b-2 of the Exchange Act.
|
|
Large accelerated
filer ☐ |
Accelerated
filer ☐ |
Non-accelerated
filer ☐ |
Smaller
reporting company ☒ |
(Do not check if a smaller reporting company) |
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
Applicable only to issuers involved
in bankruptcy proceedings during the preceding five years:
Indicate
by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
Applicable only to corporate issuers:
Indicate
the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. As of August 28, 2014, there were 665,357,414 shares of common
stock, $0.001 par value, issued and outstanding.
GREEN AUTOMOTIVE COMPANY
EXPLANATORY NOTE
We are filing this Amendment No. 1 to our Quarterly Report
on Form 10-Q/A for the quarterly period ended June 30, 2014 to: (i) correct certain mistakes in the headings to our financial statements
and Management’s Discussion and Analysis, and (ii) to include Management’s Discussion and Analysis for the six months
ended June 30, 2014, which was inadvertently omitted from our Form 10-Q for the quarterly period ended June 30, 2014, originally
filed with the Commission on September 5, 2014. The corrections and inclusions herein do not change the numbers in our financial
statements from the original filing. Other than these updates, this amendment does not otherwise change or update the disclosures
set forth in our Quarterly Report on Form 10-Q as originally filed and does not otherwise reflect events occurring after the original
filing of the Quarterly Report on Form 10-Q Report.
PART I – FINANCIAL INFORMATION
This Quarterly Report includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements
are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking
statements include the information concerning our possible or assumed future results of operations set forth under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking
statements also include statements in which words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “estimate,” “consider,” or similar expressions are used.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially
from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking
statements.
ITEM 1 Financial Statements
The unaudited condensed consolidated
financial statements of registrant for the period ended June 30, 2014 and 2013 are below. The condensed consolidated financial
statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the
interim periods presented. All such adjustments are of a normal and recurring nature.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
Index to Financial Statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company
Corporation)
Condensed Consolidated Balance Sheets
June 30, 2014 and December 31, 2013
| |
| |
|
| |
June 30, | |
December 31, |
| |
2014 | |
2013 |
| |
(Unaudited) | |
(audited) |
Current Assets | |
| | | |
| | |
Cash | |
$ | 40,810 | | |
$ | 61,723 | |
Accounts receivable | |
| 106,051 | | |
| 154,278 | |
Inventories | |
| 702,390 | | |
| 412,312 | |
Prepaid expenses and deposits | |
| 60,340 | | |
| 585,503 | |
Other | |
| 1,423 | | |
| 4,647 | |
Total Current Assets | |
| 911,014 | | |
| 1,218,463 | |
| |
| | | |
| | |
Non-Current Assets | |
| | | |
| | |
Property and equipment, net | |
| 533,115 | | |
| 608,405 | |
Deferred financing cost | |
| 24,000 | | |
| 60,000 | |
| |
| | | |
| | |
Total Assets | |
$ | 1,468,129 | | |
$ | 1,886,868 | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,060,565 | | |
$ | 1,717,214 | |
Deferred revenue | |
| 114,823 | | |
| 170,251 | |
Current portion of notes payable | |
| 1,031,506 | | |
| 845,396 | |
Credit facility and other advances | |
| 56,234 | | |
| 45,527 | |
Derivative liability | |
| 13,836,954 | | |
| 71,752,773 | |
Funds received not converted into equity (net of discount) | |
| — | | |
| 215,000 | |
Sums due to Global Market Advisors | |
| 170,889 | | |
| 170,889 | |
Accrued value added taxes | |
| 79,039 | | |
| 162,600 | |
Sums due to Global Trade Finance | |
| 25,000 | | |
| 25,000 | |
Lease payable | |
| 66,292 | | |
| 64,197 | |
Other payables | |
| 201,373 | | |
| 176,836 | |
Total Current Liabilities | |
| 17,642,675 | | |
| 75,345,683 | |
| |
| | | |
| | |
Long-term Liabilities | |
| | | |
| | |
Notes payable, net of current maturities | |
| 293,357 | | |
| 203,946 | |
| |
| | | |
| | |
Total Liabilities | |
| 17,936,032 | | |
| 75,549,629 | |
| |
| | | |
| | |
Stockholder's Deficit | |
| | | |
| | |
Preferred stock, Class A Convertible Preferred Stock 100,000,000 shares authorized at June 30, 2014 and December 31, 2013, $.001 par value, 782,701 and 924,366 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively. | |
| 783 | | |
| 924 | |
Common stock, 900,000,000 shares authorized, $.001 par value 643,629,558 and 405,043,436 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | |
| 643,629 | | |
| 405,043 | |
Additional paid-in capital | |
| 47,182,586 | | |
| 37,019,643 | |
Accumulated other comprehensive loss | |
| (135,090 | ) | |
| (198,424 | ) |
Accumulated deficit | |
| (64,159,810 | ) | |
| (110,889,947 | ) |
| |
| | | |
| | |
Total Stockholder's Deficit | |
| (16,467,903 | ) | |
| (73,662,761 | ) |
Total Liabilities and Stockholders' Deficit | |
$ | 1,468,129 | | |
$ | 1,886,868 | |
The accompanying notes are an integral
part of the unaudited condensed consolidated financial statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company
Corporation)
Condensed Consolidated Statements
of Operations
For The Three and Six Months Ended
June 30, 2014 and 2013
Unaudited
| |
| |
| |
| |
|
| |
For the three months ended June 30, | |
For the six months ended June 30, |
| |
2014 | |
2013 | |
2014 | |
2013 |
| |
| |
(Restated) | |
| |
(Restated) |
Revenues | |
$ | 1,575,599 | | |
$ | 429,392 | | |
$ | 2,823,469 | | |
$ | 647,788 | |
Costs of goods sold | |
| 1,452,724 | | |
| 409,165 | | |
| 2,459,563 | | |
| 488,012 | |
Gross profit | |
| 122,875 | | |
| 20,227 | | |
| 363,906 | | |
| 159,776 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 45,692 | | |
| 9,206 | | |
| 92,290 | | |
| 18,082 | |
Loss on disposal of equipment | |
| — | | |
| — | | |
| — | | |
| 12,516 | |
Stock based compensation | |
| 41,498 | | |
| — | | |
| 5,717,015 | | |
| 214,286 | |
Stock issued for settlements | |
| — | | |
| — | | |
| — | | |
| — | |
General and administrative | |
| 1,121,502 | | |
| 523,551 | | |
| 1,749,945 | | |
| 1,009,699 | |
| |
| 1,208,692 | | |
| 532,757 | | |
| 7,559,250 | | |
| 1,254,583 | |
| |
| | | |
| | | |
| | | |
| | |
Loss before other expenses | |
| (1,085,817 | ) | |
| (512,530 | ) | |
| (7,195,344 | ) | |
| (1,094,807 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
Change in fair value of derivative liability | |
| (7,278,229 | ) | |
| (1,114,759 | ) | |
| 56,465,415 | | |
| 37,616,530 | |
Stock issued for settlements | |
| — | | |
| (1,237,200 | ) | |
| — | | |
| (1,237,200 | ) |
(Loss)/gain on settlement of debt | |
| — | | |
| — | | |
| (484,028 | ) | |
| — | |
Loss on conversion of preferred shares | |
| — | | |
| — | | |
| — | | |
| (20,375 | ) |
Other income/expense | |
| (200,000 | ) | |
| — | | |
| (200,000 | ) | |
| — | |
Interest expense | |
| (1,137,218 | ) | |
| (137,254 | ) | |
| (1,855,906 | ) | |
| (183,174 | ) |
| |
| (8,615,447 | ) | |
| (2,489,213 | ) | |
| 53,925,481 | | |
| 36,175,781 | |
| |
| | | |
| | | |
| | | |
| | |
Income/(Loss) before income taxes | |
| (9,701,264 | ) | |
| (3,001,743 | ) | |
| 46,730,137 | | |
| 35,080,974 | |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net income | |
$ | (9,701,264 | ) | |
$ | (3,001,743 | ) | |
$ | 46,730,137 | | |
$ | 35,080,974 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) per share (Basic) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | 0.09 | | |
$ | 0.10 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) per share (Diluted) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | 0.05 | | |
$ | 0.06 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding (Basic) | |
| 599,459,864 | | |
| 342,209,651 | | |
| 531,791,726 | | |
| 342,209,651 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding (Diluted) | |
| 599,459,864 | | |
| 561,677,952 | | |
| 991,115,183 | | |
| 561,677,952 | |
The accompanying notes are an integral
part of the unaudited condensed consolidated financial statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company
Corporation)
Condensed Consolidated Statements
of Comprehensive Income / (Loss)
For The Three Months and Six Months
Ended June 30, 2014 and 2013
Unaudited
| |
| |
| |
| |
|
| |
For the three months ended June 30, | |
For the six months ended June 30, |
| |
2014 | |
2013 | |
2014 | |
2013 |
| |
| |
(Restated) | |
| |
(Restated) |
Net income (loss) | |
$ | (9,701,264 | ) | |
$ | (3,001,743 | ) | |
$ | 46,730,137 | | |
$ | 35,080,974 | |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive loss, net of tax: | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation | |
| 78,701 | | |
| (13,122 | ) | |
| 63,334 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) | |
| (9,622,563 | ) | |
| (3,014,865 | ) | |
| 46,793,471 | | |
| 35,080,974 | |
The accompanying notes are an integral
part of the unaudited condensed consolidated financial statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company
Corporation)
Condensed Consolidated Statements
of Cash Flows
For The Six Months Ended June 30,
2014 and 2013
| |
| |
|
| |
June 30, |
| |
2014 | |
2013 |
| |
| |
(Restated) |
OPERATING ACTIVITIES: | |
| | | |
| | |
Net income | |
$ | 46,730,137 | | |
$ | 35,080,974 | |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 92,290 | | |
| 18,082 | |
Non cash - interest expense | |
| — | | |
| | |
Amortization of debt discounts | |
| 1,681,307 | | |
| 46,183 | |
Loss on disposal of assets | |
| 200,000 | | |
| 12,516 | |
Shares issued for settlement of agreement | |
| | | |
| 1,237,200 | |
Shares issued as additional interest | |
| 24,038 | | |
| | |
Loss on conversion of preferred shares | |
| | | |
| 20,375 | |
(Gain)/loss on settlement of debt | |
| 484,028 | | |
| | |
Shares issued for services | |
| 100,500 | | |
| — | |
Change in fair value of derivative liability | |
| (56,465,415 | ) | |
| (37,616,530 | ) |
Share based compensation | |
| 5,717,015 | | |
| 214,286 | |
Changes in operating assets and liabilities: | |
| | | |
| — | |
Accounts receivable | |
| 48,227 | | |
| 36,475 | |
Inventories | |
| (290,078 | ) | |
| (281,486 | ) |
Other assets | |
| 3,224 | | |
| (2,212 | ) |
Prepaid expenses | |
| 525,163 | | |
| (989 | ) |
Accounts payable and accrued expenses | |
| 343,351 | | |
| 334,198 | |
Deferred revenue | |
| (55,428 | ) | |
| 43,499 | |
Other liabilities | |
| (84,125 | ) | |
| 186,357 | |
Net cash used in operating activities | |
| (945,766 | ) | |
| (671,072 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES: | |
| | | |
| | |
Proceeds from disposal of vehicles | |
| — | | |
| 28,092 | |
Proceeds from disposal of investments | |
| — | | |
| 14,896 | |
Purchase of property and equipment | |
| (17,000 | ) | |
| (420,224 | ) |
Net cash used in investing activities | |
| (17,000 | ) | |
| (377,236 | ) |
| |
| | | |
| | |
FINANCING ACTIVITIES: | |
| | | |
| | |
Increase in advances payable | |
| — | | |
| | |
Advances from related party | |
| — | | |
| | |
Proceeds from issuance of common stock | |
| 5,000 | | |
| — | |
Borrowings (payments) from line of credit | |
| 10,707 | | |
| (39,808 | ) |
Proceeds from notes payable | |
| 930,827 | | |
| 985,838 | |
Payments to notes payable | |
| (68,015 | ) | |
| | |
Net cash provided by financing activities | |
| 878,519 | | |
| 946,030 | |
| |
| | | |
| | |
Effect of change in exchange rate on cash | |
| 63,334 | | |
| 94,371 | |
| |
| | | |
| | |
Net (decrease) / increase in cash | |
| (20,913 | ) | |
| (7,907 | ) |
| |
| | | |
| | |
CASH AT BEGINNING PERIOD | |
| 61,723 | | |
| 87,325 | |
CASH AT END OF PERIOD | |
$ | 40,810 | | |
$ | 79,419 | |
The accompanying notes are an integral
part of the unaudited condensed consolidated financial statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
(Formerly Green Automotive Company
Corporation)
Condensed Consolidated Statements
of Cash Flows
For The Six Months Ended June 30,
2014 and 2013
(continued)
| |
| |
|
| |
June 30, |
| |
2014 | |
2013 |
| |
| |
(Restated) |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | — | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING TRANSACTIONS | |
| | | |
| | |
Share based compensation | |
$ | — | | |
$ | 214,286 | |
Shares issued to settle an agreement | |
$ | — | | |
$ | 1,237,200 | |
Common shares issued in exchange for preferred shares | |
$ | 388,151 | | |
$ | 7,883,692 | |
Common shares issued in relation to investment in a JV | |
$ | — | | |
$ | 335,895 | |
Common shares issued in relation to acquisition | |
$ | — | | |
$ | 565,290 | |
Common shares issued for debt conversion | |
$ | 2,656,119 | | |
$ | — | |
Preferred shares issued to converted funds owed by FMS | |
$ | — | | |
$ | 180,188 | |
Preferred shares converted to ordinary | |
$ | — | | |
$ | (63 | ) |
Preferred shares issued to settle debt | |
$ | 210,000 | | |
| | |
The accompanying notes are an integral
part of the unaudited condensed consolidated financial statements
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
We are a corporation originally organized under the laws
of the State of Delaware in 1996, but re-incorporated in Nevada effective June 3, 2011. We formerly operated under the name
GANAS Corp. (“GANAS”). Prior to November 2009, GANAS’ objective was to obtain through acquisition and/or
merger transactions, assets, which could benefit our shareholders. Effective November 4, 2009, GANAS acquired Go Green USA
LLC, a Nevada limited liability company organized on April 28, 2009 (“Go”), in a share exchange transaction pursuant
to which newly issued shares of GANAS common stock were issued in exchange for all of the issued and outstanding membership interests
of Go (the “Go Merger”). The Go Merger resulted in GANAS issuing 1,436,202 shares of its common stock with par
value $0.001 for each 1% membership interest in Go, following which GANAS changed its name to Green Automotive Company Corporation.
Effective September 30, 2011, we effected a Change of Domicile, re-incorporating in Nevada and simplifying our name to Green
Automotive Company, among other things (the “Re-Incorporation”).
We are currently involved in the manufacturing and sale of
Diesel, Gas and CNG buses at our Newport Coachworks facility in Riverside California, which we expect to be the core focus of our
business activities going forward. We have recently introduced electric bus technology with the launch of our 15 to 23 seat E-Patriot
model and will follow this with the launch of our E-Atlas model featuring 27 to 33 seats. The retailing of electric vehicles
through our GoinGreen facility in London, England is expected to form the basis for a “franchise” type model that can
be introduced into other regions and countries potentially with partners. The development of next generation electric vehicle technologies
and repair techniques which is currently handled through our Liberty facility in Coventry England, will be moving to Riverside
California in order to have the R&D for electric vehicle technology located where we are building our new electric bus models.
Liberty Transaction
On June 28, 2012, we entered into a Stock Exchange Agreement
(the “Liberty Agreement”) with Liberty Electric Cars Ltd., an England and Wales private company limited (“LEC”),
and its wholly-owned subsidiary LEC 2 Limited, an England and Wales private company limited (“LEC2” and together with
LEC, the “LEC Entities”), under which our wholly-owned subsidiary, Liberty Automotive Group, Inc. (formerly GAC EV
Motors Inc.), a Nevada corporation (“LAG”) agreed to purchase 100% of the issued and outstanding securities of LEC
(the “LEC Shares”), that owns 100% of the issued and outstanding securities of LEC2 (the “LEC2 Shares”)
(collectively the “LEC Securities”) in exchange for the transfer of Thirty Nine Million Seven Hundred Forty Two Thousand
One Hundred Seventy Eight (39,742,178) shares of our common stock held by LAG to the LEC Shareholders. These shares represented
approximately 8.19% of our outstanding voting control. We also issued to Mr. West and Mr. Hobday, the executives of LEC,
a total of 300,000 shares of our Series A Preferred Stock in exchange for the non-competition provisions in their independent contractor
agreements. This transaction closed on July 23, 2012.
