AYRO Inc

Previous wording

A summary of the principal risk factors that make investing in our securities risky and might cause our actual results to differ materially from those projected in these forward-looking statements is set forth below. If any of the following risks occur, our business, financial condition, results of operations, cash flows, cash available for distribution, ability to service our debt obligations and prospects could be materially and adversely affected.

Current wording

A summary of the principal risk factors that make investing in our securities risky and might cause our actual results to differ materially from those projected in these forward-looking statements is set forth below. If any of the following risks occur, our business, financial condition, results of operations, cash flows, cash available for distribution, and ability to service our debt obligations and prospects could be materially and adversely affected.

Previous wording

During the three and six months ended June 30, 2024, a $856,361 and $1,622,609 impairment of inventory adjustment was recorded in cost of goods sold, related to the Vanish product. Included in the impairment of inventory adjustment during the three and six months ended June 30, 2024, is $476,340 related to physical inventory stock adjustments. No such adjustments were recognized during the three and six months ended June 30, 2023.

Current wording

During the three and nine months ended September 30, 2024, $86,840 and $1,709,449 impairment of inventory adjustment was recorded in cost of goods sold, related to the Vanish product. Included in the impairment of inventory adjustment during the three and nine months ended September 30, 2024, $0 and $476,340, respectively, related to physical inventory stock adjustments. No such adjustments were recognized during the three and nine months ended September 30, 2023.

Previous wording

During the three and six months ended June 30, 2024, a $856,361 and $1,622,609 impairment of inventory adjustment was recorded in cost of goods sold, related to the Vanish product. Included in the impairment of inventory adjustment during the three and six months ended June 30, 2024, is $476,340 related to physical inventory stock adjustments. No such adjustments were recognized during the three and six months ended June 30, 2023.

Current wording

During the three and nine months ended September 30, 2024, $86,840 and $1,709,449 of impairment of inventory adjustment was recorded in cost of goods sold, related to the Vanish product. Included in the impairment of inventory adjustment during the three and nine months ended September 30, 2024, $0 and $476,340, respectively, related to physical inventory stock adjustments. No such adjustments were recognized during the three and nine months ended September 30, 2023.

Previous wording

Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses and allocated overhead. Marketing programs consist of advertising, tradeshows, events, corporate communications, and brand-building activities. We expect sales and marketing expenses to increase in absolute dollars as we expand our sales force, expand our product lines, increase marketing resources, and further develop potential sales channels.

Current wording

Sales and marketing expenses consist primarily of employee compensation and related expenses, sales commissions, marketing programs, travel and entertainment expenses and allocated overhead. Marketing programs consist of advertising, trade shows, events, corporate communications, and brand-building activities. We expect sales and marketing expenses to increase in absolute dollars as we expand our sales force, expand our product lines, increase marketing resources, and further develop potential sales channels.

Previous wording

Cost of goods increased by $0.74 million, or 224% for the three months ended June 30, 2024, as compared to the same period in 2023, after an increase of $0.84 million in inventory adjustments to better reflect current inventory, this was offset by a decrease in materials of $0.11 million due to a decrease in sales.

Current wording

Cost of goods increased by $0.05 million, or 23% for the three months ended September 30, 2024, as compared to the same period in 2023. The increase in cost of goods sold was mainly due to an increase of $0.09 million in inventory adjustments and allowances related to the impairment of 411x vehicles, and overhead allocations to better reflect current inventory, offset by a decrease of $0.09 million in materials due to decrease in sales.

Previous wording

Research and development (“R&D”) expense was $0.62 million for the three months ended June 30, 2024, as compared to $2.41 million for the same period in 2023, a decrease of $1.78 million, or 74%. The Company had a decrease of $1.8 million in R&D design costs. The decrease was primarily due to the Company being substantially complete with the R&D on the Vanish at the end of 2023, offset by re-engineering work and design changes in the current year associated with the internal restructuring.

