Sondors Electric Car Company Index to Financial Statements

Transcription

1

2 Sondors Electric Car Company Index to Financial Statements Report of Independent Auditors Report... 1 Balance Sheet... 3 Statement of Operations... 4 Statement of Cash Flows... 5 Statement of Stockholders Equity... 6 Notes to Financial Statements... 7

3

4

5 BALANCE SHEET December 31, 2016 Assets Current Assets Cash and equivalents $ 830 Total Current Assets 830 Total Assets $ 830 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 800 Total Current Liabilities 800 Commitments and Contingencies (Note 4) Stockholders' Equity Common stock: 10,000,000 shares authorized; $ par value; 2,783,330 shares issued and outstanding 278 Additional paid-in capital 975,615 Subscription receivable (933,740) Accumulated deficit (42,123) Total Stockholder's Equity 30 Total Liabilities and Stockholders' Equity $ 830 See accompanying notes to the financial statements. 3

6 STATEMENT OF OPERATIONS Revenue August 15, 2016 (Inception) to December 31, 2016 $ - Operating Expenses Advertising and marketing expenses 33,300 General and administrative expenses 8,023 Total Operating Expenses 41,323 Loss Before Income Taxes (41,323) Provision for income taxes 800 Net Loss $ (42,123) Basic and Diluted Loss per Common Share $ (0.02) Weighted Average Number of Common Shares Outstanding 2,700,000 See accompanying notes to the financial statements. 4

7 STATEMENT OF CASH FLOWS August 15, 2016 (Inception) to December 31, 2016 Cash Flows From Operating Activities: Net loss $ (42,123) Changes in operating assets and liabilities: Income tax payable 800 Net Cash Used In Operating Activities (41,323) Cash Flows From Financing Activities: Contributed capital 41,153 Prodeeds from issuance of common stock 1,000 Net Cash Provided by Financing Activities 42,153 Net increase in cash 830 Cash and equivalents at beginning of period - Cash and equivalents at end of period $ 830 Supplemental Cash Flow Information: Cash paid for interest $ - Cash paid for taxes $ - See accompanying notes to the financial statements. 5

8 STATEMENT OF STOCKHOLDERS EQUITY Common Stock Number of Shares Outstanding Amount Balance at August 15, 2016 (Inception) - - Additional Paid-In Capital Subscription Receivable Accumulated Deficit Total $ $ - $ - $ - $ - Issuance of common shares 2,783, ,462 (933,740) - 1,000 Contributed capital , ,153 Net loss (42,123) (42,123) Balance at December 31, ,783,330 $ 278 $ 975,615 $ (933,740) $ (42,123) $ 30 See accompanying notes to the financial statements. 6

9 NOTE 1 NATURE OF OPERATIONS SONDORS ELECTRIC CAR COMPANY NOTES TO THE FINANCIAL STATEMENTS Sondors Electric Car Company was incorporated on August 15, 2016 ( Inception ) in the State of Delaware. The financial statements of Sondors Electric Car Company (the "Company") are prepared in accordance with accounting principles generally accepted in the United States of America. The Company s headquarters are located in Malibu, California. The Company designs, develops, and intends to manufacture and sell its own electrical vehicle. The Company also intends to provide customer service and technical support for its electrical vehicles. In certain areas, mobile technicians capable of performing most inspections and repairs will be available. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ( US GAAP ). Use of Estimates Preparation of the financial statements in conformity with US GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could ultimately differ from these estimates. It is reasonably possible that changes in estimates may occur in the near term. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Include other inputs that are directly or indirectly observable in the marketplace. Level 3 - Unobservable inputs which are supported by little or no market activity. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, Fair values of the Company s financial instruments were assumed to approximate carrying values because of the instruments short-term nature. Risks and Uncertainties The Company has a limited operating history and has not yet generated revenue from its intended operations. The development of the Company s product and service offerings are expected to take an extended amount of time to develop and may be subject to regulatory requirements. The Company's business and operations are sensitive to general business and economic conditions in the U.S. and 7

10 NOTES TO THE FINANCIAL STATEMENTS worldwide along with governmental policy decisions. A host of factors beyond the Company's control could cause fluctuations in these conditions. Adverse developments may also include: economic recessions, changes in electric automobile technology and infrastructure, government policy decisions and law changes, changes in consumer tastes and trends, and acceptance of its products in the marketplace. Like any new business, the Company faces challenges that come from early-stage branding and financing. These adverse conditions could affect the Company's financial condition and the results of its operations. Cash and Cash Equivalents For purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Revenue Recognition The Company will recognize revenue from the sale of products and services when (a) pervasive evidence that an agreement exists, (b) the product or service has been delivered, (c) the prices are fixed and determinable and not subject to refund or adjustment, and (d) collection of the amounts due are reasonably assured. The Company is currently developing its products and has not generated any revenue to date. Future revenue recognition policies may change based on the product and service offerings developed. Advertising The Company expenses advertising costs as incurred. Income Taxes The Company applies Accounting Standards Codification ( ASC ) 740, Income Taxes ( ASC 740 ). Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position is recognized only if it is more likely than not that the position is sustainable upon examination by the relevant taxing authority based on its technical merit. Concentration of Credit Risk The Company maintains its cash with a major financial institution, which it believes to be creditworthy, located in the United States of America. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits. Loss per Common Share The Company presents basic loss per share ( EPS ) and diluted EPS on the face of the statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. For periods in which we incur a net loss, the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted EPS calculations. For the period ended December 31, 2016, the Company had no dilutive securities outstanding. 8