Additionally, pursuant to the Liberty Agreement, we issued
to GAC Automotive Services, Inc., a Nevada corporation and one of our wholly-owned subsidiaries (“GAC Auto”) Ten Million
(10,000,000) shares of Series B Convertible Preferred Stock (the “Series B Shares”). The issuance of the Series
B shares to GAC Auto is not part of the purchase price of the LEC Entities and is not compensation to the LEC Entities or LEC Shareholders,
but is reserved for issuance to certain entities that LEC and/or LEC2 have been in negotiations with at the time of execution of
the Liberty Agreement if those entities and/or assets are purchased by us or our subsidiaries. The determination as to when
and if to transfer the Series B Shares from GAC Auto to a selling party must be approved by our Board of Directors. To date,
all of the Series B Shares are still held by GAC Auto. The Series B Preferred Stock have been eliminated on consolidation and are
reflected as treasury shares.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS (continued)
As a result of the Liberty Transaction, we acquired LEC,
a company that designs and develops electric vehicle drive solutions for use in its own converted vehicles and for sale to original
equipment manufacturers (OEMs) for incorporation into their production. LEC’s engineers have invented innovative EV
drive train technologies that can be employed in a wide variety of vehicle platforms. LEC is also involved in a number of
advanced research programs for developing next generation electric vehicle (“EV”) solutions. These programs include
the prestigious “Deliver” project where LEC is working together with “tier one” automotive companies to
develop a pure electric commercial vehicle, and the “Motore” project in which LEC has partnered with other “tier
one” automotive companies and universities to develop a “rare earth” free electric motor technology. Additionally,
LEC has also created after sales support for EV’s, by providing a comprehensive aftermarket maintenance program throughout
Europe for electric trucks and cars.
Liberty Transaction (continued)
Due to its experience in EV technologies and in servicing
EVs, LEC has an agreement with a large U.S. truck manufacturer for the on-going support of electric vehicles run by its key clients
in Europe. LEC will continue to take care of all warranty support when required by these customers, all of whom run fleets
of electric commercial vehicles across Europe. This truck manufacturer’s customers include major companies such as
FedEx, UPS and Veolia, who are using the first “ground up” electric trucks known as the “Modec” that were
launched some 4 years ago for the purpose of making pollution free deliveries in urban areas.
Newport Coachworks Transaction
On October 12, 2012, we entered into an Acquisition and Stock
Exchange Agreement (the “NCWI Agreement”) with Newport Coachworks, Inc., a California corporation (“NCWI”),
under which we agreed to purchase 100% of the issued and outstanding securities of NCWI (the “NCWI Shares”) from Mr.
Carter Read, NCWI’s sole shareholder, in exchange for the transfer of Five Million (5,000,000) shares of our common stock
due at the closing of the transaction (the “GACR Closing Shares”), and up to an additional Twenty Two Million (22,000,000)
shares of our common stock (the “GACR Additional Shares” and together with the GACR Closing Shares, the “GACR
Shares”) to vest as follows: upon NCWI obtaining bona fide, binding purchase orders, with cash down payment standard
in the industry to NCWI, from third party purchasers requiring NCWI to manufacturer Sixty (60) buses with compressed natural gas
engines at NCWI’s manufacturing facility (each a “Qualified Purchase Order”) within the first twelve (12) months
following the payment of one-half of the initial forecasted funding of $500,000. This transaction closed on October 12, 2012. All
GACR Shares were issued to Mr. Carter Read as of March 31, 2014.
Matter of Time Merger
On September 1, 2011, Green Automotive Company entered into
a Stock Purchase Agreement and Escrow Agreement with Mark E. Crone (“Crone”) and Bosch Equities, L.P. (“Bosch”),
under which we purchased 100% of the outstanding equity of Matter of Time I Co., a Nevada corporation (“MOT”), and
extinguished a repayment obligation of MOT totaling $6,000, all in exchange for $30,000.
On February 10, 2012, Green Automotive Company entered into
a Merger Agreement and Plan of Reorganization with Matter of Time I Co., a Nevada corporation (“MOT”) (the “MOT
Agreement”). Under the MOT Agreement, at the closing of the transaction contemplated by the MOT Agreement, MOT dissolved
into and became a part of Green Automotive Company, with Green Automotive Company being the surviving corporation and assuming
MOT’s status as a reporting issuer under the Securities Exchange Act of 1934, as amended. On December 14, 2012 the
transactions contemplated by the MOT Agreement closed (the “Closing”). As a result of the Closing, MOT was merged out
of existence and Green Automotive Company became a reporting issuer under the Securities Exchange Act of 1934, as amended.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS (continued)
GoinGreen Transaction
On January 31, 2013, the Company signed a binding agreement
to buy UK-based electric vehicle distributor GoinGreen Limited (www.goingreen.co.uk). Trading under the brand name, “GoinGreen”,
it has sold over 1400 of the highly successful G-Wiz electric vehicles, making it one of Europe’s largest single retailers
of electric vehicles. GoinGreen Ltd was founded in 2002 and in the early days, set itself the mission to minimize the effects
of climate change by encouraging carbon-neutral motoring. The company pioneered electric vehicles in the UK with the G-Wiz, an
electric vehicle designed in California and manufactured in India by the Indo-Reva Electric Car Company, making London the capital
of the electric vehicle (EV). The deal was completed on April 1, 2013 when 1,562,498 shares of GACR common stock was authorized
for exchange for 100% of the issued and outstanding securities of GoinGreen Limited (an England and Wales private limited company)
plus 150,501 shares of GACR common stock was authorized for issuance to former creditors of GoinGreen. Due to a temporary restraining
order (“TRO”) in an unrelated litigation in Utah by the Company against a former stockholder the shares were not released
by our transfer agent until June 24, 2013.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed interim consolidated
financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) as promulgated
in the United States of America.
The unaudited condensed interim consolidated financial statements
at June 30, 2014 and for the three-month periods ended June 30, 2014 and 2013 are unaudited, but include all adjustments, consisting
of normal recurring entries, which our management believes to be necessary for a fair presentation of the periods presented. Interim
results are not necessarily indicative of results for a full year. The Company’s operating results will fluctuate for the
foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of our operating results in
future periods.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies presented
below is designed to assist in understanding the Company’s condensed consolidated financial statements. Such condensed consolidated
financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their
integrity and objectivity. These accounting policies conform to GAAP in all material respects, and have been consistently applied
in preparing the accompanying condensed consolidated financial statements.
Principles of Consolidation
The Company’s unaudited condensed consolidated financial
statements include the assets, liabilities and operating results of majority-owned subsidiaries. The Company does not hold significant
variable interests in any variable interest entities. All significant intercompany accounts and transactions have been eliminated.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reverse Merger Accounting
The MOT Merger was accounted for as a reverse-merger and
recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Green Automotive Company was the acquirer for financial reporting purposes and MOT was the acquired company. Consequently, the
assets and liabilities and operations that are reflected in the historical financial statements prior to the Merger will be those
of Green Automotive Company and will be recorded at the historical cost basis of the Company. The consolidated financial statements
after completion of the Merger include the assets and liabilities of Green Automotive Company. Common stock and the corresponding
capital amounts of the Company pre-merger have been retroactively restated as capital stock shares reflecting the exchange ratio
in the Merger.
Going Concern
Our condensed consolidated financial statements have been
prepared assuming the Company will continue as a going concern. However, as of June 30, 2014, we have sustained recurring operating
losses, past due payables and have a stockholders’ deficit of $16,467,903. These conditions, among others, give rise
to substantial doubt about our ability to continue as a going concern. Management is continuing to seek additional equity capital
to fund the acquisition or to purchase an ongoing business and improving profitability of existing operations. Until such time,
we anticipate our working capital needs will be funded through the issuance of debt and equity instruments; however, there can
be no assurance that we will receive the sums required at the times and in the amounts needed, or that any funding will not be
accompanied by conditions unfavorable to the Company. Management believes these steps will provide us with adequate funds to sustain
our continued existence. There is, however, no assurance that the steps taken by management will meet all of our needs or that
we will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Use of Estimates
The
preparation of the condensed consolidated financial statements requires management of the Company to make a number of estimates
and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. The assumptions used by management in future estimates could change significantly due to changes in circumstances, including,
but not limited to, challenging economic conditions. Accordingly, future estimates may differ significantly. Significant
estimates and assumptions included in our condensed consolidated financial statements relate to the valuation of long-lived assets,
inventory reserves, accruals for potential liabilities, and valuation assumptions related to derivative liability, equity instruments
and share based compensation.
Cash and Cash Equivalents
Cash and cash equivalents consist of amounts held as bank
deposits and highly liquid debt instruments purchased with an original maturity of three months or less. The Company had no cash
equivalents as of June 30, 2014 and December 31, 2013.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounts receivable
Accounts receivable consists of trade receivables, which
are recorded at the invoiced amount, net of taxes, allowances for doubtful accounts and prompt payment discounts. Trade receivables
do not carry interest. The allowance for doubtful accounts represents management’s estimate of the amount of probable credit
losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. Account
balances are written off against the allowance when management determines the receivable is uncollectible.
Investment in Joint Venture
The Company applies the equity method for the 30% investment
to its joint venture interest in Powabyke, a privately-held UK company, since quoted market prices are not available and the Company,
has the ability to exercise significant influence over operating and financial policies of the joint venture. Significant influence
is generally defined as 20% to 50% ownership in the voting stock of an investee. Under the equity method, the Company initially
records the investment at cost and then adjusts the carrying value of the investment to recognize the proportional share of the
equity-accounted affiliate’s net income (loss) including changes in capital of the affiliates. In addition, dividends received
from the equity-accounted company reduce the carrying value of the Company’s investment. If there is an other-than-temporary
decline in the market value of the investment, an impairment charge is recorded. Based on management’s evaluation the investment
in the joint venture has been fully impaired in 2013.
Inventories
The Company’s inventories are valued at cost, as determined
by the first-in, first out (FIFO) method; in aggregate such valuations are not in excess of market.
Concentrations
The Company currently maintains substantially all of its
cash with major financial institutions. At times, cash balances may be in excess of the amounts insured by the Federal Deposit
Insurance Corporation.
Comprehensive Income (Loss)
In June 2011, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”),
which amends FASB Codification Topic 220 on comprehensive income disclosures. The new guidance allows an entity to present
components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive
income, or in two separate, but consecutive statements, while eliminating the option to report other comprehensive income and its
components in the statement of changes in shareholders’ equity. The provisions of ASU 2011-05 were adopted in 2012.
The adoption of ASU 2011-05 did not impact the Company’s consolidated financial position, results of operations or
cash flows as it required only a change in the format of presentation.
Property and Equipment
Property and equipment consisting of leasehold improvements,
furniture and fixtures, equipment and vehicles are stated at cost. Property and equipment are depreciated using the straight-line
method over the estimated service lives ranging from three to seven years. Maintenance and repairs are expensed as incurred and
improvements are capitalized. Gains or losses on the disposition of fixed assets are recorded upon disposal.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an 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 estimated undiscounted future cash flows expected
to be generated by the asset.
If the carrying amount of an asset exceeds its undiscounted
estimated future cash flows, an impairment review is performed. An impairment charge is recognized in the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance
sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets
and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability
sections of the balance sheet. The Company determined that there was an indicator of impairment in goodwill and other intangibles
during the year ended December 31, 2013 because of the lowered revenue and cash flow projections. The Company use the present value
technique for the impairment testing. There were no impairment charges for the three months ended June 30, 2014 and 2013.
Derivative Instruments
The fair value of derivative instruments is recorded and
shown separately under current liabilities. Changes in the fair value are recorded in the condensed consolidated statement of income
under other income (expense).
The Company evaluates all of its financial instruments to
determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based
derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative
instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within 12 months of the balance sheet date.
Fair Value Measurements
ASC 820, “Fair Value Measurements”, requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820
establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure
fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input
that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure
fair value: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2, inputs other than level one that are either directly or indirectly observable such as quoted prices for identical or similar
assets or liabilities on markets that are not active; and Level 3, defined as unobservable inputs in which little or no market
data exists, therefore requiring an entity to develop its own assumptions.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
We account for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for 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 the temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
As a result of the implementation of certain provisions of
ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax positions,
as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement
related to accounting for income taxes. We adopted the provisions of ASC 740 as of January 1, 2007, and have analyzed filing positions
in each of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years
in these jurisdictions. We have identified the U.S. federal and California as our "major" tax jurisdictions. Generally,
we remain subject to Internal Revenue Service examination of our 2007 through 2013 U.S. federal income tax returns, and remain
subject to California Franchise Tax Board examination of our 2007 through 2013 California Franchise Tax Returns. However,
we have certain tax attribute carry forwards which will remain subject to review and adjustment by the relevant tax authorities
until the statute of limitations closes with respect to the year in which such attributes are utilized.
We believe that our income tax filing positions and deductions
will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position.
Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did
not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties
associated with income-based tax audits is to record such items as a component of income taxes.
Revenue Recognition
We recognize revenues related to annual membership income
and service of electric vehicles in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB
ASC”) No. 605, Revenue Recognition. Revenue is recognized when we have evidence of an arrangement, a determinable
fee, and when collection is considered to be probable and services are provided. In the event that final acceptance of our product
by the customer is uncertain, revenue is deferred until all acceptance criteria have been met. In the event we have amounts
billed or collected in accordance with contractual terms in advance of when the work is performed we treat these as deferred revenues.
These advance payments primarily relate to the Company's grant project and E-Care membership scheme. The current portion
of deferred revenue represents the balance the Company estimates will be earned as revenue during the next fiscal year (see note
9).
Grant Income
Grant income is not recognized until a grant claim has been
submitted and approved by Government representatives.
E-tech services
Revenues from consultancy services are recognized only when
all services have been rendered and collectability is reasonably assured.
E-Care services
Revenues from maintenance, repair, and overhaul services
are recognized only when all services have been rendered and collectability is reasonably assured.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings per Common Share (as Restated)
The Company computes net income per share in accordance with
ASC 260, "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings (loss) per share (EPS)
on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period including 582,701 Series A convertible preferred for June 30, 2014 (net of 200,000 forfeit
shares) and 555,142 for June 2013 (net of 300,000 forfeit shares), using the if-converted method, 29,700,000 additional common
shares for June 30, 2014 and 18,000,000 for June 30, 2013 stock options, using the treasury stock method, and 81,366,365 shares
for June 30, 2014 and 3,678,138 shares for June 30, 2013 for convertible loan notes, using the if-converted method. In computing
diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the
exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
Share-Based Payment Arrangements
Generally, all forms of share-based payments, including stock
option grants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant
date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees
for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment,
whichever is more readily determinable. The expenses resulting from share-based payments are recorded in operating expenses in
the condensed consolidated statement of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform
to the current year presentation. Such reclassifications had no impact on previously reported net loss.
Recent Accounting Pronouncements
Adopted
In February 2013, Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2013-04, Obligations Resulting from Joint and Several Liability
Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. The objective of the amendments
in this update is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and
several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting
date, except for those obligations addressed within existing guidance in U.S. GAAP. The amendment requires an entity
to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within
the scope of this guidance is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis
of its arrangement among its co-obligors and an additional amount the reporting entity expects to pay on behalf of its co-obligors. The
entity is required to disclose the nature and amount of the obligation as well as other information about those obligations. The
Company adopted this ASU as of January 1, 2014. This adoption did not have an effect on our financial statements.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
On July 18, 2013, the FASB issued ASU 2013-11, Income
Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists. Topic 740 does not include explicit guidance on the financial statement presentation
of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The
objective of the amendments in this update is to eliminate that diversity in practice. The Company adopted this ASU
as of January 1, 2014. This ASU did not have an effect on our financial statements.
Not Adopted
In April 2014, the FASB issued ASU 2014-08, Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity to reduce diversity in practice for reporting
discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment,
a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. The revised guidance only
allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major
line of business, a major equity method investment, or other major parts of an entity) and that have a major effect on a reporting
entity’s operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded
disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity
that do not qualify for discontinued operations presentation. The updated guidance is effective for periods beginning after December
15, 2014.
Other recent pronouncements issued by FASB (including its
Emerging Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission
did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
4. ACQUISITIONS
On January 31, 2013, the Company signed a binding agreement
to buy UK-based electric vehicle distributor GoinGreen Limited (www.goingreen.co.uk ). Doing business under the brand name, “GoinGreen”,
it has sold over 1,400 of the highly successful G-Wiz electric vehicles, making it one of Europe’s largest single retailers
of electric vehicles. GoinGreen Ltd was founded in 2002 and in the early days, set itself the mission to minimize the effects
of climate change by encouraging carbon-neutral motoring. The company pioneered electric vehicles in the UK with the G-Wiz, an
electric vehicle designed in California and manufactured in India by the Indo-Reva Electric Car Company, making London the capital
of the electric vehicle (EV). The deal was completed in the second quarter of 2013 when 1,562,498 shares of GACR common stock was
exchanged for 100% of the issued and outstanding securities of GoinGreen Limited (an England and Wales private limited company).
