AYRO Inc
For the period ended Dec 31, 2023. Filed Apr 1, 2024.
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FY2023 · Filed Apr 1, 2024
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Item 8. Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
AYRO, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AYRO, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in mezzanine equity and stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsto obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Redeemable Preferred Stock and Derivative Liability
| Critical Audit Matter Description | As discussed in Notes 2, 9 and 14 to the financial statements, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell to investors 22,000 shares of Series H-7 Convertible Preferred Stock for $22 million gross proceeds during the year ended December 31, 2023. The Certificate of Designations includes certain triggering events that would require the Company to redeem in cash any or all of the holder’s Series H-7 Convertible Preferred Stock at a premium set forth in the Certificate of Designations, as well as features that are not clearly and closely related to the Series H-7 Convertible Preferred Stock. Auditing the accounting conclusions for the issuance of the Series H-7 Convertible Preferred Stock discussed above was challenging because of the complex provisions affecting classification and required extensive audit effort. The accounting for the Series H-7 Convertible Preferred Stock involved an assessment of the particular features in the agreement and Certificate of Designations and the impact of those features on the accounting and classification of the Series H-7 Convertible Preferred Stock. The determination of fair value requires significant judgment by management and third-party valuation specialists to develop significant estimates and assumptions. Auditing those estimates and assumptions involved especially challenging auditor judgment. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding and evaluated the procedures over management’s technical accounting analysis and valuation process. We inspected the governing agreements for the transaction and evaluated the application of the Company’s technical accounting analysis including evaluating the terms and management’s conclusion on the interpretation and application of the relevant accounting literature. With the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology used, the reasonableness of the inputs and assumptions, and verified the accuracy and completeness of the underlying data utilized in the valuation of the Series H-7 Convertible Preferred Stock and embedded derivative liability. We also performed sensitivity analysis of the significant assumptions used in the valuation model to evaluate the change in fair value resulting from changes in the significant assumptions to determine reasonableness of the valuation conclusions. |
/s/Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2020
East Hanover, New Jersey
April 1, 2024
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