11 NOTES TO THE FINANCIAL STATEMENTS Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) , Intangibles-Goodwill and Other (Topic 350). The ASU eliminates Step 2 of the goodwill impairment test, which requires determining the fair value of assets acquired or liabilities assumed in a business combination. Under the amendments in this update, a goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods, with early adoption permitted. The adoption of this guidance by the Company is not expected to have a material impact on its financial statements. In February 2016, the FASB issued ASU , Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU but does not expect the adoption of this guidance to have a material impact on its financial statements. In May 2014, the FASB issued ASU No , Revenue from Contracts with Customers. Under this guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. The updated standard will replace most existing revenue recognition guidance under US GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard will be effective beginning January 1, The Company is currently evaluating the effect that the updated standard will have on its financial position and results of operations. The FASB issues ASUs to amend the authoritative literature in the ASC. There have been a number of ASUs to date, including those above, that amend the original text of the ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact the Company s financial statements. NOTE 3 GOING CONCERN The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has not yet commenced revenue generating activities, incurred losses from operations, and had an accumulated deficit of $42,123 as of December 31, Losses are expected to continue until such time the Company can design, produce, and sell its product offerings. These matters raise substantial doubt about the Company s ability to continue as a going concern. During the next twelve months, the Company intends to fund its operations through collection of the subscription receivable of $933,740 related to its Regulation Crowdfunding offering in 2016, which was received in The Company also intends to obtain additional equity financing through a Regulation A offering in

12 NOTES TO THE FINANCIAL STATEMENTS There are no assurances that management will be able to raise capital on terms acceptable to the Company. If it is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned development, which could harm its business, financial condition, and operating results. The accompanying financial statements do not include any adjustments that might result from these uncertainties. NOTE 4 COMMITMENTS AND CONTINGENCIES The Company is not currently involved with, and does not know of any, pending or threatening litigation against the Company or any of its officers. NOTE 5 STOCKHOLDERS EQUITY Common Stock The Company is authorized to issue 10,000,000 shares of common stock with a $ par value. On August 15, 2016, the Company issued 2,700,000 shares of common stock to its founder for $1,000. Upon the closing of its Regulation Crowdfunding offering on December 31, 2016, the Company was required to issue 83,330 shares of common stock which were sold at $12.00 per share, for which a net subscription receivable of $933,740 was due as of December 31, Such funds were received in Funds received were net of offering costs of $66,260 paid in direct connection with the offering. Contributed Capital The Company s founder contributed $41,153 in additional paid-in capital to the Company during 2016 to pay advertising and marketing, legal, and accounting expenses associated with the Company s Regulation Crowdfunding offering. NOTE 6 INCOME TAXES The following table presents the current and deferred tax provision for federal and state income taxes for the period ended December 31, 2016: Current tax provision Federal $ - State 800 Total $ 800 Deferred tax provision (benefit) Federal $ 12,000 State 2,000 Valuation allowance (14,000) Total - Total provision for income taxes $ 800 Reconciliations of the U.S. federal statutory rate to the actual tax rate consist of the federal and state tax benefit at combined statutory rate of 34%, and a change in the valuation allowance of $14,

13 NOTES TO THE FINANCIAL STATEMENTS The components of our deferred tax assets (liabilities) for federal and state income taxes consisted of the following as of December 31, 2016: Deferred tax asset attributable to: Net operating loss carryover $ 14,000 Valuation allowance (14,000) Net deferred tax asset $ - Based on federal tax returns to be filed, through December 31, 2016, we had available approximately $41,000 in U.S. tax net operating loss carryforwards, pursuant to the Tax Reform Act of 1986, which assesses the utilization of a Company s net operating loss carryforwards resulting from retaining continuity of its business operations and changes within its ownership structure. Net operating loss carryforwards start to expire 2036 or 20 years for federal income and state tax reporting purposes. The Company is subject to tax in the United States ( U.S. ) and files tax returns in the U.S. Federal jurisdiction and California state jurisdiction. The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities for all period starting in The Company currently is not under examination by any tax authority. NOTE 7 SUBSEQUENT EVENTS In 2017, the Company entered into a prototype design and development agreement with a third party. The agreement calls for total payments of $750,000 during the phased development. The $750,000 will be paid over four installments with the last installment due upon delivery of the prototype. To date, the Company has made payments totaling $450,000. Subsequent to December 31, 2016, $105,000 was advanced from the Company s founder for operating capital. The advance is short-term, due on demand, and carries no interest. The Company has evaluated subsequent events that occurred after December 31, 2016 through April 13, 2017, the issuance date of these financial statements. There have been no other events or transactions during this time that would have a material effect on the financial statements. 11