ECD Automotive Design(ECDA) - 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 $(7,458,875), a significant increase of 1,461.4$(477,698) in 2023[248]. - Vehicle builds accounted for 98.8% of total revenue in Q3 2024, with a revenue increase of $1,436,744 (29.2$5,036,479, or 34.6%, driven primarily by higher average selling prices per vehicle[249]. Expenses and Losses - Operating expenses rose to $2,642,467, an increase of 111.3$1,250,797 in the prior year, driven by significant increases in sales and marketing expenses (158.0%) and general and administrative expenses (107.6%)[240][241]. - Total operating expenses increased by $3,846,996, or 98.2$7,764,900 for the nine months ended September 30, 2024, primarily due to higher advertising and general administrative expenses[252]. - 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 significantly by $3,840,130, or 84,902.3$(634,927) for the three months ended September 30, 2024, compared to a loss of $(287,848) in the same period of 2023, reflecting a 120.6$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 Capital Needs - The company reported a net cash decrease of$4,542,083 for the nine months ended September 30, 2024, compared to an increase of $1,667,658 in the same period of 2023[269]. - Cash used in operating activities was$7,199,988 for the nine months ended September 30, 2024, mainly due to a decrease in deferred revenue and an increase in inventory[270]. - The company anticipates needing to source additional capital over the next twelve months to fund operations before achieving positive cash flow[268]. 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 increased production by approximately 20% in 2023 and plans to add an additional 10,000 sq. ft. of space in the second half of 2024 to accommodate vehicle storage[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 plans to relocate quality control and warranty services to a new facility in 2024, enhancing operational efficiency[211]. Financial Instruments and Obligations - The company issued a senior secured convertible note for $15,819,209 in December 2023, with an interest rate of Prime + 5$165,233 was calculated for the three months ended June 30, 2024, due to events of default under the December 2023 Convertible Note[200]. - The company recognized a gain on forgiveness of payable of $319,899 in the consolidated statements of operations following the waiver of pre-existing events of default[200]. - The company recorded amortization expenses of$537,054 for the nine months ended September 30, 2024, related to debt discounts and issuance costs[201]. - As of September 30, 2024, accrued interest on the December 2023 Convertible Note and the August 2024 Convertible Notes was $773,417[201]. General and Administrative Expenses - The company expects general and administrative expenses to increase as it continues to grow and comply with public company regulations[227]. - The company expects general and administrative expenses to increase in absolute dollars year-over-year but decline as a percentage of total revenue as the business grows[241]. Other Financial Information - 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]. - Net currency exchange gains (losses) were not material for the three and nine months ended September 30, 2024, and 2023[278]. - 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]. - The company recognizes revenue when the product build is completed and title has been transferred, with approximately 50% of the total contract consideration billed upon contract acceptance[285][286]. - Warranty obligations are estimated at the time revenue is recognized, with potential revisions based on actual costs differing from estimates[290]. - The company evaluates the realizability of deferred tax assets quarterly, with a valuation allowance recorded against all deferred tax assets as of September 30, 2024[298]. - The estimated fair value of cash, accounts receivable, and accounts payable approximates their carrying amounts due to short maturities[299]. - The company assesses warrants for liability or equity classification based on specific accounting standards, impacting how changes in fair value are recorded[300].