Financial Performance - Revenue for the three months ended March 31, 2025, was $6.4 million, a decrease of approximately 8.57% 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]. - Net revenues for the three months ended March 31, 2025, were $6,421,371, a decrease of 8.1% 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, compared to $1,525,633 in 2024, driven by an increase in average selling price per vehicle[215][219]. - 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 company reported a net loss of $(2,750,317) for the three months ended March 31, 2025, a slight improvement of 3.8% compared to $(2,859,862) in 2024[215]. - 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 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]. - Interest expense increased by 63.4% to $(1,856,979) for the three months ended March 31, 2025, compared to $(1,136,300) in 2024[215]. - The company experienced a significant increase in provision for credit losses, reporting $9,295 for the three months ended March 31, 2025, compared to $0 in 2024[220]. Production and Operations - The company increased production by approximately 20% in 2023 utilizing one shift[194]. - The company plans to leverage the assets of Brand New Muscle Car (BNMC) for the production of Mustangs in 2024 and 2025, resulting in 6 Mustang contracts[195]. - The company opened new retail locations in West Palm Beach, FL, and Nantucket, MA, in 2025[196]. - The company plans to relocate quality and warranty services to a new facility in 2024, which will also serve as a warranty and used vehicle sales center[195]. - Vehicle builds accounted for 99.8% of total revenue for the three months ended March 31, 2025, with a decrease of $491,455 compared to the same period in 2024[216][217]. - Warranty and other revenue decreased by 94.6% to $4,290 for the three months ended March 31, 2025, compared to $79,050 in 2024[216]. Financial Position and Liquidity - The company anticipates sufficient resources to operate during 2024[193]. - As of March 31, 2025, the company had customer deposits amounting to $7,721,542 and deferred revenue of $2,766,821 for vehicles completed but not yet titled[228]. - 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[240][241]. - The company had cash and cash equivalents of $677,473 as of March 31, 2025, with primary operating funds sourced from cash receipts from sales and loans payable[232]. - The company anticipates needing to raise additional financing through loans or equity raises to support future capital requirements, with no assurance that such financing will be available on commercially acceptable terms[238]. - Management has raised substantial doubt about the company's ability to continue as a going concern for the next twelve months due to liquidity concerns[239]. Debt and Financing - 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 of the company[181]. - The company provided cash of $2,249,565 from financing activities for the three months ended March 31, 2025, primarily from the January 2025 Convertible Note and the Agile Loan[244]. - Total future lease obligations as of March 31, 2025, amount to $4,734,564, with the largest obligations in 2029 and beyond totaling $2,765,365[246]. - 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 from the new loan were used to pay off the previous Agile Loan of $1,749,300[291]. - The Company entered into loan agreements with a private lender for two term loans totaling $300,000, with an interest rate of 24.99%[294]. - The Company authorized a new series of Series B Convertible Preferred Stock, allowing for the conversion of $1,284,881 of outstanding notes into shares[295]. Revenue Recognition and Tax Assets - The company recognizes revenue upon completion of vehicle builds and transfer of title, with product revenue recorded when the build is completed[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[257]. - The company generates additional revenue through extended warranties and repair services, with service revenue recognized upon completion of the work[258][259]. - The company has a warranty reserve based on historical warranty costs per vehicle, which may require adjustments if actual costs differ from estimates[261]. - As of March 31, 2025, the company has recorded a valuation allowance against all deferred tax assets, indicating it is more likely than not that the benefits of these assets will not be recognized[269]. - The company evaluates the realizability of deferred tax assets quarterly, considering factors such as future taxable income and historical taxable income[268]. Strategic Initiatives - 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 issue 725,000 unrestricted shares of capital stock to One Drivers Club upon completion of the showroom build-out, with a minimum value of $500,000[284]. - The Company issued 236,000 shares of common stock to an advisor for business advisory services on February 20, 2025[282]. - The Company appointed Keven Kastner as Chief Revenue Officer to drive sales and manage revenue streams[283]. Miscellaneous - The company’s financial instruments, such as cash and accounts receivable, approximate their carrying amounts due to their short maturity[270]. - The company’s warranty obligations are influenced by its product quality programs and historical warranty costs, which are monitored for potential adjustments[261]. - 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]. - As a smaller reporting company, the Company is not required to provide quantitative and qualitative disclosures about market risk[298].
ECD Automotive Design(ECDA) - 2025 Q1 - Quarterly Report