EF Hutton Acquisition I(EFHT) - 2024 Q3 - Quarterly Report

Financial Performance - Revenue for the nine months ended September 30, 2024, was $19.9 million, a 35.5$14.7 million in the same period of 2023[189]. - The company reported a net loss of $7.5 million for the nine months ended September 30, 2024, compared to a net income of$0.5 million for the same period in 2023[189]. - Net revenue for the three months ended September 30, 2024, was $6,440,049, representing a 30.0$4,954,277 in the same period of 2023[234]. - For the nine months ended September 30, 2024, net revenue was $19,884,213, a 35.3$14,698,260 in the same period of 2023[248]. - The net loss for the nine months ended September 30, 2024, was $(7,458,875), representing a 1,461.4$(477,698) in 2023[248]. - For the nine months ended September 30, 2024, total net revenues increased by $5,185,953, or 35.3$5,036,479, or 34.6%, compared to the prior year[249]. - Gross profit for the Builds category rose by $2,567,020, or 75.2$179,931 compared to the same period in 2023, driven by increased costs associated with being a public company[216]. - For the nine months ended September 30, 2024, adjusted EBITDA decreased by $0.7 million compared to the same period in 2023, despite an increase in gross profit from higher average selling prices and units sold[217]. Operational Developments - The company operates a 100,000-square-foot facility in Kissimmee, FL, with 102 employees, including 72 craftsmen and technicians[192]. - The company aims to become the world's best Land Rover customization and production facility, focusing on fully-customized luxury vehicles[188]. - The company plans to expand its manufacturing facility by adding an additional 10,000 sq. ft. in the second half of 2024 to accommodate storage for delivery-ready vehicles[210]. - The company introduced the Jaguar E-type in 2022, which has a higher price point and gross margin compared to traditional models, and plans to leverage the assets from the recent acquisition to produce Mustangs in 2024 and 2025[211]. - The company has opened new marketing channels in 2024, including outreach events and expanding into international markets such as Europe and Canada[212]. - The company’s North Line operated at full capacity in 2022, completing four to five full builds per month, and continues to explore opportunities to reduce costs and improve efficiencies[209]. - The company anticipates sufficient resources to operate during 2024, focusing on cash flow management[209]. Expenses and Financial Obligations - Operating expenses rose to$2,642,467, an increase of 111.3% compared to $1,250,797 in the prior year, driven by significant increases in sales and marketing expenses and general and administrative expenses[240]. - General and administrative expenses increased by$1,224,898, primarily due to public company costs, including higher salaries and professional fees related to financial statement restatements[241]. - Total operating expenses increased by $3,846,996, or 98.2$579,293, or 188.8%, reflecting increased promotional activities in response to higher online traffic[253]. - Interest expense surged to $(1,401,829) for the three months ended September 30, 2024, a dramatic increase of 30,893.3$(4,523) in 2023[243]. - Interest expense increased by $3,840,130, or 84,902.3$14,500 per month for the first four months and $12,500 per month thereafter under a consulting agreement with an investor relations firm[304]. - Future lease obligations total$5,018,219, with $140,638 due in 2024 and$3,274,183 due in 2028 and beyond[276]. Mergers and Acquisitions - ECD Automotive Design, Inc. completed a merger with EF Hutton Acquisition Corporation I on December 12, 2023, resulting in a name change and new capital structure[193][195]. - The total consideration for the merger included 26.5 million shares of common stock, 25,000 shares of preferred stock, and a cash payment of $2 million[197]. - The company entered into an Amended and Restated Asset Purchase Agreement to acquire assets related to vehicle builds for up to$1.25 million, including a trademark, with a base price of $950,000 and an additional$300,000 for new vehicle builds[203]. - The company issued 1,250,000 shares of common stock on August 11, 2024, following the completion of the asset purchase agreement[204]. Cash Flow and Liquidity - Cash and cash equivalents stood at $3,592,128 as of September 30, 2024, with a need for additional capital over the next twelve months to fund operations[265][268]. - Net cash used in operating activities was$7,199,988 for the nine months ended September 30, 2024, primarily due to a decrease in deferred revenue and an increase in inventory[270]. - Financing activities provided cash of $2,674,469 for the nine months ended September 30, 2024, mainly from proceeds of the August 2024 Convertible Note[274]. Compliance and Regulatory Matters - The company expects general and administrative expenses to increase in absolute terms to support continued growth and comply with public company regulations[227]. - The company has experienced varying levels of inflation impacting product and labor costs, but inflation did not materially affect operations for the three and nine months ended September 30, 2024, or 2023[277]. - The company does not typically experience seasonality in its operations[279]. - The company has no uncertain tax positions requiring adjustment to the consolidated financial statements, with a reserve of zero as of September 30, 2024, and 2023[295]. Revenue Recognition - The company recognizes revenue when it transfers promised goods or services, with a single performance obligation in contracts for vehicle sales[284]. - Approximately 50% of the total contract consideration is received upfront and recorded as deferred revenue, with the remaining 50% billed upon completion of the vehicle build[286]. - The company provides for estimated warranty costs at the time revenue is recognized, influenced by historical warranty costs per vehicle[290].