AYRO(US:AYRO)2021-11-14 16:00Product Development and Strategy - The company is currently evaluating its product development strategy, which may lead to significant changes impacting its business and financial condition[154]. - The company initiated a strategic review of its product development strategy after hiring a new CEO in Q3 2021, pausing all material R&D activities[167]. - The company has paused all material research and development expenditures, including those for a planned next-generation three-wheeled vehicle[168]. - The company suspended all material research and development activities while conducting a strategic review of its product development strategy[231]. Financial Performance and Losses - The company has a history of losses and has never been profitable, expecting to incur additional losses in the future[154]. - For the three months ended September 30, 2021, the net loss was $12.00 million, compared to a net loss of $2.68 million for the same period in 2020, representing an increase of 348%[226]. - Net loss for the nine months ended September 30, 2021, was $25.30 million, compared to a net loss of $6.01 million for the same period in 2020[214]. - Adjusted EBITDA for the three months ended September 30, 2021, was $(8.21) million, compared to $(2.09) million for the same period in 2020, indicating a deterioration in operational performance[226]. Revenue and Sales - For the three and nine months ended September 30, 2021, revenues from Club Car constituted approximately 99% and 71% of AYRO's revenue, respectively[173]. - Revenue for the three months ended September 30, 2021, was $0.56 million, an increase of 43.9% compared to $0.39 million for the same period in 2020, driven by increased sales to Club Car[205]. - For the nine months ended September 30, 2021, total revenue was $1.87 million, a 128% increase from $0.82 million in the same period in 2020[215]. Costs and Expenses - Cost of goods sold increased by $0.63 million, or 193%, for the three months ended September 30, 2021, including $0.38 million in obsolete inventory write-offs[206]. - Gross margin percentage was -70.8% for the three months ended September 30, 2021, down from 15.9% in the same period in 2020, primarily due to inventory write-offs and increased costs[206]. - Research and development expenses rose to $4.17 million for the three months ended September 30, 2021, compared to $0.66 million in 2020, an increase of $3.50 million[207]. - General and administrative expenses increased to $6.81 million for the three months ended September 30, 2021, from $1.48 million in 2020, an increase of $5.33 million[209]. - Cost of goods sold for the nine months ended September 30, 2021, increased by $1.38 million, or 215%, compared to the same period in 2020[216]. - Research and development expenses for the nine months ended September 30, 2021, were $9.14 million, up from $1.00 million in 2020, an increase of $8.14 million[218]. - General and administrative expenses for the nine months ended September 30, 2021, were $14.17 million, compared to $3.45 million in 2020, an increase of $10.72 million[220]. Cash and Financing - As of September 30, 2021, the company had $77.10 million in cash and working capital, up from $36.54 million in cash and $38.50 million in working capital as of December 31, 2020, reflecting a significant increase due to capital raising activities[228]. - During the nine months ended September 30, 2021, the company used $18.72 million in cash for operating activities, an increase of $12.18 million compared to $6.54 million used in the same period in 2020[232]. - The company raised gross proceeds of $20.00 million from a registered direct offering of 3,333,334 shares at $6.00 per share on January 25, 2021[229]. - The company raised gross proceeds of $41.80 million from a registered direct offering of 4,400,001 shares at $9.50 per share on February 11, 2021[230]. - The company issued 555,004 shares from the exercise of stock options during the nine months ended September 30, 2021, generating cash proceeds of $1.5 million[231]. - The net cash provided by financing activities during the nine months ended September 30, 2021, was $59.86 million, compared to $31.35 million in 2020, indicating a strong financing position[232]. Supply Chain and Operational Risks - The company relies on a single third-party supplier located in China for sub-assemblies, which poses risks to its operations[154]. - The company is subject to various risks, including disruptions in transportation networks and increases in shipping costs, which could adversely affect gross margins[154]. - AYRO experienced supply chain shortages of lithium-ion battery cells and other critical components, affecting vehicle production plans through at least the end of 2021[187]. - AYRO's shipping costs have increased to at least three times historical levels due to global shipping industry challenges, impacting profitability[191]. Competitive Landscape - The company’s business is highly competitive, and it may not succeed in competing effectively in the electric vehicle market[154]. Strategic Partnerships and Agreements - The majority of sales are derived from four-wheeled vehicles sold to Club Car, LLC, through a strategic arrangement initiated in early 2019[166]. - AYRO entered into a Master Manufacturing Services Agreement with Karma Automotive for $1.2 million, with $0.52 million paid at closing and $0.64 million due after meeting production requirements[174]. - AYRO launched an all-electric configurable mobile hospitality vehicle in collaboration with Gallery Carts, targeting "on-the-go" venues across the United States[176]. Miscellaneous - The COVID-19 pandemic has adversely impacted AYRO's business operations, delaying raw material procurement and affecting sales demand throughout 2021[185]. - The company recorded a compensation expense of $3.10 million due to accelerated vesting of stock awards during the three months ended September 30, 2021[183]. - AYRO's revenue recognition typically occurs upon shipment, with variations based on customer orders and production capabilities[192]. - The company does not have any off-balance sheet arrangements as of September 30, 2021, ensuring transparency in its financial obligations[239].