Current wording

Research and development (“R&D”) expense was $0.01 million for the three months ended September 30, 2024, as compared to $1.33 million for the same period in 2023, a decrease of $1.32 million, or 99%. The Company had a decrease of $0.56 million and $0.71 million in R&D design costs, and salaries and related personnel costs, respectively. The decrease was primarily due to the Company being substantially complete with the R&D on the Vanish at the end of 2023, offset by the re-engineering work and design changes in the current year associated with the internal restructuring.

Previous wording

The majority of our operating losses from continuing operations resulted from general and administrative expenses. General and administrative expenses consist primarily of costs associated with our overall operations and with being a public company. These costs include personnel, legal and financial professional services, insurance, investor relations, and compliance related fees. General and administrative expense was $5.04 million for the six months ended June 30, 2024, compared to $6.09 million for the same period in 2023, a decrease of $1.05 million, or 17%. Salaries and related expenses decreased by $1.35 million, primarily due to decreased headcount. This decrease was partially offset by an increase in consultancy-related services of $0.71 million.

Current wording

The majority of our operating losses from continuing operations resulted from general and administrative expenses. General and administrative expenses consist primarily of costs associated with our overall operations and with being a public company. These costs include personnel, legal and financial professional services, insurance, investor relations, and compliance related fees. General and administrative expense was $1.41 million for the three months ended September 30, 2024, compared to $4.37 million for the same period in 2023, a decrease of $2.96 million, or 68%. Salaries and related expenses decreased by $1.0 million, office expenses decreased by $0.26 million, and consultants services decreased by $0.18 million, primarily due to the decrease in headcount and expenses associated with the internal restructuring. Cost and associated expenses related to the issuance of Series H-7 Preferred Stock decreased by $1.24 million for the three months ended September 30, 2024 compared to the same period in 2023.

Previous wording

We recorded a $10.61 million increase of net other income from a $0.02 million increase in interest income on cash accounts, an increase in realized gains of $0.07 million on marketable securities and an increase of $0.15 million in the unrealized gain on marketable securities, these were offset by other income (expense) decreasing by $0.19 million.

Current wording

We recorded a $8.83 million increase of net other income from a $0.05 million increase in interest income on cash accounts, an increase in realized gains of $0.47 million on marketable securities, offset by a decrease of $0.64 million in the unrealized gain on marketable securities, and an increase in other (income) expense of $0.47 million mainly due to settlements with vendors.

Previous wording

The Company recognized a gain of $2.62 million for the change in fair value - derivative liability for the three months ended June 30, 2024. The gain was primarily due to the decrease in the fair value of the derivative liability associated with the Series H-7 Preferred Shares that were issued in 2023. The decrease was a result of a decrease in the Company’s stock price.

Current wording

For the three months ended September 30, 2024 and 2023, the Company recognized a gain of $2.41 million and $3.22 million, respectively, for the change in fair value - derivative liability, a decrease of $0.81 million mainly due to the decrease in the Company’s stock price. The gain for the change in fair value – derivative liability was due to the decrease in the fair value of the derivative liability associated with the Series H-7 Preferred Shares that were issued in 2023.

Previous wording

The Company recognized a gain of $7.94 million for the change in fair value - warrant liability for the three months ended June 30, 2024. The gain was primarily due to the decrease in the stock price and the increase in the risk-free rate.

Current wording

The Company recognized a gain of $0.13 million and a loss of $10.10 million for the three months ended September 30, 2024 and 2023, respectively, for the change in fair value - warrant liability, an increase of $10.23 million primarily due to the decrease in stock price and the increase in the risk-free rate.

Previous wording

Revenue was $0.06 million for the six months ended June 30, 2024, as compared to $0.25 million for the same period in 2023, a decrease of 77%, or $0.19 million. The decrease in revenue was the result of a reduction in sales.

Current wording

Revenue was $0.06 million for the nine months ended September 30, 2024, as compared to $0.34 million for the same period in 2023, a decrease of 81%, or $0.28 million. The decrease in revenue was primarily due to the reduction in product sales of $0.28 million.

