AYRO(AYRO) - 2024 Q4 - Annual Report

Forward-Looking Statements; Risk Factor Summary This section provides a standard safe harbor statement for forward-looking statements and presents a high-level summary of the principal risks facing the company Forward-Looking Statements; Risk Factor Summary This section provides a standard safe harbor statement for forward-looking statements and presents a high-level summary of the principal risks facing the company - The company's financial statements have been prepared on a going concern basis, and it must raise additional capital to fund operations[12] - AYRO has a history of losses, has never been profitable, and expects to incur additional losses in the future[12] - The company is at risk of its common stock being delisted from the Nasdaq Capital Market for failing to meet continued listing requirements[12] - A significant portion of historical revenue was derived from Club Car LLC, and the termination of their agreement requires finding new strategic partners[12] - The company is currently evaluating its product development strategy, which may lead to significant changes and impact its business[12] - A material weakness has been identified in the company's internal control over financial reporting[14] PART I Business AYRO, Inc. designs and manufactures compact, sustainable electric vehicles (EVs) for commercial use, undergoing a strategic shift to focus on the AYRO Vanish, including a new partnership with GLV Ventures and a role as a tier one supplier for General Motors - The company designs and manufactures compact, sustainable electric vehicles for commercial customers like universities, business campuses, and last-mile delivery services[18] - In September 2022, AYRO ceased production of the AYRO 411x, previously supplied by Cenntro in China, to focus resources on the new AYRO Vanish[19] - An internal restructuring was initiated on January 31, 2024, eliminating a substantial number of positions to re-evaluate sales, marketing, and manufacturing functions and to lower the bill of materials (BOM) for the Vanish[21] - In December 2024, AYRO partnered with GLV Ventures (GLV) to re-engineer and manufacture the Vanish in the United States, becoming a tier one supplier for General Motors (GM) and securing its first purchase order[22][23] - The company has written down its entire inventory to a carrying value of $0, reflecting the active re-engineering of the Vanish and uncertainty regarding the final design, pricing, and commercialization timing[29] - As of December 31, 2024, the company held 11 granted U.S. patents (4 design, 7 utility) and had two pending patent applications[55] - As of December 31, 2024, the company had no direct, full-time employees and instead utilized a network of independent contractors and consultants[74] Risk Factors This section details numerous risks that could materially affect AYRO's business, including a "going concern" warning, a history of unprofitability, potential delisting from Nasdaq, and a material weakness in internal financial controls - The company's independent registered public accounting firm, Marcum LLP, has expressed substantial doubt about its ability to continue as a going concern due to recurring losses and insufficient liquidity[81] - AYRO has a history of losses, incurring a net loss of approximately $1.8 million in 2024 and $34.2 million in 2023, with an accumulated deficit of approximately $117 million as of December 31, 2024[83] - The company received a deficiency letter from Nasdaq on July 18, 2024, for failing to maintain a minimum bid price of $1.00 per share, with an extension until July 14, 2025, to regain compliance[188][189] - A material weakness in internal control over financial reporting has been identified, citing issues with documentation, control activities, and insufficient segregation of duties due to limited personnel[162][163] - The company's Series H-7 Preferred Stock includes provisions for monthly redemptions, which could require substantial cash resources or result in significant dilution to common stockholders if paid in stock[165][166] - Following an internal restructuring, as of December 31, 2024, the company had no direct, full-time employees and relied on a network of independent contractors and consultants[87] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - Not applicable[204] Cybersecurity The company outlines its cybersecurity risk management process, involving executive management and the board of directors, with no material incidents reported to date - The executive management team, led by the Executive Chairman, is responsible for the day-to-day management of cybersecurity risks[206] - A third-party consultant is engaged to review defense measures, provide threat intelligence, and assist in incident response[207] - The board of directors is responsible for the oversight of cybersecurity risks and receives regular updates from management[208] - To date, no cybersecurity incident has materially affected the company's business strategy, results of operations, or financial condition[209] Properties The company's corporate headquarters is in New York, NY, and it leases office space in Round Rock, Texas, which has been subleased from April 2025 to February 2027 - The company leases approximately 23,927 square feet of office space in Round Rock, Texas, with the lease expiring in February 2027[210] - On March 11, 2025, the company entered into an agreement to sublease the Round Rock property from April 1, 2025, through February 28, 2027[211] Legal Proceedings The company is involved in various legal proceedings, including a settled complaint with Club Car for $1.5 million and an ongoing audit by the New York State Department of Labor - A complaint filed by Club Car in October 2023 was settled in December 2024 for $1.5 million, resolving all claims related to alleged vehicle defects and warranty support[216] - A complaint from Inventus Power, Inc. regarding unpaid invoices for battery packs was settled confidentially in August 2024 and did not have a material impact on the company's financials[217] - The company is subject to an ongoing audit by the New York State Department of Labor, which began in March 2018, concerning proper payment of overtime and spread of hours pay[214] Mine Safety Disclosures This item is not