Serve Robotics Inc.(SERV) - 2023 Q3 - Quarterly Report

Merger and Corporate Structure - The merger with Serve Robotics was completed on July 31, 2023, with each share of Serve's capital stock converting into 0.8035 shares of the company's common stock, resulting in a maximum of 20,948,917 shares issued[83]. Revenue and Financial Performance - Revenue from delivery services and branding is the primary source of income, with Uber accounting for 50% of revenues for the year ended December 31, 2022[93]. - Revenues for the three months ended September 30, 2023, increased by 88% to $62,565 compared to $33,333 for the same period in 2022[107]. - Net loss for the three months ended September 30, 2023, was $7,645,972, a 43% increase from the net loss of $5,358,605 in the same period in 2022[108]. - Net loss for the nine months ended September 30, 2023, was $17,750,350, a 22% increase from $14,600,764 in the same period in 2022[111]. Operating Expenses - General and administrative expenses rose by 50% to $1,428,143 for the three months ended September 30, 2023, compared to $952,553 for the same period in 2022[108]. - Total operating expenses for the three months ended September 30, 2023, were $5,067,816, a slight increase of 1% from $5,016,309 in the same period in 2022[110]. - Interest expense for the three months ended September 30, 2023, was $1,480,000, significantly higher than $30,000 in the same period in 2022[110]. Research and Development - Research and development expenses decreased by 9% to $2,962,812 for the three months ended September 30, 2023, from $3,261,785 in the same period in 2022[108]. - Research and development expenses for the nine months ended September 30, 2023, decreased by 23% to $7,171,446 from $9,275,252 in the same period in 2022[111]. Cash Flow and Financing - Net cash used in operating activities decreased to $12.29 million for the nine months ended September 30, 2023, from $16.98 million in the same period of 2022, a reduction of $4.69 million[117]. - Net cash provided by financing activities was $13.08 million for the nine months ended September 30, 2023, compared to $14.09 million in 2022, reflecting a decrease of $1.01 million[117]. - The company plans to raise approximately $10 million through a Private Placement to fund operations and believes this, along with existing cash, will be sufficient for short-term operating plans[116]. - The company received net proceeds from the Private Placement of $10 million, $2.7 million from SAFEs, and $4 million from notes in 2023[116]. Assets and Liabilities - As of September 30, 2023, the company had current assets of $5.12 million and current liabilities of $4.86 million, including $3.50 million in cash and cash equivalents[116]. - The company has significant contractual obligations totaling $4.80 million as of September 30, 2023, including operating lease obligations and loan financing facilities[121]. - The company entered into a term loan with Silicon Valley Bank for gross proceeds of $2.50 million, maturing on March 1, 2025, with principal payments commencing on October 1, 2022[119]. Operational Metrics - Daily Active Robots increased to 30 from 9 year-over-year, reflecting improved operational capacity[113]. - Daily Supply Hours increased to 224 from 69 year-over-year, indicating enhanced utilization of the robot fleet[113]. Market Conditions and Future Outlook - The company anticipates continued operating losses in 2023 and 2024 while aiming to scale its operating fleet by a factor of 10 and expand geographic coverage beyond Los Angeles[99]. - Inflation and economic conditions may impact discretionary consumer spending, which could negatively affect financial results due to reduced demand for delivery services[95]. - Supply chain constraints, particularly in semiconductor components, have led to increased lead times and costs, potentially affecting future robot manufacturing plans[97]. - The company aims to achieve initial profitability by 2025, contingent on revenue development and various market conditions[99]. - The company is actively pursuing new delivery and branding customers to diversify its customer base and reduce reliance on Uber[93]. - Regulatory changes could impact the company's ability to operate in certain markets, affecting revenue generation and unit economics[98]. Investment Activities - Net cash used in investing activities was $0 for the nine months ended September 30, 2023, compared to $0.47 million in 2022, indicating a significant reduction in investment expenditures[116]. - The company has no off-balance sheet financing arrangements or relationships with unconsolidated entities as of the reporting period[122].