Previous wording

Cost of goods increased by $1.71 million, or 309% for the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to an increase of $1.62 million in inventory adjustments to more accurately reflect current inventory, and an increase in freight charges of $0.1 million bringing inventory materials into the Company’s warehouse from outside vendors and this was offset by a decrease in materials of $0.15 million due to a decrease in sales.

Current wording

Cost of goods increased by $1.76 million, or 225% for the nine months ended September 30, 2024, as compared to the same period in 2023, primarily due to an increase of $1.71 million in inventory adjustments to more accurately reflect current inventory, and an increase in freight charges of $0.30 million bringing inventory materials into the Company’s warehouse from outside vendors, offset by a decrease in materials of $0.25 million due to a decrease in sales.

Previous wording

Research and development (“R&D”) expense was $1.38 million for the six months ended June 30, 2024, as compared to $4.54 million for the same period in 2023, a decrease of $3.15 million, or 70%. The Company had a decrease of $1.97 million in R&D design costs. The decrease was primarily due to the Company being substantially complete with the R&D on the Vanish at the end of 2023, offset by re-engineering work and design changes in the current year associated with the internal restructuring.

Current wording

Research and development (“R&D”) expense was $1.40 million for the nine months ended September 30, 2024, as compared to $5.87 million for the same period in 2023, a decrease of $4.47 million, or 76%. The Company had a decrease of $2.53 million and $1.15 million in R&D design costs, and salaries and related personnel costs, respectively. The decrease was primarily due to the Company being substantially complete with the R&D on the Vanish at the end of 2023, offset by the re-engineering work and design changes in the current year associated with the internal restructuring.

Previous wording

Sales and marketing expense was $0.55 million for the six months ended June 30, 2024, as compared to $1.14 million for the same period in 2023, a decrease of $0.59 million, or 51%. Salaries and related expenses decreased by $0.32 million due to the reduction of our sales and marketing resources.

Current wording

Sales and marketing expense was $0.77 million for the nine months ended September 30, 2024, as compared to $1.53 million for the same period in 2023, a decrease of $0.76 million, or 50%. Salaries and related expenses decreased by $0.58 million due to the reduction of our sales and marketing resources.

Previous wording

The majority of our operating losses from continuing operations resulted from general and administrative expenses. General and administrative expenses consist primarily of costs associated with our overall operations and with being a public company. These costs include personnel, legal and financial professional services, insurance, investor relations, and compliance related fees. General and administrative expense was $1.98 million for the three months ended June 30, 2024, compared to $3.25 million for the same period in 2023, a decrease of $1.27 million, or 39%. Salaries and related expenses decreased by $1.12 million, primarily due to decreased headcount.

Current wording

The majority of our operating losses from continuing operations resulted from general and administrative expenses. General and administrative expenses consist primarily of costs associated with our overall operations and with being a public company. These costs include personnel, legal and financial professional services, insurance, investor relations, and compliance related fees. General and administrative expense was $6.45 million for the nine months ended September 30, 2024, compared to $10.46 million for the same period in 2023, a decrease of $4.01 million, or 38%. Salaries and related expenses decreased by $2.6 million, with office expenses decreased by $0.50 million, primarily due to decreased headcount and expenses associated with the internal restructuring. Cost and associated expenses related to the issuance of Series H-7 Preferred Stock decreased by $1.21 million for the nine months ended September 30, 2024, compared to the same period in 2023.

Previous wording

We recorded a $11.87 million increase of net other income from a $0.03 million increase in interest income on cash accounts, an increase in realized gains of $0.38 million on marketable securities, and an increase of $0.07 million in the unrealized gain on marketable securities and other income, these were offset by other income (expense) decreasing by $0.25 million.

Current wording

We recorded a $20.69 million increase of net other income from a $0.01 million increase in interest income on cash accounts, an increase in realized gains of $0.87 million on marketable securities, offset by a decrease of $0.58 million in the unrealized gain on marketable securities, and an increase in other income (expense) of $0.67 million mainly due to settlements with vendors.

