AYRO(US:AYRO)2022-08-10 16:00Financial Performance - The company has a history of losses and has never been profitable, expecting to incur additional losses in the future[98] - Revenue for the three months ended June 30, 2022, was $0.98 million, an increase of 88% compared to $0.52 million for the same period in 2021[151] - Revenue for the six months ended June 30, 2022, was $2.01 million, an increase of 53.2% compared to $1.32 million for the same period in 2021[158] - Cost of goods sold increased by $2.4 million, or 556.8%, for the three months ended June 30, 2022, primarily due to a $1.32 million write-off of NCM inventory[152] - Cost of goods sold increased by $2.93 million, or 272.5%, for the six months ended June 30, 2022, due to inventory write-offs and increased vehicle sales[159] - Gross margin percentage was (188.1)% for the three months ended June 30, 2022, a significant decrease from 17.5% for the same period in 2021[153] - General and administrative expenses were $2.74 million for the three months ended June 30, 2022, a decrease of $1.32 million, or 32.5%, primarily due to a reduction in stock-based compensation[156] - General and administrative expenses for the six months ended June 30, 2022, were $5.45 million, a decrease of $1.91 million, or 26%, primarily due to a decrease in stock-based compensation[164] - As of June 30, 2022, the company had $40.89 million in cash and $17.97 million in marketable securities, down from $69.16 million in cash at the end of 2021[165] Product Development and Strategy - The company plans to unveil the first AYRO Z prototype in the fourth quarter of 2022, focusing on the development and launch of this new model[105] - The company has canceled the development of a planned next-generation three-wheeled high-speed vehicle as part of a strategic review initiated in 2021[103] - The company ceased production of the AYRO 411x in September 2022 due to rising shipping costs and quality issues, focusing instead on the AYRO Z[104] - The company is transitioning from the AYRO 411x platform to the AYRO Z, with plans to retire the 411x assembly line by late September 2022[119] - A supply agreement with Gallery Carts led to the launch of an all-electric configurable mobile hospitality vehicle, addressing the demand for mobile food and beverage options[120] Supply Chain and Operational Challenges - The Master Procurement Agreement with Club Car requires a minimum order of 500 vehicles per year, which Club Car did not meet for 2020 and 2021[113] - The company intends to eliminate dependency on Chinese imports for the AYRO Z and optimize the supply chain to North American and European sources[112] - Supply chain shortages of lithium-ion battery cells and other critical components are expected to continue impacting production through the third quarter of 2022[129] - Shipping costs have increased to at least three times historical levels, significantly impacting profitability and operational margins[128] - The COVID-19 pandemic has adversely impacted the company's operations, delaying raw material procurement and affecting sales and demand through at least the third quarter of 2022[124] Internal Controls and Governance - The company has identified a material weakness in its internal control over financial reporting, which could harm its business if not remediated[100] - The company is evaluating its relationship with Club Car and may seek a new business partner for selling products starting with the AYRO Z[123] - The company is exploring potential partnerships and acquisitions to enhance its competitive position in the electric vehicle market[167] Research and Development - Research and development expense decreased by $2 million, or 65.6%, to $1.05 million for the three months ended June 30, 2022, due to repositioning of expenses[154] Agreements and Contracts - The company has a manufacturing services agreement with Karma, with an initial payment of $1.2 million for assembly and logistics services[116] - The Karma Agreement was amended to allow Karma to assemble a certain number of units of the AYRO 411x vehicle, expiring in September 2022[117]