Due to the TRO the shares were not released by our transfer agent until June 24, 2013.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (continued)
The allocation of the purchase price and the estimated fair
market values of the assets acquired and liabilities assumed of GoinGreen Limited are shown below.
| |
|
Cash | |
$ | 14,896 | |
Accounts receivable | |
| 29,379 | |
Prepayments | |
| 19,623 | |
Inventories | |
| 75,693 | |
Other current assets | |
| 27,845 | |
Property and equipment, net of accumulated depreciation | |
| 14,653 | |
Goodwill | |
| 769,890 | |
Total assets acquired | |
| 951,979 | |
| |
| | |
Credit Line | |
| 1,584 | |
Accounts payable and accrued expenses | |
| 81,313 | |
Deferred revenue | |
| 34,983 | |
Income Tax payable | |
| 62,345 | |
Other | |
| 206,464 | |
Total liabilities assumed | |
| 386,689 | |
| |
| | |
Purchase Price | |
$ | 565,290 | |
| |
| | |
Final Consideration | |
| | |
1,562,498 of common stock issued @ $0.33 in exchange for equity | |
| 515,625 | |
150,501 of common stock issued @ $0.33 to settle debt | |
| 49,665 | |
The acquisition method of accounting is based on ASC Subtopic
805-10, “Business Combinations,” and uses the fair value concepts defined in ASC Subtopic 820-10, “Fair Value
Measurements and Disclosures”. The purchase price for GoinGreen businesses was allocated to the net tangible and intangible
assets based upon their fair values as of the respective acquisition dates. The allocation of the purchase price was based upon
a valuation and the estimates and assumptions were subject to change within the measurement period. The excess of the purchase
price over the fair values of the net tangible assets and intangible assets, if any, was recorded as goodwill and is generally
driven by our expectations of our ability to realize synergies and achieve our strategic growth objectives.
The goodwill recorded in connection with the GoinGreen acquisitions
was $769,890, on the transaction acquisition date. In accordance with U.S. GAAP, impairment testing for goodwill is performed at
least annually. The Company performs its annual impairment test as of December 31. Goodwill is tested for impairment
between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting
unit below its carrying value.
The impairment test for goodwill uses a two-step approach,
which is performed at the entity level as the Company has one reporting unit. Step 1 compares the fair value of the reporting unit
to its carrying value including goodwill. If the carrying value exceeds the fair value, there is a potential impairment and Step
2 must be performed. Step 2 compares the carrying value of the reporting unit’s goodwill to its implied fair value (i.e.,
the fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible
assets). If the carrying value of goodwill exceeds its implied fair value, the excess is recorded as an impairment.
The Company performed its annual test of goodwill as of December
31, 2013. The Company determined the fair value of the reporting unit exceeded the carrying value of the reporting unit.
For the year ended December 31, 2013, the Company concluded
there were indicators of potential goodwill impairment, including the decline in the value of the Company’s revenue recognition.
As a result of identifying indicators of impairment, the Company performed an impairment test of goodwill as of December 31,
2013.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (continued)
In performing Step 1 of the impairment test, the Company
estimated the fair value of the reporting unit using the market approach for purposes of estimating the total enterprise value
for the Company.
The market approach is based on the guideline publicly traded
company method to determine the fair value of the reporting unit. Under this method, market multiples ratios were applied to the
reporting unit’s earnings with consideration given to the Company’s size, product offerings, growth, and other relevant
factors compared to those of the guideline companies. The guideline companies selected were engaged in the same or a similar line
of business as the Company. Market multiples were then selected based on consideration of risk, growth, and profitability differences
between the Company and the guideline companies. The selected market multiples were then multiplied by the Company’s
earnings streams for the twelve months ended December, 2013.
Based on the above analysis, it was determined that the carrying
value of the reporting unit including goodwill exceeded the fair value of the reporting unit, requiring the Company to perform
Step 2 of the goodwill impairment test to measure the amount of impairment loss, if any.
In performing Step 2 of the goodwill impairment test, the
Company compared the implied fair value of the reporting unit’s goodwill to its carrying value of goodwill. This test
resulted in a non-cash, goodwill impairment charge of $769,890 which was recognized during the year ended December 31, 2013.
This charge had no impact on our cash flows or our compliance with debt covenants.
The following table sets forth the balance of the Company’s
goodwill as of December 31, 2013:
| |
| |
| |
| |
|
| |
December 31, 2012 | |
Additions | |
Impairments | |
December 31, 2013 |
Goodwill, gross | |
$ | — | | |
$ | 769,890 | | |
$ | (769,890 | ) | |
$ | — | |
Accumulated impairment losses | |
| — | | |
| — | | |
| — | | |
| — | |
Total goodwill, net | |
$ | — | | |
$ | 769,890 | | |
$ | (769,890 | ) | |
$ | — | |
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
4. ACQUISITIONS (continued)
The following are unaudited pro-forma results of operations
as if the acquisition has occurred at the beginning of the period for the three and six months ended June 30, 2014 and 2013:
Pro-forma (unaudited)
| |
| |
| |
| |
|
| |
For the three months ended June 30, | |
For the six months ended June 30, |
| |
2014 | |
2013 | |
2014 | |
2013 |
| |
| |
(Restated) | |
| |
(Restated) |
Revenues | |
$ | 1,575,599 | | |
$ | 429,392 | | |
$ | 2,823,469 | | |
$ | 831,311 | |
| |
| | | |
| | | |
| | | |
| | |
Costs of goods sold | |
| 1,452,724 | | |
| 409,165 | | |
| 2,459,563 | | |
| 595,645 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 122,875 | | |
| 20,227 | | |
| 363,906 | | |
| 235,666 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 45,692 | | |
| 9,206 | | |
| 92,290 | | |
| 19,066 | |
Loss on disposal of equipment | |
| — | | |
| — | | |
| — | | |
| 12,516 | |
Impairment of assets | |
| — | | |
| — | | |
| — | | |
| — | |
Stock Based Compensation | |
| 41,498 | | |
| — | | |
| 5,717,015 | | |
| — | |
Stock issued for settlement of agreements | |
| — | | |
| — | | |
| — | | |
| | |
General and administrative | |
| 1,121,502 | | |
| 523,551 | | |
| 1,749,945 | | |
| 1,126,545 | |
| |
| 1,208,692 | | |
| 532,757 | | |
| 7,559,250 | | |
| 1,158,127 | |
| |
| | | |
| | | |
| | | |
| | |
Loss before other expenses | |
| (1,085,817 | ) | |
| (512,530 | ) | |
| (7,195,344 | ) | |
| (922,461 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Stock issued in settlement of an agreement | |
| — | | |
| (1,237,200 | ) | |
| — | | |
| (1,451,486 | ) |
Change in fair value of derivative liability | |
| (7,278,229 | ) | |
| (1,114,759 | ) | |
| 56,465,415 | | |
| 37,616,530 | |
(Loss) or gain on settlement of debt | |
| — | | |
| — | | |
| (484,028 | ) | |
| | |
Loss on conversion of preferred shares | |
| — | | |
| — | | |
| — | | |
| (20,375 | ) |
Other income/(expense) | |
| (200,000 | ) | |
| — | | |
| (200,000 | ) | |
| — | |
Interest expense | |
| (1,137,218 | ) | |
| (137,254 | ) | |
| (1,855,906 | ) | |
| (183,174 | ) |
| |
| (8,615,447 | ) | |
| (2,489,213 | ) | |
| 53,925,481 | | |
| 35,961,495 | |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income before income taxes | |
| (9,701,264 | ) | |
| (3,001,743 | ) | |
| 46,730,137 | | |
| 35,039,034 | |
| |
| | | |
| | | |
| | | |
| | |
Income taxes | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net (loss) income | |
$ | (9,701,264 | ) | |
$ | (3,001,743 | ) | |
$ | 46,730,137 | | |
$ | 35,039,034 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per share (Basic) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | 0.09 | | |
$ | 0.10 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss) income per share (Diluted) | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | 0.05 | | |
$ | 0.05 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding (Basic) | |
| 599,459,864 | | |
| 342,209,651 | | |
| 531,791,726 | | |
| 342,209,651 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding (Diluted) | |
| 599,459,864 | | |
| 342,209,651 | | |
| 991,115,183 | | |
| 668,564,206 | |
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
5. ACCOUNTS RECEIVABLE
Accounts receivable consists of the following: as of June
30, 2014 and December 31, 2013:
| |
| |
|
Accounts Receivables | |
June 30, 2014 | |
December 31. 2013 |
Trade receivables | |
$ | 106,051 | | |
$ | 123,254 | |
Grant monies receivable | |
| — | | |
| 31,024 | |
| |
$ | 106,051 | | |
$ | 154,278 | |
6. INVENTORIES
Inventories consist of raw materials and work In progress.
These pertain to the Bus production in the NCWI facility. The Company’s inventories are valued at cost, as determined by
the first-in, first out (FIFO) method; in aggregate such valuations are not in excess of market and consisted of the following
as of June 30, 2014 and
| |
| |
|
| |
June 30, 2014 | |
December 31. 2013 |
Raw materials | |
$ | 6,995 | | |
$ | 106,852 | |
Goods in transit | |
| — | | |
| 12,956 | |
Work in progress | |
| 445,613 | | |
| 178,596 | |
Finished Goods | |
| 249.782 | | |
| 113,908 | |
| |
$ | 702,390 | | |
$ | 412,312 | |
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following: as of June
30, 2014 and December 31, 2013:
| |
| |
|
| |
June 30, 2014 | |
December 31, 2013 |
Leasehold improvements | |
$ | 15,196 | | |
$ | 14,828 | |
Furniture and fixtures | |
| 8,162 | | |
| 8,138 | |
Equipment | |
| 627,638 | | |
| 608,598 | |
Computer hardware and software | |
| 117,991 | | |
| 117,028 | |
Vehicles | |
| 23,189 | | |
| 29,189 | |
| |
| 792,176 | | |
| 777,781 | |
Less accumulated depreciation | |
| (259,061 | ) | |
| (169,376 | ) |
| |
| | | |
| | |
| |
$ | 533,115 | | |
$ | 608,405 | |
Our property and equipment in 2014 are located equally in
terms of value in California and in the United Kingdom (the “UK”). The UK assets are acquired as part of LEC Entities
and GoinGreen acquisitions (see Note 4). For the three months ended June 30, 2014 and June 30 2013 (restated), depreciation expense
was $45,692 and $9,206 respectively.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
8. GOODWILL & INTANGIBLE ASSETS
Intangible assets consist of the following and were mainly
related to the LEC and GoinGreen acquisitions:
| |
| |
|
| |
June 30, 2014 | |
December 31, 2013 |
Goodwill on purchase of GoinGreen | |
$ | 789,890 | | |
$ | 769,890 | |
Go License | |
| 500,000 | | |
| 500,000 | |
Crash test homologation costs | |
| 228,912 | | |
| 228,912 | |
Liberty acquired technology | |
| 619,462 | | |
| 619,462 | |
Assembled workforce | |
| 689,000 | | |
| 689,000 | |
Trade name and website | |
| 45,000 | | |
| 45,000 | |
Non-compete agreement | |
| 1,500,000 | | |
| 1,500,000 | |
| |
| 4,352,264 | | |
| 4,352,264 | |
Less amortization and impairment | |
| (4,352,264 | ) | |
| (4,352,264 | ) |
| |
| | | |
| | |
| |
$ | — | | |
$ | — | |
Amortization expense was $0 for the three months ended June
30, 2014 and the year ended December 31, 2013. Additionally, the Company impaired the remaining basis in the intangibles during
the year ended December 31, 2013 as management revised its sales forecast for the product which impaired the goodwill of $769,890
as of
9. DEFERRED REVENUE
Deferred revenue consists of the following: as of June 30,
2014 and December 31, 2013:
| |
| |
|
Deferred Revenues | |
June 30, 2014 | |
December 31. 2013 |
Deferred Grant Income | |
$ | 17,964 | | |
$ | 17,964 | |
Deferred membership fees | |
| 96,859 | | |
| 152,287 | |
| |
$ | 114,823 | | |
$ | 170,251 | |
10. FUNDS RECEIVED NOT CONVERTED INTO EQUITY (NET OF DISCOUNT)
The Company has received advances during the year ended December
31, 2013 in the amount of $215,000. These advances were made directly from the shareholders. The Company issued common shares during
the six months ended June 30, 2014 to settle all these advances.
11. SUMS DUE TO GLOBAL MARKET ADVISORS
On July 19, 2010, we entered into an Advisory Agreement (the
“Advisory Agreement’) with Global Market Advisors, Inc., a Nevada corporation (“GMAI”). Under the
Advisory Agreement, GMAI was retained by us to assist with a variety of services, including, but not limited to, assisting us with
our filings as a public company, making the public aware of us and our business, and provide general advice to our management in
order to execute our business plan and strategy. The agreement was terminated with effect on July 31, 2013. In exchange for
the services we agreed to compensate GMAI and at June 30, 2014 and December 31, 2013, $170,889 has been accrued to cover all costs
and fees owed.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
12. SUMS DUE TO GLOBAL TRADE FINANCE
On January 1, 2012 the Company made and entered into a credit
facility with Global Trade Finance (“GTF”) to provide credit up to $250,000. The Company had drawn down $79,000
of the facility through the second quarter of 2012. The effective rate of interest is 8% on the facility, and the facility
was to be secured by 5,000,000 shares of Green Auto common stock, and the advances made to the Company under the credit facility
were not reduced to Convertible Notes. The facility was to be due January 1, 2013, or up to twenty four months if demand for repayment
is not made, however, effective September 30, 2012, the $79,000 was converted into 1,500,000 shares of the Company’s common
stock. The Company recorded $4,000 gain on settlement of debt. The Company also borrowed another $25,000 on this facility that
it still owes under the same terms listed above as of June 30, 2014 and December 31, 2013.
13. NOTES PAYABLE, NET OF DISCOUNTS
As a result of our inability to file our Form 10-Q for the
period ended June 30, 2014 within the time period required under the Securities Exchange Act of 1934, as amended, we have defaulted
on certain covenants under various loan documents with Typenex, LG Capital, and JMJ Financial. We have informed each, as well as
other lenders, of the default and requested a waiver from the default, which was conditionally granted. With this filing,
we have cured our outstanding defaults related to the late filing.
| |
| |
|
Notes Payable | |
June 30, 2014 | |
December 31, 2013 |
| |
| |
|
Blue Citi - Convertible Note Payable, 0% interest, convertible at 40% discount to market price, unsecured | |
$ | 278,500 | | |
$ | — | |
R Knight £38,500 Note Payable, Nil Interest, when funds permit, unsecured | |
| — | | |
| 63,487 | |
P Beitl £109,576 Note Payable, Nil Interest, when funds permit, unsecured | |
| 186,586 | | |
| 180,691 | |
David Voss Note Payable, 15% Interest, unsecured, convertible at fixed 00.5 cents per share | |
| 15,000 | | |
| — | |
Black Mountain - Convertible Note Payable, 10% interest, convertible at 35% discount to market price, unsecured | |
| 110,000 | | |
| — | |
Union Capital Note Payable, 8% Interest, unsecured, convertible at 42% discount to market price after 180 days | |
| 50,000 | | |
| — | |
N Jones £10,053 Note Payable, Nil Interest, unsecured | |
| 17,118 | | |
| 16,577 | |
I Hobday – Note payable, Nil interest, unsecured | |
| 24,419 | | |
| 5,813 | |
P Lilley £700 Note Payable, Nil Interest, unsecured | |
| 1,191 | | |
| 1,154 | |
L G Capital Note payable, 8% Interest, unsecured, convertible at 50% discount to market price after 180 days | |
| 27,000 | | |
| 76,500 | |
Auctus Note Payable, 8% Interest, unsecured, convertible at 42% discount to market price after 180 days | |
| — | | |
| 37,750 | |
JMJ Financial Note Payable, interest 12% after 90 days, unsecured, convertible at 40% discount to market price | |
| 166,668 | | |
| 82,000 | |
Louis Klein Note Payable, 15% Interest, unsecured, convertible at fixed 10.5 cents per share | |
| 50,000 | | |
| 50,000 | |
Linda Singer Note Payable, 15% Interest, unsecured, convertible at fixed 10.5 cents per share | |
| 100,000 | | |
| 100,000 | |
David Hopkins Note Payable, 15% Interest, unsecured , a conversion price of 50% of close price on date of notification | |
| 20,000 | | |
| 20,000 | |
Gel Properties Note Payable, 6% Interest, unsecured, convertible at 40% discount to market price | |
| 25,000 | | |
| 25,000 | |
Redwood Fund II Note Payable ,10% Interest, unsecured, convertible at 50% discount to market price | |
| 100,000 | | |
| 100,000 | |
Redwood Management LLC Note Payable, Nil Interest, unsecured, convertible at 50% discount to market price | |
| — | | |
| 336,376 | |
Bizloan Note payable, 36% Interest, secured | |
| 83,647 | | |
| 219,691 | |
Typenex Note Payable, 8% Interest, unsecured, convertible at 60% discount to market price after 180 days | |
| 142,500 | | |
| — | |
WEAM/WFC | |
| 200,000 | | |
| — | |
Accrued interest | |
| — | | |
| 8,080 | |
| |
| 1,597,629 | | |
| 1,323,119 | |
Debt Discount | |
| (272,766 | ) | |
| (273,777 | ) |
| |
$ | 1,324,863 | | |
$ | 1,049,342 | |
| |
| | | |
| | |
Current Portion | |
$ | 1,031,506 | | |
$ | 845,396 | |
Long Term | |
| 293,357 | | |
| 203,946 | |
| |
$ | 1,324,863 | | |
$ | 1,049,342 | |
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
13. NOTES PAYABLE, NET OF DISCOUNTS (continued)
In connection with the Black Mountain convertible notes issued
on February 13, 2014, the Company issued a five year warrant to the note holder to purchase an additional 1,200,000 common shares
at an exercise price of $0.15. The warrant has anti-dilution provisions, including adjustable provisions for the exercise price
and the number of shares. As of June 30, 2014, the adjusted number of issuable shares equaled 26,865,672 shares and the strike
price was $0.0067, Using the Black-Scholes model and the following inputs: $0.0523 market price, 1 year estimated term, 0.11% risk
free rate and expected volatility of 176%, the warrant’s value was $ 1,266,388.
