ECD Automotive Design(ECDA) - 2025 Q3 - Quarterly Report

Financial Performance - Net revenues for the three months ended September 30, 2025, were $5,783,182, a decrease from $6,440,049 for the same period in 2024, representing a decline of approximately 10.2%[200] - Net income for the three months ended September 30, 2025, was $2,232,855, compared to a net loss of $2,569,518 for the same period in 2024[200] - For the nine months ended September 30, 2025, net revenues were $19,220,445, down from $19,884,213 in 2024, indicating a decrease of about 3.3%[200] - Revenue for the three months ended September 30, 2025, decreased by $656,867, or 10%, compared to the same period in 2024, primarily due to a decrease in build revenue[238] - Revenue for the nine months ended September 30, 2025, decreased by $663,768 (3%) to $19,220,445 compared to $19,884,213 in the same period of 2024[246] - The company reported a net loss of $4,787,756, a decrease of $2,671,119 (36%) compared to a net loss of $7,458,875 in the same period of 2024[246] Debt and Financing - The company entered into a Securities Purchase Agreement on October 6, 2023, issuing a senior secured convertible note for a principal amount of $15,819,209[204] - The December 2023 Convertible Note has a maturity date of December 12, 2026, and is secured by a first priority perfected security interest in all existing and future assets of the company[205] - The company executed a Business Loan and Security Agreement on February 20, 2025, receiving a term loan of $1,575,000, which included an administrative agent fee of $75,000[216] - A new business loan agreement was entered into on April 4, 2025, for a principal amount of $1,824,300, with repayments structured over 69 equal weekly payments[218] - The net proceeds from the new loan were used to pay off the Agile Loan in a discounted amount of $1,749,300, including principal and interest[219] - Interest expense increased by $1,680,635, or 120%, for the three months ended September 30, 2025, due to additional debt taken out[243] - Interest expense increased by $3,200,138 (83%) to $7,044,791 due to additional debt and early repayment of the Agile Loan[251] - Total other income increased by $8,915,282, primarily due to gains on the fair value of conversion of Notes Payable to Series B and C Preferred Stock[250] Operating Expenses - Cost of goods sold increased by $3,021,678, or 68%, for the three months ended September 30, 2025, leading to a gross loss of $1,671,005[238] - Operating expenses rose by $771,097, or 29%, for the three months ended September 30, 2025, driven mainly by increased general and administrative costs[241] - Gross profit fell by $4,106,005 (73%) to $1,482,011 due to increased costs of materials, shipping, customs fees, and labor associated with builds[248] - Operating expenses rose by $3,376,213 (43%) to $11,141,113, primarily driven by a 52% increase in general and administrative expenses[249] Business Operations - The company operates a logistics center in the UK to source and transport over-25-year-old vehicles for restoration[203] - The company employs 95 individuals at its headquarters, known as the "RoverDome," located in Kissimmee, FL[203] - The company plans to expand its production capabilities by relocating quality and warranty services to a new facility in 2025[228] - The company introduced the Jaguar E-type in 2022, which has a higher price point and gross margin compared to traditional models[228] - The company opened new retail locations in West Palm Beach, FL, and Nantucket, MA, in 2025 to enhance marketing channels[229] Cash Flow and Liquidity - Cash used in operating activities was $5,942,498, with $1,457,749 allocated to fund working capital[262] - Financing activities provided cash of $4,623,329, mainly from proceeds of Convertible Notes and Series C Preferred Stock[264] - The company's liquidity condition raises substantial doubt about its ability to continue as a going concern within one year[260] Accounting and Financial Reporting - The Company provides for estimated warranty costs at the time revenue is recognized, influenced by historical warranty costs per vehicle[275] - Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue, with contracts typically having a payment period of one year or less[276] - Shipping and handling costs related to customer contracts are recorded as part of the cost of goods[277] - Inventories are measured at the lower of cost or net realizable value, with finished goods inventory including completed vehicles not yet delivered[278] - The estimated fair value of cash, accounts receivable, and accounts payable approximates their carrying amounts due to short maturities[279] - The Company assesses warrants for liability or equity classification based on specific accounting standards, impacting how changes in fair value are recorded[280] - Convertible debt instruments are evaluated for liability classification and whether conversion features should be accounted for separately[281] - Redeemable equity instruments are classified based on whether they are subject to unconditional obligations for redemption, affecting their measurement[282] - The Company is not required to provide quantitative and qualitative disclosures about market risk as a smaller reporting company[283]