Financial Performance - Revenue for the three months ended March 31, 2025, was $6.4 million, a decrease of approximately 8.6% compared to $7.0 million for the same period in 2024[176]. - The company reported a net loss of $2.8 million for the three months ended March 31, 2025, compared to a net loss of $2.9 million for the same period in 2024[176]. - For the three months ended March 31, 2025, net revenues decreased by 8.1% to $6,421,371 compared to $6,989,746 for the same period in 2024[215]. - Gross profit increased by 15.7% to $1,764,572 for the three months ended March 31, 2025, driven by an increase in average selling price per vehicle[215]. - Adjusted EBITDA for the three months ended March 31, 2025 was $(877,790), a decrease of $442,900 compared to $(434,890) for the same period in 2024[199]. - The net loss for the three months ended March 31, 2025 was $(2,750,317), a slight improvement of 3.8% compared to $(2,859,862) in 2024[215]. Operating Expenses - General and administrative expenses rose significantly by 58.3% to $3,393,542 for the three months ended March 31, 2025, compared to $2,143,550 in 2024[220]. - Total operating expenses increased by 47.0% to $3,719,080 for the three months ended March 31, 2025, compared to $2,529,711 in 2024[220]. - General and administrative expenses increased by $1,249,992 for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to equity compensation increases of $632,714, inventory write-offs of $353,377, and recruitment expenses of $85,541[222]. Revenue Recognition - The Company recognizes revenue when the product build is completed and title has been transferred, with revenue from vehicle sales recorded upon delivery[256]. - Approximately 25% to 50% of the total contract consideration is received as an upfront payment, recorded as deferred revenue, with the remaining 50% to 75% billed upon completion of the build[257]. - The Company generates revenue through extended warranties and repair services, with service revenue recognized upon completion of the repair work[258][259]. - The Company applies the five-step revenue recognition model to contracts when it is probable that it will collect the consideration due[255]. Financing and Debt - The company has a senior secured convertible note with a principal amount of $15,819,209, accruing interest at an annual rate of Prime Interest rate plus 5%[180]. - The December 2023 Convertible Note has a maturity date of December 12, 2026, and ranks senior to all outstanding and future indebtedness[181]. - The company executed a Business Loan and Security Agreement for a term loan of $1,575,000, with repayments commencing March 3, 2025[189]. - The Company entered into a securities purchase agreement on January 8, 2025, for a loan of $1,724,100, which includes the issuance of 500,000 shares of Common Stock[276][277]. - The Company entered into a Business Loan and Security Agreement on February 20, 2025, receiving a term loan of $1,575,000, with total interest accruing to $661,500[281]. - The Company entered into a new loan agreement on April 4, 2025, receiving a term loan of $1,824,300, with total interest accruing to $638,505[290]. - The net proceeds of the new loan were used to pay off the Agile Loan in the discounted amount of $1,749,300[291]. - The Company received two term loans of $150,000 each from a private lender on May 8, 2025, with an interest rate of 24.99%[294]. Operational Developments - The company plans to leverage the assets of Brand New Muscle Car (BNMC) for the production of Mustangs, resulting in 6 Mustang contracts[195]. - The company increased production by approximately 20% in 2023 and added an additional 10,000 sq. ft. of space in the second half of 2024 for vehicle storage[194]. - The company has opened new retail locations in West Palm Beach, FL, and Nantucket, MA, as part of its marketing strategy in 2025[196]. - The company plans to relocate quality and warranty services to a new facility in 2024, enhancing operational efficiency[195]. Cash Flow and Liquidity - Cash used in operating activities was $3,045,185 for the three months ended March 31, 2025, compared to $2,554,971 for the same period in 2024, primarily due to a decrease in deferred revenue and increases in accounts receivable and prepaid assets[240][241]. - The company provided cash of $2,249,565 from financing activities for the three months ended March 31, 2025, mainly from proceeds of the January 2025 Convertible Note and the Agile Loan[244]. - The company’s liquidity condition raises substantial doubt about its ability to continue as a going concern for the next twelve months, as indicated by management's assessment[239]. - The company plans to use its current cash position and collections from accounts receivable to fund ongoing operations, while also considering future financing options[247]. Market and Economic Conditions - Inflation has impacted the company through increased shipping, product, and labor costs, but did not have a material impact on operations for the three months ended March 31, 2025[248]. Tax and Valuation - As of March 31, 2025, the Company had zero reserves related to uncertain tax positions, indicating no adjustments were necessary for tax positions taken[266]. - The Company recorded a valuation allowance against all deferred tax assets as it is more likely than not that the benefits of these assets will not be recognized[269]. Strategic Partnerships and Agreements - The Company signed a Strategic Partnership Agreement with One Drivers Club to launch a retail showroom in West Palm Beach, Florida, with a base rent of $225,000 per annum, subject to 4% annual increases[284]. - The Company will pay One Drivers Club $75,000 for showcasing custom vehicles from April 1, 2025, to December 31, 2025[287]. Shareholder and Corporate Governance - The Company held its 2024 annual meeting on December 27, 2024, with 21,334,357 shares (58.94%) represented[288]. - The Company authorized a new series of Series B Convertible Preferred Stock, with an initial conversion of $1,284,881 into 4,000 shares of Series B Preferred Stock[295]. - The Exchange Agreement allows the Lender to require the Company to participate in Additional Exchanges for converting outstanding amounts into Series B Preferred Stock[296]. - The Exchange Agreement is detailed in the Current Report on Form 8-K filed on May 15, 2025, as Exhibit 10.1[297].
EF Hutton Acquisition I(EFHT) - 2025 Q1 - Quarterly Report