In connection with the Blue Citi convertible notes issued
on March 21, 2014, the Company issued a three year warrant to the note holder to purchase an additional 15,218,579 common shares
at an exercise price of $0.0183. The warrant has anti-dilution provisions, including adjustable provisions for the exercise price
and the number of shares. As of June 30, 2014, the adjusted number of issuable shares equaled 41,567,164 shares and the strike
price was $0.00670. Using the Black-Scholes model and the following inputs: $0.0158 market price, 1 year estimated term, 0.11%
risk free rate and expected volatility of 176%, the warrant’s value was $ 504,027.
In connection with a funding transaction between the Company
and Typenex Co-Investment, LLC, in June 2014 the Company issued a $665,000 secured convertible promissory note to Typenex payable
17 months after the issuance date and bearing interest at the rate of 10% per annum. The loan will be funded in six installments
of which the first installment was for $142,500 and the remainder are for $110,000 each, except the last which is for $82,500.
The Typenex transaction had an original issue discount of $60,000 and transaction expenses of $5,000. As the lender, Typenex is
secured by a first priority security interest on the assets of the Company. The Typenex Note is convertible into shares of the
Company’s common stock beginning on the date which is six months after each respective installment of the loan is received
by the Company. The conversion formula is the amount of the loan being converted divided by the conversion price, which is 60%
of the average of the three lowest Closing Bid Prices in the proceeding twenty trading days. In connection with the Typenex
transaction, the Company issued a five year warrant to Typenex to purchase common stock that includes anti-dilution provisions.
The number of shares issuable under the warrant equal $332,500 divided by the greater of the market price per share at the
issue date of the warrant ($0.0205) or the average trading price per share calculated on the two days prior to the date of
notice of conversion. The purchase price per share is determined by using the lower of the conversion price and the market price.
As of June 30, 2014, the adjusted number of issuable shares equaled 49,626,866 and the strike price was $0.00670. Using the Black-Scholes
model and the following inputs: $0.0205 market price, 1 year estimated term, 0.11% risk free rate and expected volatility of 176%,
the warrant’s value was $817,799.
14. STOCK INCENTIVE PLAN
On May 30, 2011, the Company adopted the 2011 Non-Qualified
Stock Incentive Plan (the “Plan”). Under the Plan, participants, including both employees and nonemployees of
the Company, have the opportunity to acquire common units of the Company. For awards made under the Plan, participants purchase
common units at the time the award is made at (i) a stated value, or (ii) a percentage that is not less than 50% of the current
fair market value of the stock. Award agreements with employees have a term of ten years and typically have a graded vesting terms
over five years. If a participant ceases to be employed with the Company prior to the end of the vesting period, the participant
forfeits his/her rights to any unvested units at the date of the termination.
There were 4,000,000 unvested stock options as of December
31, 2013 and December 31, 2012. The Company granted 18,000,000 stock options during the year ended December 31, 2012. No options
were granted during the year ended December 31, 2013. The Company recorded a $331,894 stock option expense for the year ended December
31, 2013 and none for 2012. For the six month period ending June 30, 2014, the Company granted 1,303,949 options and recorded
a stock option expense of $41,498.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
14. STOCK INCENTIVE PLAN (continued)
The fair value of each option award is estimated on the date
of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Because the Black-Scholes
option valuation model incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based
on historical volatilities of the Company’s stock. The Company uses historical data to estimate option exercise and employee
termination within the valuation model. The expected term of options granted is derived from estimates and represents the period
of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the
option is based on the U.S. Treasury yield curve in effect at the time of grant.
| |
| |
|
| |
June 30, 2014 | |
March 31, 2014 |
Expected Volatility | |
| 176 | % | |
| 192 | % |
Expected dividends | |
| — | % | |
| — | % |
Expected terms (in years) | |
| 1 | | |
| 1 | |
Risk-free rate | |
| 0.11 | % | |
| 0.13 | % |
Forfeiture rate | |
| — | % | |
| — | % |
A summary of option activity as of June 30, 2014 and December
31, 2013, and changes during the periods then ended is presented below:
| |
| |
| |
| |
|
| |
| |
Weighted- | |
Average | |
|
| |
| |
Average | |
Remaining | |
Aggregate |
| |
| |
Exercise | |
Contractual | |
Intrinsic |
| |
Options | |
Price | |
Life (Years) | |
Value |
Outstanding at January 1, 2013 | |
| 22,000,000 | | |
$ | 0.34 | | |
| 2.44 | | |
$ | 191,500 | |
Granted | |
| — | | |
| — | | |
| — | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | | |
| — | |
Forfeited or expired | |
| — | | |
| — | | |
| — | | |
| — | |
Outstanding at December 31, 2013 | |
| 22,000,000 | | |
$ | 0.34 | | |
| 1.44 | | |
$ | 191,500 | |
Exercisable at December 31, 2013 | |
| 18,000,000 | | |
$ | 0.42 | | |
| 2.00 | | |
$ | — | |
| |
| |
| |
| |
|
| |
| |
Weighted- | |
Average | |
|
| |
| |
Average | |
Remaining | |
Aggregate |
| |
| |
Exercise | |
Contractual | |
Intrinsic |
| |
Options | |
Price | |
Life (Years) | |
Value |
Outstanding at January 1, 2014 | |
| 22,000,000 | | |
$ | 0.34 | | |
| 2.44 | | |
$ | 112,000 | |
Granted | |
| 10,100,000 | | |
| 0.06 | | |
| 9.8 | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | | |
| — | |
Forfeited or expired | |
| — | | |
| — | | |
| — | | |
| — | |
Outstanding at June 30, 2014 | |
| 32,100,000 | | |
$ | 0.30 | | |
| 8.70 | | |
$ | 112,000 | |
Exercisable at June 30, 2014 | |
| 29,700,000 | | |
$ | 0.24 | | |
| 8.73 | | |
$ | 112,000 | |
15.
STOCKHOLDERS’
DEFICIT
Series A Convertible Preferred Stock (“CPS”)
and Derivative Liability
On July 23, 2012 and in relation with the LEC Acquisition
(Note 4), the Company issued 300,000 shares of restricted preferred stock to two LEC Directors as a covenant not to compete. The
preferred shares are fully forfeitable in the event the Directors terminated their employment or violated the non-compete provision
before the third year anniversary. Additionally, these preferred shares were valued at $5.00 per share and were recorded as part
of the purchase price
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
15.
STOCKHOLDERS’
DEFICIT (continued)
On or about September 29, 2012, the Company issued an additional
30,000 CPS to FMS to settle $150,000 of advances owed to FMS (see Note 4) at a conversion rate of $5.00 per CPS.
On or about December 26, 2012, the Company issued an additional
53,680 CPS to FMS for cash at a price of $5.00 per CPS.
On or about December 26, 2012, the Company issued an additional
12,121 CPS to FMS for cash at a price of $8.25 per CPS.
On or about February 15, 2013, FMS converted 62,500 Series
A preferred shares into 20,437,331 shares of our common stock.
On or about March 6, 2013, the Company issued an additional
21,841 CPS to FMS for cash at a price of $8.25 per CPS in settlement of $180,188 advances from related party.
On or about July 26, 2013, the Company issued an additional
95,485 CPS to FMS for cash, 51,387 at a price of $5 per CPS and 44,098 at a price of $8.25 per CPS in settlement of $620,743 advances
from related party.
On or about July 29, 2013, 42,152 Series A Preferred Shares
were converted into 16,156,335 shares of our common stock.
On or about November 27, 2013 the Company issued an additional
15,891 CPS to FMS for cash, 2,800 at a price of $5 per CPS and 13,091 at a price of $8.25 per CPS in settlement of $122,001 advances
from related party.
On January 7, 2014 the Company issued 27,000 CPS to two investors
for settlement of liability, these shares were valued at $210,000.
During the period from January 9, 2014 to March 31, 2014,
38,665 shares of CPS were converted into 19,386,464 common shares.
On or about April 11, 2014 a holder of Series A Preferred
shares of the Company converted 125,000 Series A Preferred Stock into 66,875,000 restricted shares of the Company’s common
stock. The shares issued for the Series A Preferred stock represented 11.05% of the Company’s shares issued and outstanding
as of April 11, 2014.
On or about May 28, 2014 the Company converted 5,000 Series
A Preferred Stock into 2,289,220 shares of its common stock.
The CPS is convertible into Company’s common stock
in accordance with the following formula:
No. of common shares to be issued upon conversion of CPS
=
No. of common stock outstanding on date of conversion x 0.000001
x No. of preferred stock being converted.
Due to there being no explicit limit to the number of shares
to be delivered upon settlement of the above conversion option embedded in the CPS, the conversion feature is classified as derivative
liabilities and recorded at fair value.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
15.
STOCKHOLDERS’
DEFICIT (continued)
Pursuant to ASC 815, “Derivatives and Hedging,”
the Company initially recognized the fair value of the embedded conversion feature of the CPS on date of issuance and was charged
to operations. On June 30, 2014, the Company recorded a mark-to-market adjustment based on the fair value of the derivative liability
on that date which resulted in a gain of $56,465,415. The fair value of the derivative liability was determined using the Black
Scholes option pricing model with a quoted market price of $0.016, a conversion price of $0.05, expected volatility of 176%, no
expected dividends, an expected term of one year and a risk-free interest rate of 0.11%. As of June 30, 2014, the number of common
shares that could be potentially issued to settle the conversion of the preferred stock (net of 200,000 forfeit shares) is 375,043,538
common shares.
The following table sets forth by level with the fair value
hierarchy the Company’s financial assets and liabilities measured at fair value on June 30, 2014.
| |
| |
| |
| |
|
| |
Level 1 | |
Level 2 | |
Level 3 | |
Total |
Assets | |
| | | |
| | | |
| | | |
| | |
None | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Derivative Financial instruments | |
$ | — | | |
$ | — | | |
$ | 13,836,954 | | |
$ | 13,836,954 | |
The following table summarizes the derivative liabilities
included in the condensed consolidated balance sheet at June 30, 2014:
| |
|
Balance at January 1, 2014 | |
$ | 71,752,773 | |
Derivative liability related to new issuance and conversion, net | |
| (1,450,404 | ) |
Change in Value of Historic Derivatives | |
| (56,465,415 | ) |
Balance at June 30, 2014 (unaudited) | |
$ | 13,836,954 | |
Common Stock
On or about February 15, 2013 FMS converted 62,500 Preferred
A shares into 20,437,331 shares of our common stock. On or about February 15, 2013, we issued 375,000 shares of our common stock
to Kodiak Capital Group LLC worth $150,000 as part of the Kodiak Funding Agreement. The issuance was exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, and the investor was either accredited or sophisticated and familiar with our operations.
On or about February 15, 2013, we issued 160,715 shares of
our common stock to Colin Manners (part of Kodiak Capital Group LLC) worth $64,286 as part of the Kodiak Funding Agreement. The
issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investor was either accredited
or sophisticated and familiar with our operations.
On March 18, 2013, the Company entered into a funding agreement
for up to $3 million with Kodiak Capital Group LLC, a Newport Beach-based institutional investor. The Company has agreed to file
a registration statement with the U.S. Securities & Exchange Commission (“SEC”) covering the shares that may be
issued to Kodiak under the terms of the common stock purchase agreement. As a result of the current market price for the
Company’s common stock, the Company intends to withdraw the registration statement filing.
On or about April 1, 2013, the Company issued 1,712,999 shares
to the owners of GoinGreen Limited (a UK company) to acquire 100% of the business. Due to the TRO the shares were not released
by our transfer agent until June 24, 2013.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
15.
STOCKHOLDERS’
DEFICIT (continued)
On or about May 9, 2013, the Company issued 1,050,000 shares
of its common stock to Metro-Electric PLC to secure a 30% investment in the Powabyke brand of Electric Bikes owned by Metro-Electric
PLC.
On or about May 9, 2013, the Company issued 1,500,000 shares
of its common stock each to Gary Spaniak Sr. and Ron Davis to compensate them for Liberty Electric Cars Limited withdrawing from
the Merger with ELCR in order to be acquired by GACR.
On or about July 18, 2013, the Company issued 27,000,000
shares of its common stock to Carter Read of which 5,000,000 was in relation to the purchase of Newport Coachworks, Inc. and 22,000,000
was in relation to Mr. Read securing purchase orders in excess of sixty (60) units.
On or about July 29, 2013, the Company converted 42,152 Series
A Preferred Stock into 16,156,335 shares of its common stock.
On or about September 20, 2013, the Company issued 1,188,603
shares of its common stock. Of those shares, 1,046,618 were issued in connection with convertible debt, 27,939 were issued to a
member of staff to retain their services, and 114,046 were issued in lieu of rent payments.
On or about October 16, 2013, the Company issued 500,000
shares of its common stock in connection with advisory services provided.
On or about November 8, 2013, the Company issued 625,461
shares of its common stock in connection with advisory services provided.
On or about November 18, 2013, the Company issued 50,000
shares of its common stock in connection with advisory services provided.
On or about December 11, 2013, the Company issued 7,700,000
shares of its common stock in connection with a 3(a)(10) arrangement with Ironridge.
On or about December 23, 2013, the Company issued 297,429
shares of its common stock to Redwood Management in connection with the repayment of convertible debt in the amount of $33,460.73.
On or about December 31, 2013, the Company issued 238,095
shares of its common stock to Redwood Management in connection with the repayment of convertible debt in the amount of $25,000.
During the three months ended March 31, 2014, the Company
issued 19,644,299 shares in connection with debt conversion valued at approximately $555,490, mainly related to the LEC debt that
was assumed by Redwood.
During the three months ended March 31, 2014, the Company
issued 32,051 shares for $5,000 in cash to unrelated party.
During the three months ended March 31, 2014, the Company
issued 278,133 shares as additional interest and penalties valued at $24,038.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
15.
STOCKHOLDERS’
DEFICIT (continued)
During the three months ended March 31, 2014, the Company
issued 78,792,270 shares in connection with liability settlement valued at approximately $4,993,110, mainly related to Ironridge
settlement agreement and other liabilities related to consultants and two officers for accrued salary.
During the three months ended March 31, 2014, the Company
issued 872,569 shares in connection with services provided to the company by outside consultants valued at approximately $64,000.
On or about April 2, 2014 the Company issued 1,200,000 shares
of its common stock to JMJ Financial in connection with the repayment of convertible debt in the amount of $16,920.
On or about April 2, 2014 the Company issued 4,821,925
shares of its common stock to LG Capital in connection with the repayment of convertible debt in the amount of $51,500 plus
$2,746 in accrued interest.
On or about April 9, 2014 the Company issued 1,631,280 shares
of its common stock to Auctus Private Equity Fund in connection with the repayment of convertible debt in the amount of $17,750
plus $1,646 in accrued interest.
On or about April 9, 2014 the Company issued 1,600,000 shares
of its common stock to JMJ Financial in connection with the repayment of convertible debt in the amount of $22,560.
On or about April 11, 2014 the Company converted 125,000
Series A Preferred Stock into 66,875,000 shares of its common stock.
On
or about April 14, 2014, the Company issued 212,500 shares of common stock in exchange to investor Maurice Graham Oates at $0.0400
per share for a total of $8,500.
On or about April 22, 2014 the Company issued 1,585,930 shares
of its common stock to JMJ Financial in connection with the repayment of convertible debt in the amount of $22,742.23.
On or about May 23, 2014 the Company issued 540,000 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $4,472.
On or about May 28, 2014 the Company converted 5,000 Series
A Preferred Stock into 2,289,220 shares of its common stock.
On or about May 30, 2014 the Company issued 900,000 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $7,453.
On or about June 3, 2014 the Company issued 1,578,767 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $13,075.
On or about June 5, 2014 the Company issued 4,262,943 shares
of its common stock to Redwood Management in connection with the payment of accrued interest in the amount of $29,841.
On or about June 6, 2014 the Company issued 3,474,337 shares
of its common stock to LG Capital Funding in connection with the repayment of convertible debt in the amount of $26,058 plus $1,058in
accrued interest.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
15.
STOCKHOLDERS’
DEFICIT (continued)
On or about June 10, 2014 the Company issued 2,000,000 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $21,827.
On or about June 12, 2014 the Company issued 1,700,000 shares
of its common stock to JMJ Financial in connection with the repayment of convertible debt in the amount of $15,810.
On or about June 17, 2014 the Company issued 290,753 shares
of its common stock to Gel Properties in connection with the of repayment convertible debt in the amount of $3,173.
On or about June 17, 2014 the Company issued 400,000 shares
of its common stock to a creditor of former CFO Darren West. In exchange, the accrued salary due Darren West was reduced $17,000.
