AYRO(US:AYRO)2023-08-13 16:00Revenue and Sales - The company has historically derived a significant portion of its revenues from Club Car, and the termination of the master procurement agreement (MPA) could lead to a substantial decrease in sales[90]. - Revenue is derived from the sale of four-wheeled electric vehicles, with recognition upon shipment[111]. - Revenue for the three months ended June 30, 2023, was $0.14 million, a decrease of 85.8% compared to $0.98 million for the same period in 2022, primarily due to reduced sales to Club Car[127]. - Revenue for the six months ended June 30, 2023, was $0.25 million, a decrease of 87.4% from $2.01 million for the same period in 2022, again due to reduced sales to Club Car[136]. Financial Condition and Losses - The company has a history of losses and expects to incur additional losses in the future, indicating it may never achieve profitability[82]. - Net loss for the three months ended June 30, 2023, was $6.00 million, compared to a net loss of $5.97 million for the same period in 2022[126]. - The company used $14.89 million in cash for operating activities during the six months ended June 30, 2023, an increase of $5.06 million compared to the same period in 2022[147]. - As of June 30, 2023, the company had $13.57 million in cash and $19.46 million in marketable securities, down from $39.1 million in cash and $9.85 million in marketable securities as of December 31, 2022[142]. Product Development and Strategy - The company is focusing on the development and launch of the AYRO Vanish, with pre-production completed in December 2022[89]. - The company has initiated a strategic review of its product development strategy to create value in the electric vehicle market[88]. - The company is reevaluating its channel strategy following the termination of the MPA, which may impact sales and financial condition[91]. - The company is evaluating its product development strategy, which may result in significant changes impacting its business and financial condition[83]. - The company has ceased production of the AYRO 411x and is focusing on the development and launch of the new Vanish vehicle[99]. Manufacturing and Supply Chain - The Vanish will utilize assemblies and products primarily sourced from North America and Europe, reducing dependency on Chinese imports[100]. - The company has entered into a manufacturing agreement with Linamar Corporation, which has an initial term of three years and requires minimum purchase commitments[102]. - The company experienced supply chain shortages of lithium-ion battery cells and other critical components, impacting vehicle production[110]. - The company relies on a single third-party supplier for certain components, which poses risks to its operations[83]. Compliance and Regulatory Issues - The company has received a letter from Nasdaq regarding non-compliance with the minimum bid price requirement, which could lead to delisting if not resolved[92]. - Nasdaq granted the company an additional 180-day period until October 2, 2023, to regain compliance with the Minimum Bid Price Requirement[93]. - If compliance is not demonstrated by October 2, 2023, the company's common stock could be delisted from Nasdaq[95]. - The company plans to seek stockholder approval for a reverse stock split at a ratio of 1-for-2 to 1-for-10 to meet compliance[94]. Investment and Financing - The company completed a Private Placement on August 10, 2023, raising approximately $22 million through the sale of 22,000 shares of Series H-7 Preferred Stock and warrants[152]. - The Preferred Shares are convertible into up to 22,000,000 shares of common stock at an initial conversion price of $1.00 per share[152]. - Holders of the Preferred Shares are entitled to an 8% annual dividend, compounded monthly, which increases to 15% per annum during a Triggering Event[157]. - The company is required to redeem the Preferred Shares in twelve equal monthly installments starting between February 7, 2024, and August 7, 2025[155]. - The Placement Agent received a cash fee of 6% of the gross proceeds from the Private Placement and warrants to purchase shares equal to 2% of the common stock convertible from the Preferred Shares[154]. - The company intends to seek stockholder approval for the issuance of more than 19.9% of its outstanding shares by November 5, 2023[158]. - The Warrants are exercisable for shares of common stock at an exercise price of $1.00 per share and expire five years from the date of issuance[161]. - The company is obligated to file a resale registration statement for 150% of the Conversion Shares and Warrant Shares within 30 days after the closing date[162]. - There is no established public trading market for the Preferred Shares or the Warrants, and the company does not intend to list them on any national securities exchange[160]. - The company is subject to certain affirmative and negative covenants regarding indebtedness and cash requirements as part of the Purchase Agreement[160]. Operating Expenses - Operating expenses are expected to increase as the company invests in growing its business, including sales and marketing, research and development, and general administrative expenses[120][121]. - Research and development expenses increased to $2.41 million for the three months ended June 30, 2023, an increase of 129.8% compared to $1.05 million for the same period in 2022, driven by costs related to the AYRO Vanish[129]. - General and administrative expenses rose to $3.25 million for the three months ended June 30, 2023, an increase of 18.5% from $2.74 million in the same period in 2022, primarily due to professional services[132]. - Research and development expenses for the six months ended June 30, 2023, were $4.54 million, an increase of 137.2% from $1.91 million in the same period in 2022, mainly due to costs for the AYRO Vanish[138]. - Cost of goods sold decreased by $2.5 million, or 88.3%, for the three months ended June 30, 2023, corresponding with the decrease in vehicle sales[128]. Strategic Partnerships - The company is exploring potential partnerships and acquisitions to enhance its competitive position in the market[144].