AYRO(US:AYRO)2022-11-02 16:00Financial Performance - The company has a history of losses and has never been profitable, expecting to incur additional losses in the future[101]. - Revenue for the three months ended September 30, 2022, was $0.37 million, a decrease of 33% compared to $0.56 million for the same period in 2021, primarily due to a $2,000 discount per vehicle sold, reducing revenue by $0.13 million[151]. - Revenue for the nine months ended September 30, 2022, was $2.38 million, an increase of 27.3% compared to $1.87 million for the same period in 2021, driven by increased vehicle sales[160]. - Gross margin percentage was (155.9%) for the three months ended September 30, 2022, compared to (70.8%) for the same period in 2021, attributed to credit memos related to the Club Car Discount[152]. - Cost of goods sold increased by 144.3% to $4.96 million for the nine months ended September 30, 2022, compared to $2.03 million in the same period in 2021, due to inventory write-offs and increased sales[161]. Product Development and Strategy - The company ceased production of the AYRO 411x in September 2022 due to rising shipping costs and quality issues, focusing on the development of the new Vanish model[109]. - The company expects to unveil the first Vanish prototype in the fourth quarter of 2022[110]. - The company is currently evaluating its product development strategy, which may result in significant changes impacting business and financial condition[102]. - The company intends to utilize North American and European sources for the new Vanish to reduce dependency on Chinese imports[117]. - The company is reevaluating its relationship with Club Car and may seek new business partners for selling products starting with the Vanish[120]. Supply Chain and Operational Challenges - The cost of shipping products by ocean freight has increased to at least three times historical levels, adversely impacting profitability[132]. - The company expects supply chain shortages of lithium-ion battery cells and other critical components to continue affecting production through the fourth quarter of 2022[133]. - The COVID-19 pandemic has delayed procurement of raw materials and shipments, adversely impacting sales and demand for products in 2021 and the first half of 2022[128]. Financial Position and Cash Flow - As of September 30, 2022, the company had $39.43 million in cash and $15.79 million in marketable securities, down from $69.16 million in cash as of December 31, 2021[167]. - During the nine months ended September 30, 2022, the company had no notable financing activities[174]. - In the nine months ended September 30, 2021, the company received net proceeds of $59.57 million from the issuance of common stock, net of fees and expenses[174]. - The company also received $0.10 million from the exercise of warrants for cash during the same period[174]. - In June 2021, the company issued 555,004 shares of common stock from the exercise of stock options, resulting in cash proceeds of $1.5 million[174]. Expenses and Cost Management - Research and development (R&D) expense decreased by 59.5% to $1.69 million for the three months ended September 30, 2022, down from $4.17 million in the same period in 2021, due to a repositioning of expenses[153]. - Sales and marketing expense was $0.38 million for the three months ended September 30, 2022, a decrease of 40.5% from $0.65 million in the same period in 2021, as costs related to marketing initiatives were reduced[155]. - General and administrative expenses were $3 million for the three months ended September 30, 2022, a decrease of 55.9% from $6.81 million in the same period in 2021, primarily due to a reduction in stock-based compensation[156]. - General and administrative expenses for the nine months ended September 30, 2022, were $8.45 million, a decrease of 40.4% from $14.17 million in the same period in 2021, mainly due to a significant reduction in stock-based compensation[165]. Inventory and Quality Issues - The company has canceled all purchase orders and future builds with Cenntro and is in discussions regarding unsaleable inventory[116]. - The company experienced a 100% failure rate in testing certain components from Cenntro, leading to a write-off of $1,317,289 in inventory[135]. Market Position and Future Outlook - The company’s vehicles are designed for low-speed logistics and community transport, targeting commercial customers[108]. - The company’s future growth depends on customers' willingness to adopt electric vehicles[102]. - The company is exploring potential partnerships and acquisitions to enhance its competitive position in the electric vehicle market following a strategic review[169]. Compliance and Regulatory Issues - The company has not regained compliance with Nasdaq's minimum bid price requirement of $1.00 per share as of the date of the report[112].