On or about June 18, 2014 the Company issued 3,342,831
shares of its common stock to LG Capital Funding in connection with the repayment of convertible debt in the amount of
$25,000 plus $71 in accrued interest.
On or about June 18, 2014 the Company issued 2,200,000 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $19,361.
On or about June 19, 2014 the Company issued 8,571,428 shares
of its common stock to Redwood Fund III in connection with the repayment of convertible debt in the amount of $60,000.
On or about June 24, 2014 the Company issued 2,000,000 shares
of its common stock for advisory services rendered in 2013 at $0.014 per share.
On or about June 27, 2014 the Company issued 7,462,686 shares
of its common stock to Redwood Fund III in connection with the repayment of convertible debt in the amount of $40,000 plus $10,000
in accrued interest.
On or about June 27, 2014 the Company issued 640,736 shares
of its common stock to Gel Properties in connection with the repayment of convertible debt in the amount of $5,639.
16. CONTINGENCIES
Our predecessor, Go Green USA, LLC (“Go Green”)
was a party defendant, along with other defendants in a civil action filed in Marshall County, West Virginia by Glen Dale Motor
Co. and Tomsic Motor Co, Civil Action No. 11-C-104 H. This undefended and previously unknown action resulted in a default
judgment and related judgment order in the amount of $3,717,615 with interest accruing at 7% per annum from and after February
13, 2012. There is no active effort to enforce this action against Go Green and we believe there are numerous defenses to
the asserted judgment and any such enforcement effort. Moreover, the existence of the liability pre-existed our acquisition
of Go Green and its existence was not disclosed as a part of the acquisition.
Management has not accrued for this event in the financial
statements as it is not determinable whether the Company is liable for this judgment. The Company expects that if efforts are made
to enforce the judgment the expected loss could be from $0 to $3,717,615 not including additional accrued post-judgment interest.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
16. CONTINGENCIES (continued)
In December 2013 we entered in to an arrangement with Ironridge
Global Equity IV, Ltd. under Section 3(a)(10) of the Securities Act of 1933 that was approved by a Superior Court Judge in Los
Angeles, California pursuant to which we agreed to settle approximately $543,000 of trade debt claims purchased by Ironridge in
exchange for the issuance by the Company of free-trading shares of our common stock under a calculation negotiated between Ironridge
and the Company (the “Stipulation”). As of December 31, 2013, we had issued 7,700,000 free trading shares of our common
stock to cover the Newport Coachworks liabilities assigned to Ironridge under the Stipulation The 3(a)(10) agreement specifies
a $6m “calculation period” which determines the final number of shares to be issued to Ironridge in settlement of the
loan they made to the Company by purchasing Company third party debt.
After the initial issuance GAC issued a total of 27 million
additional free trading shares to Ironridge under the Stipulation formula. On or about March 28, 2014, however, Ironridge demanded
GAC issue an additional 43 million free-trading shares based on Ironridge’s calculations under the Stipulation. Ironridge’s
calculation depends on its interpretation of certain clauses in the Stipulation and the allegation that GAC delayed the timely
issuance of shares to which Ironridge was entitled and has thus increased the base amount of shares owed under the Stipulation.
The initial Ironridge demand for 43 million shares was increased to 55 million additional shares (the “Additional Shares”).
On April 16, 2014 Ironridge brought an ex parte proceeding
before Hon. Deirdre Hill, J. (“Judge Hill”) to compel GAC to issue the Additional Shares under the Stipulation. GAC
filed its answering papers in opposition to the Ironridge motion, and the Court held a hearing on May 14, 2014. At the conclusion
of the hearing, the Court denied Ironridge’s request for the issuance of the Additional Shares without prejudice. Since the
date of the May 14 hearing Ironridge has not filed any other court papers, nor has GAC had any further communications from Ironridge
of any kind.
17. SUBSEQUENT EVENTS
On or about July 3, 2014, the Company sought and gained a
verbal commitment to delay the acquisition of Transhock Distribution Limited and AutoParts Warehouse Limited, incorporated in England
and Wales, until later in 2014, subject to (a) the completion of the Company’s U.K. re-organization, (b) the determination
of the new amount of funding required on closing, the owners having renegotiated their invoice financing terms, and (c) the
availability of funds to close the deal.
On July 22, 2014, the Company agreed to sell its 30% investment
of its joint venture interest in Powabyke, to Flare Capital Limited for £15,000 or approximately $25,350. The transaction
is expected to be completed during the first week of September, 2014 under a share purchase agreement signed August 21, 2014. Based
on management’s previously disclosed evaluations, the carrying value for the investment in Powabyke had been reduced to $0.
On July 31, 2014 the Company’s Board of Directors passed
a resolution to increase the number of authorized common shares to two billion five hundred million (2,500,000,000) from nine hundred
million (900,000,000). The increase is subject to approval by the Company’s shareholders and will not be effective until
the filing of an amendment to the Company’s Articles of Incorporation.
On August 21, 2014 Director Nicholas Hewson resigned as a
director of the Company with his resignation effective that day. Mr. Hewson’s resignation was not related to any disagreement
with the Company on any matter relating to the Company’s operations, policies and practices. Mr. Hewson, who resides
in the United Kingdom and is retired, informed the board that the geographic separation caused by the Company’s decision
to reorganize its business to focus on U.S. based domestic operations, made his ability to devote the time required to perform
his oversight functions as a director more difficult. The Company accepted Mr. Hewson’s resignation and expressed appreciation
for the services he performed as a director.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
17. SUBSEQUENT EVENTS (continued)
On or about August 26, 2014, the Company arranged for the
disposition of the assets of its subsidiaries organized and operated in the United Kingdom (U.K.) under the circumstances and terms
and conditions described below. The decision to do so is based on management’s assessment of its U.K. operations, the
working capital requirements to maintain these operations and the determination to focus the Company’s core business on the
building of buses at its Newport Coachworks facility in Riverside, California. The decision will result in, among other things,
in the elimination of more than approximately $1,352,178 of Company obligations consisting of approximately $689,481 of trade creditor
debt, $622,697 in tax arrears and $40,000 of lease obligations.
The procedures will be conducted under the U.K. Insolvency
Act of 1986. On August 26 and 27, 2014, Lamey’s, an insolvency practitioner firm (“IP Firm”) retained by
the Company, caused notices of a creditors committee meeting to be sent to the following subsidiaries of GAC: GoinGreen and Liberty
Electric Cars Europe. The purpose of the meetings will be to conduct a voluntary liquidation of these subsidiaries in accordance
with Section 98 of the U.K. Insolvency Act of 1986. At the meeting, there is expected to be a creditors’ voluntary
liquidation (“CVL”) of these companies. Under the procedure, the IP will supervise and conduct a sale or other disposition
of the assets of the U.K. subsidiaries and use the proceeds to pay outstanding liabilities of the subsidiaries in a manner to be
determined and approved at the creditors’ meeting. As a result, these U.K. subsidiaries will cease all Company affiliated
operations and all liabilities of the subsidiary companies to their creditors will be paid or eliminated by operation of U.K. law.
Subject to approval at the creditors committee meeting for
each company, former Liberty and Goingreen staff members, led by Clive Southwell, a former director of the U.K. business, have
purchased the assets of Goingreen and LEC2 through a company they organized, Clean Transport and Technology Limited (“Clean
Technology”), for a purchase price of $9,951 plus tax for LEC2 and $26,538 plus tax for Goingreen. The assets of LEC2 consist
primarily of spare parts and batteries, and the assets of Goingreen consist primarily of parts, equipment and used vehicles. The
sale proceeds have been paid to the IP and, unless there is an objection to either sale at the respective creditors’ committee
meetings when held, the proceeds will be distributed to the creditors of the respective subsidiaries. The Company has been
advised by the IP that the likelihood of an objection is small in as much as the IP for the Company received an independent valuation
of the assets of these subsidiaries before accepting the purchase price into escrow.
Mr. Nicholas Hewson, a former director of the Company, made
a small investment to assist Clive Southwell and his new team in the acquisition of the assets. Similarly, Ian G. Hobday, a current
director of the Company lent Clean Technology a small sum of money to enable the asset purchase to take place.
The IP will send similar notices of creditors meetings to
the creditors for LEC2 and Liberty shortly. The delay relates to entering into arrangements for the disposition of lithium batteries
owned by one or both companies that comports with U.K. environmental law requirements. If proper arrangements cannot be made,
then the IP will consider alternatives for the dissolution of these two companies that may include compulsory liquidation.
The final outcome will be the cessation of the Company’s
U.K. business operations.
GREEN AUTOMOTIVE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
17. SUBSEQUENT EVENTS (continued)
On August 21, 2014 the Company’s Board of Directors
authorized the filing of a Certificate of Designation with the Nevada Secretary of State in connection with the creation of a class
of shares designated by the Board of Directors as the “Series Y Preferred Shares” with the characteristics described
below. The purpose of the Series Y Preferred Shares is to create additional authorized shares of common stock for the Company
by permitting the return of issued and outstanding shares of common stock held by Company management and others to the Company’s
treasury for cancellation and to be available for original issuance, in return for the issuance of an identical number of restricted
Series Y Preferred Shares to each person who participates in the return of shares of common stock. The Series Y Preferred
Shares are being created in order to afford the Company time to amend its articles of incorporation to increase the authorized
number of shares of common stock it may issue. The maximum total number of issued and outstanding shares of common stock
that will be subject to this arrangement is 40,000,000 shares. Officers and directors of the Company participating in this exchange
are listed below together with the amounts they are returning to the Company for cancellation:
| |
| |
|
Name of Shareholder | |
Shares of Common Stock Cancelled | |
Series Y Preferred Issued |
| |
| |
|
Ian G. Hobday | |
| 10,438,823 | | |
| 10,438,823 | |
Peter C. Leeds | |
| 3,280,392 | | |
| 3,280,392 | |
Carter Read | |
| 21,000,000 | | |
| 21,000,000 | |
The Company filed the Certificate of Designation for the
Series Y Preferred Shares with the Nevada Secretary of State on September 2, 2014. The Company has entered into Series Y Preferred
Exchange Agreement dated September 2, 2014 with each cooperating holder of outstanding shares of common stock who will participate.
Each Series Y Preferred share shall be entitled to one vote and participate together with the holders of shares of common stock
on all matters presented to Company stockholders for a vote. The Series Y Preferred will have the same economic rights as
holders of shares of common stock. The Certificate of Designation mandates that the Series Y Preferred will be cancelled and an
identical number of new restricted shares of common stock issued to the former holders of Series Y Preferred after the Company
has amended its Articles of Incorporation to increase the authorized number of its common shares.
The restricted shares of Series Y Preferred will be issued
pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as transactions by an issuer not
involving a public offering.
As a result of our inability to file our Form 10-Q for the
period ended June 30, 2014 within the time period required under the Securities Exchange Act of 1934, as amended, we defaulted
on certain covenants under various loan documents with some of our lenders. We have informed each of the default and requested
a waiver from the default, which was conditionally granted. With this filing, we have cured our outstanding defaults related
to this late filing.
ITEM 2 Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q of
Green Automotive Company for the period ended June 30, 2014 contains forward-looking statements, principally in this Section and
“Business.” Generally, you can identify these statements because they use words like “anticipates,” “believes,”
“expects,” “future,” “intends,” “plans,” and similar terms. These statements reflect
only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis
for doing so, we cannot guarantee their accuracy and actual results may differ materially from those we anticipated due to a number
of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should
not place undue reliance on these forward-looking statements which apply only as of the date of this annual report. To the extent
that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition,
involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results
or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance
that the statement of expectation of belief will be accomplished.
We believe it is important to communicate
our expectations to our investors. There may be events in the future; however, that we are unable to predict accurately or over
which we have no control. The risks described in this filing, as well as any cautionary language in this quarterly report
and our annual report on Form 10-K provide examples of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events
to differ materially from those anticipated, include, but are not limited to: our ability to successfully obtain financing for
product acquisition; changes in product strategies; general economic, financial and business conditions; changes in and compliance
with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.
Overview
We are currently involved in the manufacturing
and sale of Diesel, Gas and CNG buses at our Newport Coachworks facility in Riverside California, which we expect to be the core
focus of our business activities going forward. We have recently introduced electric bus technology with the launch of our 15 to
23 seat E-Patriot model and will follow this with the launch of our E-Atlas model featuring 27 to 33 seats. The retailing
of electric vehicles through our Goingreen facility in London, England is expected to form the basis for a “franchise”
type model that can be introduced into other regions and countries potentially with partners. The development of next generation
electric vehicle technologies & repair techniques which is currently handled through our Liberty facility in Coventry England,
will be moving to Riverside California in order to have the R&D for electric vehicle technology located where we are building
our new electric bus models.
History and Development of the Company
We are a corporation originally organized
under the laws of the State of Delaware in 1996, but re-incorporated in Nevada effective June 3, 2011. We formerly operated
under the name GANAS Corp. (“GANAS”). Prior to November 2009, GANAS’ objective was to obtain through acquisition
and/or merger transactions, assets, which could benefit our shareholders. Effective November 4, 2009, GANAS acquired Go Green
USA LLC, a Nevada limited liability company organized on April 28, 2009 (“Go”), in a share exchange transaction pursuant
to which newly issued shares of GANAS common stock were issued in exchange for all of the issued and outstanding membership interests
of Go (the “Go Merger”). The Go Merger resulted in GANAS issuing 1,436,202.25 shares of its common stock with
par value $0.001 for each 1% membership interest in Go, following which GANAS changed its name to Green Automotive Company Corporation.
Effective September 30, 2011, we effected a Change of Domicile, re-incorporating in Nevada and simplifying our name to Green
Automotive Company, among other things (the “Re-Incorporation”).
In August 2009, prior to the Go Merger,
Go entered into a Memorandum of Understanding with a subsidiary of Zotye Holding Group, a Chinese automotive manufacturer
(collectively, “Zotye”) which, on January 29, 2010, was reduced to a definitive Exclusive Agreement of Distribution
and Service between the Issuer and Zotye (the “Zotye Agreement”). On July 20, 2010, the Zotye Agreement was amended
and restated “between the Issuer and Yongkang Titan Imp. & Exp. Co., Ltd., a reported subsidiary of Zotye,” and
then on December 21, 2010, the Zotye Agreement was further amended and restated between the Issuer and Zhejiang Titan Imp. &
Exp. Co., Ltd., another reported Zotye subsidiary.
On January 29, 2010, following the execution
of the Zotye Agreement we changed our primary SIC Code to 5012 for automobiles.
Following the Go Merger, and throughout
the 2010 and 2011 fiscal years we devoted all of our resources to the homologation of the all-electric Zotye Sport Utility Vehicle
(“SUV”) with the intent to import and distribute the SUV throughout the U.S. pursuant to the Zotye Agreement. However,
after taking several SUV’s through the required tests to comply with the standard safety benchmarks required by the U.S.
Department of Transportation (“DOT”) and the U.S. Federal Motor Vehicle Safety Standards (“FMVSS”) to determine
the safety and US marketability of the SUV, we elected to modify our business plan so as to not be dependent upon one supplier,
one product and only one segment of the new all-electric automotive industry, and instead to be involved in two areas of the industry:
the import, testing and distribution of foreign and domestic manufactured Eco- friendly passenger vehicles (“Passenger Vehicles”),
Municipal Transit Buses, School Buses, Limousines, and Airport and Hotel Shuttle Vans (collectively, “Mass-Transit Vehicles”),
and the conversion of conventional internal combustion engine driven vehicles into all-electric powered vehicles (“Conversion
Vehicles”), with the medium term goal of becoming one of the first manufacturers of all-electric Mass-Transit Vehicles and
Conversion Vehicles.
As an enticement to enter into the Zyote
agreement, the Company issued Gao Xiang, a senior member of the Zyote management team, 5,000,000 GAC shares. Since the Zyote agreement
was never finalized, we requested the return of these shares from Gao Xiang. Despite the Company’s best efforts to procure
the return of the issued share certificate, Goa Xiang has not relinquished the share certificate. To ensure the shares could not
be traded, we placed an administrative stop on the certificate.
On September 1, 2011, Green Automotive
Company entered into a Stock Purchase Agreement and Escrow Agreement with Mark E. Crone (“Crone”) and Bosch Equities,
L.P. (“Bosch”), under which we purchased 100% of the outstanding equity of Matter of Time I Co., a Nevada corporation
(“MOT”), and extinguished a repayment obligation of MOT totaling $6,000, all in exchange for $30,000.
On February 10, 2012, we entered into
a Merger Agreement and Plan of Reorganization with Matter of Time I Co., a Nevada corporation (“MOT”) (the “MOT
Agreement”). The MOT Agreement provided that, at the closing of the transaction contemplated by the MOT Agreement,
MOT would dissolve into and became a part of Green Automotive Company, with Green Automotive Company being the surviving corporation
and assuming MOT’s status as a reporting issuer under the Securities Exchange Act of 1934, as amended. On December
14, 2012 the transactions contemplated by the MOT Agreement closed (the “Closing”). As a result of the
Closing, MOT was merged out of existence and Green Automotive Company became a reporting issuer under the Securities Exchange Act
of 1934, as amended.
