AYRO(US:AYRO)2022-05-01 16:00Financial Performance - The company has a history of losses and has never been profitable, expecting to incur additional losses in the future[84] - Revenue for the three months ended March 31, 2022, was $1.03 million, an increase of 30.2% or $0.24 million compared to $0.79 million for the same period in 2021[130] - Net loss for the three months ended March 31, 2022, was $4.58 million, a decrease of $1.06 million compared to a net loss of $5.63 million for the same period in 2021[129] - Cash used in operating activities was $5.55 million for the three months ended March 31, 2022, an increase of $2.1 million compared to $3.45 million in the same period in 2021[140] - Cash used in investing activities was $20.12 million for the three months ended March 31, 2022, compared to $0.15 million in the same period in 2021, primarily due to investment in marketable securities[140] - As of March 31, 2022, the company had $43.49 million in cash and $19.98 million in marketable securities, down from $69.16 million in cash as of December 31, 2021[135] Revenue Sources - Approximately 99% of the company's revenues for the three months ended March 31, 2022, were derived from Club Car[100] - Revenue is primarily derived from the sale of four-wheeled electric vehicles, with recognition upon shipment to customers[117] Operational Challenges - The company experienced significant disruptions in operations due to the COVID-19 pandemic, affecting raw material procurement and customer demand, with expectations of continued impact through Q3 2022[111] - Shipping costs have increased to at least three times historical levels, adversely affecting profitability and operational margins[114] - Supply chain shortages of lithium-ion battery cells and critical components have slowed vehicle production, with expectations of continued impact through Q3 2022[115] - The company relies on a single third-party supplier for sub-assemblies, which poses risks to production and operational stability[86] Product Development and Strategy - The company is currently updating its model year 2023 vehicle lineup to support markets such as last-mile delivery and government use[91] - A strategic review of the product development strategy was initiated, pausing all material research and development activities related to the next-generation three-wheeled vehicle[92] - The company is evaluating its product development strategy, which may result in significant changes impacting its business and financial condition[84] - Research and development efforts are focused on the new AYRO Z fleet vehicle model, aimed at reducing dependency on Chinese imports and enhancing supply chain resilience[116] Expenses and Cost Management - Cost of goods sold increased by $0.53 million, or 82.6%, for the three months ended March 31, 2022, due to increased vehicle sales and shipping costs[131] - Gross margin percentage was (14.6%) for the three months ended March 31, 2022, down from 18.3% for the same period in 2021, primarily due to increased shipping costs and out of scope costs[131] - Research and development expenses decreased by $1.06 million, or 54.7%, to $0.87 million for the three months ended March 31, 2022, due to repositioning of expenses[132] - Sales and marketing expenses increased by $0.28 million, or 150%, to $0.84 million for the three months ended March 31, 2022, as the company expanded its sales and marketing staff[133] - General and administrative expenses decreased by $0.60 million, or 18.3%, to $2.70 million for the three months ended March 31, 2022, primarily due to a reduction in headcount[134] Agreements and Partnerships - The company has minimum purchase requirements under its Manufacturing License Agreement with Cenntro, which includes selling a minimum of 1,300 units by the third anniversary of the agreement[95] - The Master Procurement Agreement with Club Car requires a minimum order of 500 vehicles per year to maintain exclusivity in North America[99] - The company has entered into a Master Manufacturing Services Agreement with Karma, agreeing to pay $1.2 million for manufacturing services[101] - The Karma Agreement allows for termination by either party with varying notice periods, with Karma having the discretion to terminate without cause upon twelve months' notice[102] - A supply agreement with Gallery Carts was established in 2020, leading to the launch of an all-electric mobile hospitality vehicle, catering to the growing demand for on-the-go food options[103] Market Demand - A study by Technomic indicated that 77% of students desire alternative mobile and to-go food options on campuses, highlighting market demand for innovative delivery solutions[104]