applicable to the company - Not applicable[218] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities AYRO's common stock trades on the Nasdaq Capital Market, with no cash dividends paid or planned, and the company repurchased 418,478 shares in Q4 2024 - The company's common stock trades on the Nasdaq Capital Market under the symbol "AYRO"[220] - The company has not paid cash dividends and does not plan to, restricted in part by the terms of its outstanding Series H-7 Preferred Stock[221] Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 1, 2024 - October 31, 2024 | 418,478 | $0.90 | | November 1, 2024 – November 30, 2024 | - | - | | December 1 2024 – December 31, 2024 | - | - | | Fourth Quarter 2024 | 418,478 | - | Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights a dramatic 87.2% decrease in revenue for FY2024, a narrowed net loss due to non-cash gains, and critical liquidity concerns with insufficient cash to fund operations Results of Operations (Years Ended December 31) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $63,777 | $498,917 | $(435,140) | | Gross Loss | $(6,587,202) | $(4,635,079) | $(1,952,123) | | Total Operating Expenses | $12,789,809 | $23,521,349 | $(10,731,540) | | Loss from Operations | $(19,377,011) | $(28,156,428) | $8,779,417 | | Net Loss | $(1,755,479) | $(34,160,455) | $32,404,976 | - Revenue decreased by 87.2% in 2024, primarily due to a $426,612 reduction in vehicle sales following the termination of the MPA with Club Car[264] - Cost of goods sold increased by 29.5%, mainly due to a $1.86 million increase in inventory impairment adjustments for the Vanish and a $732,129 write-off of prepaid inventory[265] - The significant reduction in net loss was driven by non-cash gains, including a $10.96 million gain on the change in fair value of warrant liability and a $6.74 million gain on the change in fair value of derivative liability[271][272] - The company recognized impairment losses of $1.66 million on long-lived assets, including a $1.62 million write-down of idle fixed assets intended for Vanish production[248][269] - Management states that existing cash and marketable securities as of December 31, 2024, are not sufficient to fund operations for at least the next twelve months, raising substantial doubt about the company's ability to continue as a going concern[276] Cash Flow Summary (Years Ended December 31) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,315,402) | $(26,181,465) | | Net cash provided by (used in) investing activities | $(3,064,499) | $8,893,614 | | Net cash provided by (used in) financing activities | $(10,860,809) | $21,632,156 | Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not applicable[300] Financial Statements and Supplementary Data This section contains the audited consolidated financial statements for 2024 and 2023, with the auditor's report expressing substantial doubt about the company's going concern ability - The independent auditor's report includes an explanatory paragraph highlighting substantial doubt about the Company's ability to continue as a going concern due to significant losses and the need to raise additional funds[340] Consolidated Balance Sheet Highlights (As of December 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,035,475 | $33,440,867 | | Inventory | $0 | $3,431,982 | | Total Assets | $21,738,718 | $52,863,778 | | Total Liabilities | $9,469,271 | $27,532,112 | | Total Stockholders' Equity | $4,681,929 | $14,137,727 | Consolidated Statement of Operations Highlights (Years Ended December 31) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $63,777 | $498,917 | | Gross Loss | $(6,587,202) | $(4,635,079) | | Loss from Operations | $(19,377,011) | $(28,156,428) | | Net Loss | $(1,755,479) | $(34,160,455) | | Net Loss per Share (Basic & Diluted) | $(2.02) | $(8.19) | - The company wrote down its entire inventory balance to $0 as of December 31, 2024, from $3.4 million in 2023, due to the ongoing re-engineering of the Vanish[414][415] - Property and equipment, net, was written down to $0 as of December 31, 2024, from $3.1 million in 2023, after a $1.6 million impairment charge on idle assets[418] Changes in and Disagreements With Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - Not applicable[302] Controls and Procedures Management concluded that the company's disclosure controls and procedures were ineffective as of December 31, 2024, due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were ineffective as of December 31, 2024, due to a material weakness in internal control over financial reporting[304] - The material weakness was attributed to: (i) inability to document and implement controls consistent with current resources, (ii) failure to maintain and test effective control activities, and (iii) insufficient segregation of duties and oversight in finance and accounting functions[306] - The company is engaging external consultants to provide support and assist in the remediation of the material weakness[307] Other Information On March 30, 2025, the company entered into an Omnibus Waiver and Amendment Agreement with Series H-7 Preferred Stock holders, modifying restrictive covenants including the minimum cash requirement - On March 30, 2025, the company entered into an Omnibus Waiver and Amendment Agreement with its Series H-7 Preferred Stock holders[313] - The agreement amends a restrictive covenant to require the company to maintain cash and cash equivalents equal to at least 120% of the aggregate stated value of the outstanding Series H-7 Preferred Stock, effective January 1, 2025[314] - The amendment also removed the previous requirement to maintain a segregated cash account[314] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[315] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information for Items 10 through 14 is incorporated by reference from the company's forthcoming definitive proxy statement for its 2025 annual meeting of stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming definitive proxy statement[317][318][319][320][321] PART IV Exhibits, and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report - This item lists the financial statements and exhibits filed with the Annual Report on Form 10-K[323] Form 10-K Summary This item is not applicable to the company - Not applicable[325]