On June 28, 2012, we entered into a Stock
Exchange Agreement (the “Liberty Agreement”) with Liberty Electric Cars Ltd., an England and Wales private company
limited (“LEC”), and its wholly-owned subsidiary LEC 2 Limited, an England and Wales private company limited (“LEC2”
and together with LEC, the “LEC Entities”), under which our wholly-owned subsidiary, Liberty Automotive Group, Inc.
(formerly GAC EV Motors Inc.), a Nevada corporation (“LAG”) agreed to purchase 100% of the issued and outstanding securities
of LEC (the “LEC Shares”), that owns 100% of the issued and outstanding securities of LEC2 (the “LEC2 Shares”)
(collectively the “LEC Securities”) in exchange for the transfer of Thirty Nine Million Seven Hundred Forty Two Thousand
One Hundred Seventy Eight (39,742,178) shares of our common stock held by LAG to the LEC Shareholders. These shares represent
approximately 8.19% of our outstanding voting control. This transaction closed on July 23, 2012. As a result of this
transaction, through LEC, we design and develop electric vehicle drive solutions for use in LEC’s own converted vehicles
and for sale to original equipment manufacturers (OEMs) for incorporation into their production, as well as in the aftermarket
maintenance of electric vehicles. Additionally, under the June 28, 2012 Liberty Agreement, the Company is to issue 59,000,000 shares
to the former Liberty shareholders for the acquisitions already identified.
Additionally, pursuant to the Liberty
Agreement, we issued to GAC Automotive Services, Inc., a Nevada corporation and one of our wholly-owned subsidiaries (“GAC
Auto”) Ten Million (10,000,000) shares of Series B Convertible Preferred Stock (the “Series B Shares”). The
issuance of the Series B shares to GAC Auto is not part of the purchase price of the LEC Entities and is not compensation to the
LEC Entities or LEC Shareholders, but is reserved for issuance to certain entities that LEC and/or LEC2 have been in negotiations
with at the time of execution of the Liberty Agreement if those entities and/or assets are purchased by us or our subsidiaries.
The determination as to when and if to transfer the Series B Shares from GAC Auto to a selling party must be approved by
our Board of Directors. To date, all of the Series B Shares are still held by GAC Auto. The Series B Preferred Stock have
been eliminated on consolidation and are reflected as treasury shares.
On October 12, 2012, we entered into
an Acquisition and Stock Exchange Agreement (the “NCI Agreement”) with Newport Coachworks, Inc., a California corporation
(“NCI”), under which we agreed to purchase 100% of the issued and outstanding securities of NCI (the “NCI Shares”)
from Mr. Carter Read, NCI’s sole shareholder, in exchange for the transfer of Five Million (5,000,000) shares of our common
stock due at the closing of the transaction (the “GACR Closing Shares”), and up to an additional Twenty Two Million
(22,000,000) shares of our common stock (the “GACR Additional Shares” and together with the GACR Closing Shares, the
“GACR Shares”) to vest as follows: upon NCI obtaining bona fide, binding purchase orders, with a cash down payment
(or provides a truck chassis in lieu of cash deposit), standard in the industry, to NCI from third party purchasers requiring NCI
to manufacturer Sixty (60) buses with diesel or compressed natural gas engines at NCI’s manufacturing facility (each a “Qualified
Purchase Order”) within the first twelve (12) months following the payment of one-half of the initial forecasted funding
of $500,000. This transaction closed on October 12, 2012. On July 18, 2013 following Board approval, we issued to Mr. Read
all of the GACR Additional Shares as a consequence of receiving orders for 232 buses from Don Brown Bus Sales for delivery over
a 2-year period. The GACR Shares, when issued, represented approximately 6.8% of our then outstanding common stock as of
October 30, 2012.
On January 31, 2013, we signed a binding
agreement to buy UK-based electric vehicle distributor GoinGreen Limited (www.goingreen.co.uk). Under the brand name, “GoinGreen”,
it has sold over 1400 of the highly successful G-Wiz electric vehicles, making it one of Europe’s largest single retailers
of electric vehicles. GoinGreen Ltd was founded in 2002 and in the early days, set itself the mission to minimize the effects
of climate change by encouraging carbon-neutral motoring. The company pioneered electric vehicles in the UK with the G-Wiz, an
electric vehicle designed in California and manufactured in India by the Indo-Reva Electric Car Company, making London a centerpiece
of the electric vehicle (EV) market. The deal was consummated on April 1, 2013 when 1,562,498 shares of GACR common stock was exchanged
for 100% of the issued and outstanding securities of GoinGreen Limited (an England and Wales private limited company).
On or about October 29, 2012, Liberty
Electric Cars agreed to acquire a 30% interest in Powabyke EV Limited from Metroelectric PLC (Metroelectric) of Stanstead Abbotts,
Hertfordshire, United Kingdom under a Purchase and Management Agreement. The consideration to be paid was 1,050,000 restricted
ordinary Green Automotive shares with an estimated value of £300,000 or $480,870. On or about March 22, 2013, we issued the
shares to Metroelectric, with a market value of $335,895 on the day of issuance.
On February 17, 2014, we entered into
an Acquisition and Stock Exchange Agreement (the “Blackhawk Agreement”) with Blackhawk Manufacturing, Inc., a California
corporation (“Blackhawk”), Sanders, Larios, Larios & Luevanos LLC, a California limited liability company (“SLLL”),
Alan Servicios S de R.I. de C.V., a Mexican corporation (“Alan Servicios”), Lalusa Investments, a Mexican corporation
(“Lalusa”), and Shelmado Transporte, a Mexican corporation (“Shelmado”) (Blackhawk, SLLL, Alan Servicos,
Lalusa and Shelmado together are referred to herein as the “BMI Entities”), and the individuals identified on the signature
page of the Blackhawk Agreement as shareholders of the BMI Entities (the “BMI Entity Shareholders”), under which we
agreed to purchase 100% of the issued and outstanding securities of the BMI Entities (the “BMI Shares”), in exchange
for that number of shares of our common stock that has a fair market value of Six Million Dollars ($6,000,000), with the fair market
value being the price per share as of February 15, 2014, which was $0.05 cents per share and therefore equals approximately 120,000,000
shares of our common stock (the “Purchase Price”).
Subsequent to the closing but prior to
the issuance of the Blackhawk Shares to the BMI Entity Shareholders, certain of the BMI Entity Shareholders met with Company management
and other representatives and presented information about Blackhawk’s financial condition that was materially different from
the financial representations and warranties in the Blackhawk Agreement. These related to, among other matters, Blackhawk’s
operating income for the year ended December 31, 2013, its projections for calendar year 2014, its secured and unsecured debt and
trade payables, and other issues concerning its cash flow and ability to operate the ongoing business. As a result of these disclosures,
on May 21, 2014 GAC informed Blackhawk that it rescinded the Blackhawk Agreement and all remaining transaction documents, effective
immediately, and all such agreements were terminated. GAC did not issue and shall not issue the 120 million shares of its
common stock for the Purchase Price. GAC also has reserved all other rights and remedies it may have in connection with these former
transactions.
On or about February 25, 2014, the Company
entered into an acquisition and stock exchange agreement to purchase Transhock Distribution Limited and AutoParts Warehouse Limited,
incorporated in England and Wales, U.K. for cash and stock, including twenty six million (26,000,000) shares of the Company’s
common stock to be issued to Derek Neale and David Peter Davies, each 50% owners of Transhock and AutoParts (the “Closing
Shares”). Neale and Davies will each receive three million five hundred thousand (3,500,000) shares upon the two (2) year
anniversary, and another three million five hundred thousand (3,500,000) each at three (3) years anniversary of the closing, conditionally,
if they are still actively engaged with the business operations of Transhock and Autoparts (the “Earnout Shares”).
Additionally, Neale and Davies are to each be issued options to purchase five hundred thousand (500,000) shares of the Company’s
shares at an exercise price equal to the market price on the day the transaction is closed (the “Closing Options”).
Davies and Neale are to receive a Directors and Spouse Salary and Dividend package of seven thousand one hundred twenty five pounds
sterling (£7,125) each to be paid up and until the shares can be freely traded on either NASDAQ or the Dow Jones Indexes
whereupon the package will be reviewed in the light of business performance and the number of hours directors want to commit to
working in the business going forward. Both Neale and Davies are to have seats on to the Liberty Board. The cash consideration
for the transaction is to reduce certain Transhock liabilities in relation to (a) a Government business expansion loan which needs
to be paid down in the event of a change of ownership and (b) a lower level of invoice financing available in the event the personal
guarantees of the two owners are removed. The total amount of the capital required to meet the liabilities is approximately $750,000
in a mixture of cash and new working capital structures. In the event the acquisition is not closed, Neale and Davies will
still receive the Closing Shares. The closing was to take place on April 25, 2014. On or about June 17, 2014 the Company
signed a Deed of Addendum with Neale and Davies to extend the agreement until July 31, 2014.
Subsequently, on or about 3rd July 2014,
the Company sought and gained a verbal commitment to delay the acquisition of Transhock, until later in 2014, subject to (a) the
completion of the Company’s U.K. re-organization, (b) the determination of the new amount of funding required on closing,
the owners having renegotiated their invoice financing terms, and (c) the availability of funds to close the deal.
Overview of Electric Vehicle and Luxury Shuttle Bus
Market
The market for electric vehicles is growing
rapidly, driven primarily by government incentives and the fuel costs for traditional vehicles. With most major OEM’s
now launching electric vehicles (EV) the general consensus is that EV’s will eventually replace traditional fossil fuel vehicles,
the only question is “how quickly”. Industry analysts Frost and Sullivan’s research (2010) indicated that circa
20% of the market for EV’s will be satisfied by new entrants rather than traditional automotive OEM’s. Indeed,
Tesla’s rise to market value ($2.3bn based on the sale of just 1,500 cars worldwide in 2011, and $28bn by the end 2013 based
on sales of 22,450 vehicles) shows what new entrants can achieve. Electric cars in all categories are forecasted to reach sales
of 3.8m units annually by 2020 (Pike Research 2012), with electric trucks forecasted to reach annual sales of 100,000 units globally
(Pike Research 2011) (excluding buses and coaches). The development of infrastructure for charging EV’s lags the introduction
of vehicles, and as such, the main initial market will be for EV’s that regularly drive the same or similar routes (delivery
vehicles, school buses, shuttle buses etc.). These vehicles, which return to base regularly, and can therefore be charged
easily, represent the vanguard of EV adoption. As infrastructure for charging becomes better and more readily available,
coupled with a reduction in component costs driven by volume growth and technology development, the adoption of EVs by the public
for personal use should increase. The market features two types of products: “ground up” electric vehicles (Renault
Zoe, Modec truck, Tesla sports car) and converted product (Smiths Electric Trucks, Azure E Connect). Converted vehicles are
quicker to market and remove the need to design an entire vehicle. Adoption of EVs in the business-to-business segment is
driven by a number of factors: pollution and emission reduction; lower fuel costs; legislation; incentives; health issues; driver
satisfaction; noise reduction and total cost of ownership benefits.
The luxury shuttle bus market represents
the top 20% of the overall market for shuttle buses. Typical customers include 5 Star hotels and resorts; luxury touring companies;
Limo buses and other high end transport providers. The vehicles in this sector range in capacity from 15 through 52 seats, and
can be powered by Gas, Diesel, CNG and as a recent development by both electric and hydrogen fuel cells. The trend is towards more
environmentally friendly products, which saw the introduction a few years ago of clean diesel engines, then CNG and more recently
zero emission solutions. The buses are constructed on a variety of major OEM chassis (including but not limited to Ford, Freightliner,
GM, Mercedes, Navistar etc.). Sales opportunities for these bus types exist not only in America, but also in Canada and a number
of export markets (South America, Caribbean, Middle East, South Africa etc.). Typically the buses feature a high number of operator
specified options and additions, ranging from large screen TV’s to bars, bathrooms and luxury seating. Limo buses, which
have begun replacing the more traditional stretched Limo, feature even more extravagant interiors, including disco style music
systems, multi bar installations, and bench style seating. Limo buses currently account for 10% of the Luxury shuttle bus segment
but this is growing as traditional stretched Limos are replaced.
Results of Operations for the Three Months Ended June
30, 2014 and June 30, 2013
Summary of Results of Operations
| |
| |
|
| |
For the three months ended June 30, |
| |
2014 | |
2013 |
| |
| |
(Restated) |
Revenues | |
$ | 1,575,599 | | |
$ | 429,392 | |
Costs of goods sold | |
| 1,452,724 | | |
| 409,165 | |
Gross profit | |
| 122,875 | | |
| 20,227 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Depreciation and amortization | |
| 45,692 | | |
| 9,206 | |
Loss on disposal of equipment | |
| — | | |
| — | |
Stock based compensation | |
| 41,498 | | |
| — | |
Stock issued for settlements | |
| — | | |
| — | |
General and administrative | |
| 1,121,502 | | |
| 523,551 | |
| |
| 1,208,692 | | |
| 532,757 | |
| |
| | | |
| | |
Loss before other expenses | |
| (1,085,817 | ) | |
| (512,530 | ) |
| |
| | | |
| | |
Other income (expenses) | |
| | | |
| | |
Change in fair value of derivative liability | |
| (7,278,229 | ) | |
| (1,114,759 | ) |
Stock issued for settlements | |
| — | | |
| (1,237,200 | ) |
(Loss)/gain on settlement of debt | |
| — | | |
| — | |
Loss on conversion of preferred shares | |
| — | | |
| — | |
Other income/expense | |
| (200,000 | ) | |
| — | |
Interest expense | |
| (1,137,218 | ) | |
| (137,254 | ) |
| |
| (8,615,447 | ) | |
| (2,489,213 | ) |
| |
| | | |
| | |
Income/(Loss) before income taxes | |
| (9,701,264 | ) | |
| (3,001,743 | ) |
Operating Loss; Net Loss
Our net loss was ($9,701,264) for the
three months ended June 30, 2014 compared to ($3,001,743) for the three months ended June 30, 2013 (restated) These net income
figures were largely a result of non-cash income due to a change in the fair value of derivative liabilities primarily related
to our convertible preferred stock and outstanding convertible loan notes, and, as a result, our net loss of ($9,701,264) is not
indicative of the results of our operations and should not be viewed as an indicator of our future results.
Our management believes our operating
loss of $1,085,817 for the three months ended June 30, 2014, compared to our operating loss of $512,530 for the three months ended
June 30, 2013, is an accurate indicator of our current results. We continue to see an improvement in Gross Margin as a consequence
of production efficiencies and as revenue continues to grow; we expect this trend in our core activity to continue in future quarters.
Revenue
Our revenue from the three months ended
June 30, 2014 was $1,575,599 compared to $429,392 for the three months ended June 30, 2013. Our revenue was derived from
the operations of our subsidiaries Newport Coachworks, Inc., Liberty Electric Cars Ltd., Liberty Electric Cars Europe Limited and
GoinGreen Limited. The growth in the Company’s revenue was largely due to the sale of buses from our Newport Coachworks facility
in California, which grew from $223,514 during the three months ended June 30, 2013 to $1,090,571 for the three months ended June
30, 2014.
Cost of Goods Sold
Our cost of goods sold for the three
months ended June 30, 2014 were $1,452,724 compared to $409,165 for the three months ended June 30, 2013 (restated). The
cost of goods sold for the three months ended June 30, 2014 was in line with the revenues generated from the operations of our
subsidiaries Newport Coachworks, Inc., Liberty Electric Cars Ltd., Liberty Electric Cars Europe Limited and GoinGreen Limited.
The cost of sales content varies substantially depending upon whether it is cost related to a bus being manufactured in-house
at Newport Coachworks, which has a high material and labor content, or is grant work completed by Liberty Electric Cars Ltd., which
has negligible material and no direct labor costs.
Depreciation and Amortization
Our expenses related to depreciation
and amortization were $45,692 for the three months ended June 30, 2014, compared to $9,206 for the three months ended June 30,
2013. The increase was attributable to investment in plant and equipment related to continuing growth in our Newport Coachworks
business.
Stock-Based Compensation
Our expenses related to stock-based compensation
were $41,498 for the three months ended June 30, 2014, compared to $0 for the three months ended June 30, 2013.
General and Administrative Expenses
General and administrative expenses were
$1,121,502 for the three months ended June 30, 2014, compared to $523,551 for the three months ended June 30, 2013, primarily due
to the expenses in the Company and each of the Company’s subsidiaries, as well as increased legal expenses for the Company.
Change in Fair Value of Derivative Liability
During the three months ended June 30, 2014, we had a change
in fair value of derivative liability of ($7,278,229), compared to ($1,114,759) for the three months ended June 30, 2013, primarily
related to the conversion of Series A Preferred Stock to common stock, the issuance of convertible notes and warrants and the declining
price of our common stock.
Loss on Settlement of Debt
During the three months ended June 30
2014 and June 30, 2013, we had no settlement of debt.
Interest Expense
During the three months ended June 30,
2014, we had interest expense of $1,121,502 compared to $523,551 for the three months ended June 30, 2013. The main interest expense
in 2014 stemmed from interest expenses paid on convertible notes and the amortization and debt discount related to convertible
debt issued and converted.
Results of Operations for the Six Months Ended June 30,
2014 and June 30, 2013
Summary of Results of Operations
| |
| |
|
| |
For the six months ended June 30, |
| |
2014 | |
2013 |
| |
| |
(Restated) |
Revenues | |
$ | 2,823,469 | | |
$ | 647,788 | |
Costs of goods sold | |
| 2,459,563 | | |
| 488,012 | |
Gross profit | |
| 363,906 | | |
| 159,776 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Depreciation and amortization | |
| 92,290 | | |
| 18,082 | |
Loss on disposal of equipment | |
| — | | |
| 12,516 | |
Stock based compensation | |
| 5,717,015 | | |
| 214,286 | |
Stock issued for settlements | |
| — | | |
| — | |
General and administrative | |
| 1,749,945 | | |
| 1,009,699 | |
| |
| 7,559,250 | | |
| 1,254,583 | |
| |
| | | |
| | |
Loss before other income (expenses) | |
| (7,195,344 | ) | |
| (1,094,807 | ) |
| |
| | | |
| | |
Other income (expenses) | |
| | | |
| | |
Change in fair value of derivative liability | |
| 56,465,415 | | |
| 37,616,530 | |
Stock issued for settlements | |
| — | | |
| (1,237,200 | ) |
(Loss)/gain on settlement of debt | |
| (484,028 | ) | |
| — | |
Loss on conversion of preferred shares | |
| — | | |
| (20,375 | ) |
Other income/expense | |
| (200,000 | ) | |
| — | |
Interest expense | |
| (1,855,906 | ) | |
| (183,174 | ) |
| |
| 53,925,481 | | |
| 36,175,781 | |
| |
| | | |
| | |
Income/(Loss) before income taxes | |
| 46,730,137 | | |
| 35,080,974 | |
Operating Income; Net Income
Our net income was $46,730,137 for the
six months ended June 30, 2014 compared to net income of $35,080,974 for the six months ended June 30, 2013 (restated) These
net income figures were largely a result of non-cash income due to a significantly favorable change in the fair value of derivative
liabilities primarily related to our convertible preferred stock and outstanding convertible loan notes of $56,465,415 and $ 37,616,530
for the six months ended June 30, 2014 and June 30,2013 (restated) respectively, and, as a result, our net income for these periods
is not indicative of the results of our operations and should not be viewed as an indicator of our future results.
Our management believes our operating
loss before other income (expenses) of ($7,195,344) for the six months ended June 30, 2014, compared to our operating loss before
income (expenses) of ($1,094,807) for the six months ended June 30, 2013(restated), is a better indicator of our current results,
although a non-cash expense of $5,717,015 was recorded in the six months ended June 30, 2014 for stock based compensation , compared
with stock based compensation of $214,286 for the six months ended June 30, 2013 (restated) which largely resulted in the higher
operating loss for the six months ended June 30, 2014 . We continue to see an improvement in Gross Margin (the Gross Margin was
$363,906 for the six months ended June 30, 2014 compared to $159,776 for the six months ended June 30, 2013, restated ) as a consequence
of production efficiencies and higher revenues.
Revenue
Our revenue from the six months ended
June 30, 2014 was $2,823,469 compared to $647,788 for the six months ended June 30, 2013 (restated). Our revenue was derived
from the operations of our subsidiaries Newport Coachworks, Inc., Liberty Electric Cars Ltd., Liberty Electric Cars Europe Limited
and GoinGreen Limited. The growth in the Company’s revenue in the six months ended June 30, 2014 was largely due to the increased
sales of buses from our Newport Coachworks facility in California,
Cost of Goods Sold
Our cost of goods sold for the six months
ended June 30, 2014 were $2,459,563 compared to $488,012 for the six months ended June 30, 2013 (restated). The cost of goods
sold for the six months ended June 30, 2014 was in line with the revenues generated from the operations of our subsidiaries Newport
Coachworks, Inc., Liberty Electric Cars Ltd., Liberty Electric Cars Europe Limited and GoinGreen Limited. The cost of sales
content varies substantially depending upon whether it is cost related to a bus being manufactured in-house at Newport Coachworks,
which has a high material and labor content, or is grant work completed by Liberty Electric Cars Ltd., which has negligible material
and no direct labor costs.
Depreciation and Amortization
Our expenses related to depreciation
and amortization were $92,290 for the six months ended June 30, 2014, compared to $18,082 for the six months ended June 30, 2013
(restated) . The increase was attributable to investment in plant and equipment related to continuing growth in our Newport Coachworks
business.
Stock-Based Compensation
Our expenses related to stock-based compensation
were $5,717,015 for the six months ended June 30, 2014, compared to $214,286 for the six months ended June 30, 2013( restated).
General and Administrative Expenses
General and administrative expenses were
$1,749,945 for the six months ended June 30, 2014, compared to $1,009,699 for the six months ended June 30, 2013 (restated) related
to our general operating expenses and each of our subsidiaries, as well as increased legal expenses for us.
Change in Fair Value of Derivative Liability
During the six months ended June 30,
2014, we had a favorable change in fair value of derivative liability of $56,465,415 compared to a favorable change of $37,616,530 for the six months ended June 30, 2013 (restated), primarily related to the conversion of Series A Preferred Stock to common
stock, the issuance of new convertible notes and warrants and the change in the trading price of our common stock.
Loss on Settlement of Debt
During the six months ended June 30 2014
we had a loss on settlement of debt of $484,028 compared to no loss on settlement of debt during the six months ended June 30,
2013 (restated).
Interest Expense
During the six months ended June 30,
2014, we had interest expense of $1,855,906 compared to $183,174 for the six months ended June 30, 2013 (restated). The increase
in interest expense in 2014 stemmed from interest expenses paid on convertible notes and the amortization and debt discount related
to new convertible debt issued and converted.
Liquidity and Capital Resources for Six Months Ended
June 30, 2014 and 2013
Introduction
During the six months ended June 30,
2014 and 2013, because of our operating losses, we did not generate positive operating cash flows. Our cash on hand as of
June 30, 2014 was $40,810 and our monthly cash flow burn rate is approximately $350,000. As a result, we have significant short
term cash needs. Our method for satisfying these needs has been to increase sales, lower costs where possible, and generate
proceeds through the sale of our common stock, the issuance of debt, and the issuance of convertible notes. We currently believe
it is unlikely that we will be able to satisfy our cash needs for operational purposes from our revenues by the end of 2014.
Our cash, current assets, total assets,
current liabilities, and total liabilities as of June 30, 2014 compared to December 31, 2013, respectively, are as follows:
| |
| |
| |
|
| |
June 30, 2014 | |
December 31, 2013 | |
Change |
Cash | |
$ | 40,810 | | |
$ | 61,723 | | |
$ | (20,913 | ) |
Total Current Assets | |
| 911,014 | | |
| 1,218,463 | | |
| (307,449 | ) |
Total Assets | |
| 1,468,129 | | |
| 1,886,868 | | |
| (418,739 | ) |
Total Current Liabilities | |
| 17,642,675 | | |
| 75,345,683 | | |
| (57,703,008 | ) |
Total Liabilities | |
$ | 17,936,032 | | |
$ | 75,549,629 | | |
$ | (57,613,597 | ) |
Our current liabilities were reduced
by $57,703,008 from December 31, 2013 to June 30, 2014 primarily by a $57,915,819 reduction in derivative liabilities.
Cash Requirements
We had cash available as of June 30,
2014 of $40,810 and $61,723 on December 31, 2013. Based on our revenues, cash on hand and current monthly burn rate, around
$350,000, we will need to continue borrowing from our shareholders and other related parties, and/or raise money from the sales
of our securities, and/or the issuance of debt to fund operations.
In order to repay our obligations in
full or in part when due, we will be required to raise significant capital from external sources. There is no assurance, however,
that we will be successful in these efforts or that these efforts will not be highly dilutive. As of June 30, 2014, we had outstanding
cash payments due to our CEO Ian G. Hobday of $211,318 for unpaid and accrued salary and expenses, covering the period from July
1, 2012 through to June 30, 2014, including the conversion of $160,000 of accrued and unpaid salary to stock during the period
ending March 31, 2014; to our former CFO Darren West of $253,500 for unpaid and accrued salary and expenses, covering
the period from July 1, 2012 through to April 31, 2014 including a 30-day notice period following his death; to our Global
Marketing Director, Petra Beitl of $260,898, for unpaid and accrued salary and expenses, covering the period from July
1, 2012 through to June 30, 2014; to Carter Read, President of our subsidiary Newport Coachworks, of $94,000, for unpaid
and accrued salary and expenses, covering the period from November 1, 2012 through to June 30, 2014 and including the
conversion of $100,000 of accrued and unpaid salary to stock during the period ending March 31, 2014; to Peter Leeds, a director
of the Company of $25,000 for payments made on behalf of the company between June 2013 and June 2014. The Company is currently
negotiating agreements with all of the above named individuals pursuant to which all of the outstanding accrued salaries, expenses
and loans listed above will be cancelled by converting them to restricted Series A Preferred Shares of the Company.
Sources and Uses of Cash
Operations
We had net cash (used) by operating activities
of ($945,766) for the six months ended June 30, 2014, as compared to ($671,072) for the six months ended June 30, 2013 (restated).
For the period in 2014, the net cash used in operating activities consisted primarily of our net income of $46,730,137, adjusted
by the change in fair value of derivative liability of ($56,465,415), share based compensation of $5,717,015 depreciation and amortization
of $92,290, amortization of debt discount of $1,681,307, shares issued as additional interest of $24,038, and changes to
operating assets and liabilities, consisting of: other assets of $3,224, prepaid expenses $525,163, accounts payable and accrued
expenses of $343,351, value added taxes of ($83,561), lease payable of $2,095, deferred financing costs of ($36,000), accounts
receivable of ($48,227), deferred revenue of ($55,428), inventory of $290,078, and changes in other liabilities of $24,537.
Investments
We had $(17,000) in net cash used in
investing activities for the six months ended June 30, 2014. In the same period in 2013 (restated), we had ($377,236) in
net cash used in investing activities, related to purchase of property and equipment of ($17,000), proceeds from disposal of vehicles
of $0, and proceeds from disposal of investments of $0.
Financing
Our net cash provided by financing activities
for the six months ended June 30, 2014 was $878,519 compared to $946,030 for the six months ended June 30, 2013. For the first
six months of 2014, our financing activities consisted of $930,827 in proceeds from notes payable, $10,707 from payments to reduce
a line of credit, $68,015 as payments on notes payable and $5,000 as proceeds from the issuance of common stock. For the same period
in 2013, our financing activities consisted of $985,838 in proceeds from notes payable and $39,808 from payments to reduce a line
of credit.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
ITEM 3 Quantitative and Qualitative Disclosures
About Market Risk
As a result of our inability to file
our Form 10-Q for the period ended June 30, 2014 within the time period required under the Securities Exchange Act of 1934, as
amended, we have defaulted on certain covenants under various loan documents with some of our lenders. We have informed each of
the default and requested a waiver from the default, which was conditionally granted. With this filing, we have cured our outstanding
defaults related to this late filing
ITEM 4 Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures
(as defined in Rule 13a-l5(e) under the Exchange Act) that are designed to ensure that information that would be required to be
disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive
Officer and Chief Financial Officer (our Principal Accounting Officer), as appropriate, to allow timely decisions regarding required
disclosure.
As required by Rule 13a-15 under the
Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer (one individual), evaluated the
effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2014. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2014, and as of the date that the evaluation
of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective
to satisfy the objectives for which they are intended.
(b) Management’s Report on Internal Controls
over Financial Reporting
Our management is responsible for establishing
and maintaining effective internal control over financial reporting (as defined in Rule 13a-l5(f) of the Securities Exchange Act).
Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2014. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on that assessment, management believes that, as of June 30, 2014, the Company’s internal control
over financial reporting was ineffective based on the COSO criteria, due to the following material weaknesses listed below.
Insufficient segregation of duties
in our finance and accounting functions due to limited personnel. We internally performed all aspects of our financial reporting
process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record
journal entries and responsibility for the preparation of the financial statements. Due to the fact these duties were performed
by limited personnel (one person), a lack of review was created over the financial reporting process that might result in a failure
to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures
as filed with the SEC.
Insufficient corporate governance
policies. We have not documented our internal controls. We have limited policies and procedures that cover the recording
and reporting of financial transactions and accounting provisions. As a result we may be delayed in our ability to calculate
certain accounting provisions. While we believe these provisions are accounted for correctly in the attached unaudited financial
statements our lack of internal controls could lead to a delay in our reporting obligations. We were required to provide
written documentation of key internal controls over financial reporting beginning with our fiscal year ending December 31, 2009.
Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our
assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a
material weakness.
Effective controls over the control
environment were not maintained. Specifically, a formally adopted written code of business conduct and ethics that governs
our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated
to our employees its accounting policies and procedures. This has resulted in inconsistent practices. Further, our
Board of Directors does not currently have a director that qualifies as an audit committee financial expert as defined in Item
407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management
has determined that these circumstances constitute a material weakness.
Failure to properly account for our
revenue and assets. We do not have formal procedures in place to regularly review our revenue recognition and impairment
of long-lived assets. As a result, in the past, we did not originally correctly record our revenue and test the impairments
of long-lived assets, which caused us to have a high number of audit adjustments proposed by our independent auditor, particularly
in our fiscal year ended December 31, 2012. If we did not adjust these errors based on the proposals by our independent auditor
the magnitude of the resulting misstatements in our financial statements could reasonably be expected to have been material. As
a result, we are currently looking to hire additional personnel with U.S. GAAP experience to assist in the preparation of our financial
statements.
These control deficiencies could result
in a material misstatement to our interim or annual financial statements that possibly would not be prevented or detected.
When we are financially able, we intend
to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies and we intend to consider
the results of our remediation efforts and related testing as part of our next assessment of the effectiveness of our internal
control over financial reporting.
(c) Changes in Internal Control over Financial Reporting
On March 29, 2014, Darren West, our then-Chief
Financial Officer, passed away. Mr. West’s passing was a change in our internal control over financial reporting during
the period ended March 31, 2014, which may have materially affected our internal control over financial reporting. In an
effort to minimize the impact of Mr. West’s passing and until we hire a permanent Chief Financial Officer we are working
with a consultant in order to assist with the preparation of our financial statements.
(d) Officer’s Certifications
Appearing as an exhibit to this quarterly
report on Form 10-Q are “Certifications” of our Chief Executive and Financial Officer. The Certifications are required
pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the
quarterly report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certifications.
This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics
presented.
PART II – OTHER INFORMATION
ITEM 1 Legal Proceedings
On February 10, 2014, Mr. Ray Mariorenzi
filed a lawsuit against our Company and an additional defendant alleging breach of an oral contract. The lawsuit is entitled
Ray Mariorenzi v. Global Market Advisors, Inc. and Green Automotive Company Corporation, Superior Court of the State of
California for the County of Orange, Central Justice Center - Case No. 30-2014-00704187, and in the complaint Mr. Mariorenzi alleges
that at a meeting in March, 2012, he made an oral agreement with an officer and director of Global Market Advisors, Inc.
for the purpose of Mr. Mariorenzi performing consulting services to benefit Green Automotive Company and that such services would
be provided from March 2012 through end of 2013. In the Complaint, Mr. Mariorenzi alleges he performed the services but has
not been completely compensated for such services and, as a result, claims he is owed $123,500 and 5,750,000 shares of our common
stock from the defendants. We were served on or about February 27, 2014. We filed an Answer, with a general denial,
on April 16, 2014. The Court set a Case Management Conference for June 10, 2014, and a court date has been set for 2015.
We intend to vigorously defend against the unsubstantiated claims in the Complaint.
Our predecessor, Go Green USA, LLC (“Go
Green”) was a party defendant, along with other defendants in a civil action filed in Marshall County, West Virginia by Glen
Dale Motor Co. and Tomsic Motor Co, Civil Action No. 11-C-104 H. The basis for this action was a claim by the plaintiffs
that the defendants breached a dealer agreement entered into by and between the plaintiffs and the defendants by accepting a franchise
fee and payment for vehicles (totaling approximately $250,000) from the plaintiffs but failing to deliver any of the purchased
vehicles to the plaintiffs. This undefended and previously unknown action resulted in a default judgment and related judgment
order in the amount of $3,717,615 with interest accruing at 7% per annum from and after February 13, 2012. There is no active
effort to enforce this action against Go Green and we believe there are numerous defenses to the asserted judgment and any such
enforcement effort. Moreover, the existence of the liability pre-existed our acquisition of Go Green and its existence was
not disclosed as a part of the acquisition. Management has not accrued for this event in the financial statements as its not determinable
whether we are liable for this case. We expect that if we are properly served and are a proper party to the litigation that the
expected loss could be zero to $3,717,615.
In the fall of 2013, by prearrangement,
Ironridge Global Partners,IV, Ltd. (“Ironridge”) as plaintiff filed a complaint against Green Automotive Company (“GAC”
or the “Company”) as defendant in Superior Court, County of Los Angeles, California (the “Superior Court”)
alleging that the Company owed Ironridge $545,049.08 as a result of certain trade debt of GAC that Ironridge arranged to purchase.
On December 2, 2013 GAC and Ironridge entered into a stipulation (the “Stipulation”) for the settlement of Ironridge’s
complaint pursuant to which Ironridge would forgive the indebtedness in exchange for which GAC would issue a certain number of
shares to Ironridge calculated in accordance with a formula set forth in the Stipulation. On December 4, 2013 counsel for Ironridge
and GAC appeared before the Hon. Deirdre Hill, Judge (Judge Hill) in the Superior Court, and the Court approved the Stipulation
under procedures authorized in Section 25107 of the California Corporations Code and in accordance with a transaction exemption
under Section 3(a)(10) of the Securities Act of 1933 (the “Securities Act”) described immediately below.
Ordinarily the shares the Company would
have issued to Ironridge would have been restricted, and Ironridge would not have been able to sell them in the open market without
(i) the effectiveness of a registration statement for the shares under the Securities Act of 1933 as amended (the “Securities
Act”), or (ii) the availability of an exemption from registration under the Securities Act, such as Rule 144. Ironridge and
the Company agreed that Ironridge would prepare documentation to invoke a transactional exemption under Section 3(a)(10) of the
Securities Act which permits certain original (new) share issuances by a reporting company issuer to be exempt from the Securities
Act registration requirements if the conditions of the Section 3(a)(10) exemption are met. Among these conditions is the
approval by a Court with proper standing of the fairness of the issuances to, among others, the issuer and the recipient of the
shares, after the conduct of a fairness hearing.
Accordingly, the Stipulation described
earlier was submitted to the Court and the Court approved the Stipulation. As a result GAC was required to issue unrestricted free-trading
shares of its common stock to Ironridge. Under the Stipulation the initial issuance was 7,700,000 free-trading shares. Judge Hill
retained jurisdiction over the parties for all purposes related to the Stipulation.
After the initial issuance GAC issued
a total of 27 million additional free trading shares to Ironridge under the Stipulation formula. On or about March 28, 2014, however,
Ironridge demanded GAC issue an additional 43 million free-trading shares based on Ironridge’s calculations under the Stipulation.
Ironridge’s calculation depends on its interpretation of certain clauses in the Stipulation and the allegation that GAC delayed
the timely issuance of shares to which Ironridge was entitled and has thus increased the base amount of shares owed under the Stipulation.
The initial Ironridge demand for 43 million shares has increased to 55 million additional shares (the “Additional Shares”),
and may increase further based on remarks in the Ironridge papers described below. GAC has disputed the demand and has refused
to issue the Additional Shares.
On April 16, 2014 Ironridge brought an
ex parte proceeding before Judge Hill to compel GAC to issue the Additional Shares under the Stipulation. GAC filed its answering
papers in opposition to the Ironridge motion, and the Court scheduled a hearing for May 14, 2014.
On May 14, 2014 counsel for the Company
and counsel for Ironridge Global Partners IV, Ltd. (“Ironridge”) appeared before the Hon. Deirdre Hill, Judge (“Judge
Hill” or the “Court”) for a hearing in connection with Ironridge’s motion for an order of the Court directing
the Company to issue 55 million free-trading shares (the “Additional Shares”) of the Company’s common stock pursuant
to a stipulation entered into before Judge Hill and approved by the Court on December 4, 2014 (the “Stipulation”).
The Company opposed Ironridge’s application and refused to issue the Additional Shares.
At the conclusion of the hearing, the
Court denied Ironridge’s request for the issuance of the Additional Shares without prejudice. Since the conclusion of the
hearing and the entry of the Court’s order denying Ironridge’s application, Ironridge has not made any further demands
on the Company to issue Additional Shares under the Stipulation or otherwise.
In the ordinary course of business, we
are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain
and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or
results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending
or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 1A Risk Factors
As a smaller reporting company, we are
not required to provide the information required by this Item.
ITEM 2 Unregistered Sales of Equity Securities and
Use of Proceeds
During the three months ended June 30,
2014, we issued the following unregistered securities:
On or about April 2, 2014 the Company
issued 1,200,000 unrestricted shares of its common stock to JMJ Financial in connection with the repayment of convertible debt
in the amount of $16,920 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of
the Securities Act of 1933, as amended (the “Securities Act”) as transactions by an issuer not involving a public offering.
On or about April 2, 2014 the Company
issued 4,821,925 unrestricted shares of its common stock to LG Capital in connection with the repayment of convertible debt in
the amount of $51,500 issued more than six months prior plus $2,745.67 in accrued interest. These shares were exempt from registration
under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about April 9, 2014 the Company
issued 1,631,280 unrestricted shares of its common stock to Auctus Private Equity Fund in connection with the repayment of convertible
debt in the amount of $17,750 issued more than six months prior plus $1,645.92 in accrued interest. These shares were exempt from
registration under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about April 9, 2014 the Company
issued 1,600,000 unrestricted shares of its common stock to JMJ Financial in connection with the repayment of convertible debt
in the amount of $22,560 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of
the Securities Act as transactions by an issuer not involving a public offering.
On or about April 11, 2014 a holder of
Series A Preferred shares of the Company converted 125,000 Series A Preferred Stock into 66,875,000 restricted shares of the Company’s
common stock. The shares issued for the Series A Preferred stock represented 11.05% of the Company’s shares issued and outstanding
as of April 11, 2014.
On or about April 14, 2014, the Company
issued 212,500 restricted shares of common stock in exchange for a cash investment of $8,500. These shares were exempt from registration
under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about April 22, 2014 the Company
issued 1,585,930 unrestricted shares of its common stock to JMJ Financial in connection with the repayment of convertible debt
in the amount of $22,742.23 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2)
of the Securities Act as transactions by an issuer not involving a public offering.
On or about May 23, 2014 the Company
issued 540,000 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt in
the amount of $4,472 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of the
Securities Act as transactions by an issuer not involving a public offering.
On or about May 28, 2014 a holder of
Series A Preferred shares of the Company converted 5,000 Series A Preferred Stock into 2,289,220 restricted shares of its common
stock. These shares were exempt from registration under Section 4(a)(2) of the Securities Act as transactions by an issuer
not involving a public offering.
On or about May 30, 2014 the Company
issued 900,000 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt in
the amount of $7,453 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of the
Securities Act as transactions by an issuer not involving a public offering.
On or about June 3, 2014 the Company
issued 1,578,767 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt
in the amount of $13,075 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of
the Securities Act as transactions by an issuer not involving a public offering.
On or about June 5, 2014 the Company
issued 4,262,943 unrestricted shares of its common stock to Redwood Management in connection with the payment of accrued interest
in the amount of $29,840.60. These shares were exempt from registration under Section 4(a)(2) of the Securities Act as transactions
by an issuer not involving a public offering.
On or about June 6, 2014 the Company
issued 3,474,337 unrestricted shares of its common stock to LG Capital Funding in connection with the repayment of convertible
debt in the amount of $26,058 issued more than six months prior plus $1,057.53 in accrued interest. These shares were exempt from
registration under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about June 10, 2014 the Company
issued 2,000,000 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt
in the amount of $21,827 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of
the Securities Act as transactions by an issuer not involving a public offering.
On or about June 12, 2014 the Company
issued 1,700,000 unrestricted shares of its common stock to JMJ Financial in connection with the repayment of convertible debt
in the amount of $15,810. These shares were exempt from registration under Section 4(a)(2) of the Securities Act as transactions
by an issuer not involving a public offering.
On or about June 17, 2014 the Company
issued 290,753 unrestricted shares of its common stock to Gel Properties in connection with the of repayment convertible debt in
the amount of $3,173 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of the
Securities Act as transactions by an issuer not involving a public offering.
On or about June 17, 2014 the Company
issued 400,000 restricted shares to a creditor of former CFO Darren West. In exchange, the accrued salary due Darren West was reduced
$17,000.
On or about June 18, 2014 the
Company issued 3,342,831 unrestricted shares of its common stock to LG Capital Funding in connection with the repayment of
convertible debt in the amount of $25,000 issued more than six months prior plus $71.23 in accrued interest. These shares
were exempt from registration under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a
public offering.
On or about June 18, 2014 the Company
issued 2,200,000 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt
in the amount of $19,361 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of
the Securities Act as transactions by an issuer not involving a public offering.
On or about June 19, 2014 the Company
issued 8,571,428 unrestricted shares of its common stock to Redwood Fund III in connection with the repayment of convertible debt
in the amount of $60,000 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2)
of the Securities Act as transactions by an issuer not involving a public offering.
On or about June 24, 2014 the Company
issued 2,000,000 restricted shares of its common stock for advisory services rendered in 2013. These shares were exempt from registration
under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about June 27, 2014 the Company
issued 7,462,686 unrestricted shares of its common stock to Redwood Fund III in connection with the repayment of convertible debt
in the amount of $50,000 issued more than six months prior plus $10,000 in accrued interest. These shares were exempt from registration
under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On or about June 27, 2014 the Company
issued 640,736 unrestricted shares of its common stock to Gel Properties in connection with the repayment of convertible debt in
the amount of $5,639 issued more than six months prior. These shares were exempt from registration under Section 4(a)(2) of the
Securities Act as transactions by an issuer not involving a public offering.
For the three month period June 30, 2014
the Company issued a total of 119,580,336 shares of its common stock, representing 18.6% of the Company’s issued and outstanding
shares as of June 30, 2014.
ITEM 3 Defaults Upon Senior Securities
During the period covered by this report
there were no events which are required to be reported under this Item.
ITEM 4 Mine Safety Disclosures
During the period covered by this report
there were no events which are required to be reported under this Item.
ITEM 5 Other Information
On March 29, 2014, our Chief Financial
Officer and Secretary, Mr. Darren West, passed away. On March 31, 2014, our Board of Directors appointed Mr. Ian Hobday,
our current Chief Executive Officer, to the positions of interim Chief Financial Officer and interim Secretary. We plan to hire
a new Chief Financial Officer and Secretary as soon as possible and until then are working with a consultant to provide a full
spectrum of financial support services.
ITEM 6 Exhibits
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3.1 (1) |
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Articles of Incorporation of Green Automotive Company, filed June 3, 2011 |
3.2 (1) |
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Articles of Merger of Green Automotive Company, filed October 19, 2011 |
3.3 (1) |
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Articles of Merger between Green Automotive Company and Matter of Time I Co., filed December 13, 2012 |
3.4 (1) |
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Amended and Restated Bylaws of Green Automotive Company |
10.1 (1) |
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Advisory Agreement by and between Green Automotive Company and Global Market Advisors, Inc. dated July 19, 2010 |
10.2 (1) |
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Credit Agreement by and between Green Automotive Company and Global Trade Finance, Inc. dated January 1, 2012 |
10.3 (1) |
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Settlement, General Release and Conversion Agreement by and between Green Automotive Company and Global Trade Finance, Inc. dated June 30, 2012 |
10.4 (1) |
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Assignment Agreement by an between Green Automotive Company and Investment Finance IFC Ltd. Dated January 27, 2012 |
10.5 (1) |
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Merger Agreement and Plan of Reorganization by and between Green Automotive Company and Matter of Time I Co. dated February 10, 2012 and completed December 12, 2012. |
10.6 (1) |
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Stock Exchange Agreement by and between Green Automotive Company and Liberty Electric Cars Ltd. Dated June 28, 2012 |
10.7 (1) |
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Amendment No. 1 to Stock Exchange Agreement by and between Green Automotive Company and Liberty Electric Cars Ltd. Dated December 4, 2012 |
10.8 (1) |
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Stock Purchase Agreement by and between Green Automotive Company and First Market Services dated June 29, 2012 |
10.9 (1) |
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Acquisition and Stock Exchange Agreement by and between Green Automotive Company and Newport Coachworks, Inc. dated October 12, 2012 |
10.10 (1) |
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Amended and Restated Independent Contractor Agreement by and between Liberty Electric Cars Ltd. and Ian Hobday dated December 4, 2012 |
10.11 (1) |
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Amended and Restated Independent Contractor Agreement by and between Liberty Electric Cars Ltd. and Darren West dated December 4, 2012 |
10.12 (1) |
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Employment Agreement by and between Newport Coachworks, Inc. and Carter Read dated October 2012 |
10.13 (1) |
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Distribution Agreement by and between Newport Coachworks, Inc. and Don Brown Bus Sales, Inc. dated November 1, 2012 |
10.14 (1) |
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Employment Agreement with Mark Aubry dated December 17, 2012 |
10.15 (1) |
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Stock Purchase Agreement by and between Green Automotive Company and First Market Services dated November 20, 2012 |
10.16 (1) |
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Stock Purchase Agreement by and between Green Automotive Company and Mark E. Crone and Bosch Equities, LP dated September 1, 2011 |
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10.17 (1) |
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Exchange Agreement by and between Green Automotive Company and Investment Finance Company IFC Limited dated March 31, 2012 |
10.18 (2) |
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Investment Agreement with Kodiak Capital Group, LLC dated March 14, 2013 |
10.19 (2) |
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Registration Rights Agreement with Kodiak Capital Group, LLC dated March 14, 2013 |
10.20 (3) |
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Acquisition and Stock Exchange Agreement by and between Green Automotive Company, Liberty Electric Cars Ltd. and GoinGreen Limited dated February 28, 2013 |
10.21 (4) |
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Securities Purchase Agreement with Auctus Private Equity Fund, LLC, dated August 26, 2013 |
10.22 (4) |
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Promissory Note issued to Auctus Private Equity Fund LLC, dated August 26, 2013 |
10.23 (4) |
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Securities Purchase Agreement with LG Capital Funding, LLC, dated August 21, 2013 |
10.24 (4) |
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Promissory Note issued to LG Capital Funding, LLC, dated August 21, 2013 |
10.25 (5) |
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Services Agreement by and between Navistar, Inc. and Liberty Electric Cars Ltd. dated May 3, 2011 |
10.26 (6) |
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Summary of Amendment to D Distribution Agreement by and between Newport Coachworks, Inc. and Don Brown Bus Sales, Inc. dated November 1, 2012 |
10.27 (7) |
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Acquisition and Stock Exchange Agreement by and between Green Automotive Company, the BMI Entities and the BMI Entity Shareholders dated February 17, 2014 |
10.28 (7) |
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Amendment No. 1 to the Blackhawk Agreement dated February 20, 2014 |
10.29 (7) |
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Amendment No. 2 to the Blackhawk Agreement dated March 4, 2014 |
10.30 (7) |
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Amendment No. 3 to the Blackhawk Agreement dated March 17, 2014 |
10.31 (7) |
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Amendment No. 4 to the Blackhawk Agreement dated April 14, 2014 |
10.32 (7) |
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Consulting Agreement with Floyd Sanders dated April 8, 2014 |
10.33 (7) |
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Consulting Agreement with Sergio Larios dated April 8, 2014 |
10.34 (7) |
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Consulting Agreement with Carlos Larios dated April 8, 2014 |
10.35 (7) |
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Consulting Agreement with Lin Austin dated April 8, 2014 |
21.1* |
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List of Subsidiaries |
31.1* |
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Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
32.1* |
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Section 1350 Certification of Chief Executive Officer |
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101.INS ** |
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XBRL Instance Document |
101.SCH ** |
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XBRL Taxonomy Extension Schema Document |
101.CAL ** |
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XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF ** |
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XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB ** |
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XBRL Taxonomy Extension Label Linkbase Document |
101.PRE ** |
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XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith.
** XBRL (Extensible Business
Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) Incorporated by reference from our Current Report on Form
8-K filed with the Commission on December 20, 2012.
(2) Incorporated by reference from our Current Report on Form
8-K filed with the Commission on March 19, 2013.
(3) Incorporated by reference from our Current Report on Form
8-K filed with the Commission on August 15, 2013.
(4) Incorporated by reference from our Registration Statement
on Form S-1/A filed with the Commission on November 12, 2013.
(5) Incorporated by reference from our Amended Current Report
on Form 8-K/A filed with the Commission on June 17, 2013.
(6) Incorporated by reference from our Amended Current Report
on Form 8-K/A filed with the Commission on November 29, 2013.
(7) Incorporated by reference from our Current Report on Form
8-K filed with the Commission on April 17, 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.
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Green Automotive Company
a Nevada corporation |
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Dated: December
23, 2015 |
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/s/
Ben Rainwater |
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By: |
Ben Rainwater |
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Its: |
Chief Executive Officer |
EXHIBIT INDEX
Exhibit No.
Document
31.1
Certification
Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes – Oxley
Act of 2002.
31.2
Certification Pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes – Oxley Act of 2002.
32.1
Certification Pursuant to 18 U.S.C Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes – Oxley Act of 2002.
32.2
Certification Pursuant to 18 U.S.C Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes – Oxley Act of 2002.
Exhibit 31.1
CERTIFICATION
I, Ben Rainwater, certify that:
1. I have reviewed this First Amended Quarterly Report
on Form 10-Q/A of Green Automotive Company;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s)
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over
financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s)
and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: December 23, 2015
/s/ Ben Rainwater
Ben Rainwater
President
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the First Amended Quarterly Report of Green
Automotive Company (the “Company”) on Form 10-Q/A for the period ending June 30, 2014 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Ben Rainwater, Chief Executive Officer, certify, pursuant
to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.
/s/ Ben Rainwater
Ben Rainwater
Chief Executive Officer
December 23, 2015
Green Automotive (CE) (USOTC:GACR)
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Green Automotive (CE) (USOTC:GACR)
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부터 6월(6) 2023 으로 6월(6) 2024