Previous wording

The Company recognized a gain of $2.63 million for the change in fair value - derivative liability for the six months ended June 30, 2024. The gain was primarily due to the decrease in the fair value of the derivative liability associated with the Series H-7 Preferred Shares that were issued in 2023. The decrease was a result of a decrease in the Company’s stock price.

Current wording

For the nine months ended September 30, 2024 and 2023, the Company recognized a gain of $5.04 million and $3.22 million, respectively, for the change in fair value - derivative liability, an increase of $1.82 million mainly due to the decrease in the Company’s stock price. The gain for the change in fair value – derivative liability was due to the decrease in the fair value of the derivative liability associated with the Series H-7 Preferred Shares that were issued in 2023.

Previous wording

The Company recognized a gain of $9.01 million for the change in fair value - warrant liability for the six months ended June 30, 2024. The gain was primarily due to the decrease in the stock price and the increase in the risk-free rate.

Current wording

The Company recognized a gain of $9.14 million and a loss of $10.10 million for the nine months ended September 30, 2024 and 2023, respectively, for the change in fair value - warrant liability, an increase of $19.24 million primarily due to the decrease in stock price and the increase in the risk-free rate.

Previous wording

As of June 30, 2024, we had $14.09 million in cash cand cash equivalents, $0 million in restricted cash, $22.87 million in marketable securities and working capital of $35.45 million. As of December 31, 2023, we had $33.44 million in cash and cash equivalents and working capital of $44.67 million, including $10 million in restricted cash. The decrease in cash and cash equivalents and working capital was primarily a result of our operating loss and the Company’s internal restructuring. Our sources of cash since inception have been predominately from the sale of equity and debt.

Current wording

As of September 30, 2024, we had $2.73 million in cash cand cash equivalents, $10.02 million in restricted cash, $16.13 million in marketable securities and working capital of $28.28 million. As of December 31, 2023, we had $33.44 million in cash and cash equivalents and working capital of $44.67 million, including $10 million in restricted cash. The decrease in cash and cash equivalents and working capital was primarily a result of our operating loss and the Company’s internal restructuring. Our sources of cash since inception have been predominately from the sale of equity and debt.

Previous wording

During the six months ended June 30, 2024, we used $6.83 million in cash in operating activities, a decrease in use of $8.06 million compared to the cash used in operating activities of $14.89 million during the same period in 2023. The decrease in cash used in operating activities was primarily a result of the decrease in our operating loss as the Company proceeds with the internal restructuring.

Current wording

During the nine months ended September 30, 2024, we used $10.33 million in cash in operating activities, a decrease in use of $10.97 million compared to the cash used in operating activities of $21.30 million during the same period in 2023. The decrease in cash used in operating activities was primarily a result of the decrease in our operating loss as the Company proceeds with the internal restructuring.

Previous wording

Our ability to generate cash from operations in future periods will depend in large part on profitability, the rate and timing of collections of our accounts receivable, inventory turns and our ability to manage other areas of working capital.

Current wording

Our ability to generate cash from operations in future periods will depend in large part on profitability, the rate and timing of collections of our accounts receivable, inventory turnovers and our ability to manage other areas of working capital.

Previous wording

During the six months ended June 30, 2024, we used cash of $0.36 million from financing activities as compared to $0.0 million of cash used in investing activities during 2023, an increase of $0.36 million. The net decrease in cash used was due to redemptions of the Series H-7 preferred stock.

Current wording

During the nine months ended September 30, 2024, we used cash of $5.10 million from financing activities as compared to $21.63 million of cash provided in financing activities during 2023, a decrease of $26.73 million. The decrease in cash used was due to cash redemptions of the Series H-7 preferred stock of $5.10 million, and no proceeds from private placement of preferred stock, as compared to $21.63 million of proceeds from the private placement of preferred stock and no cash used in redemptions for the nine months ended September 30, 2023.

Previous wording

Currently, the Company is experiencing supply chain shortages, including with respect to lithium-ion battery cells, integrated circuits, vehicle control chips, and displays. Certain production-ready components may be delayed in shipment to Company facilities which has and may continue to cause delays in validation and testing for these components, which would in turn create a delay in the availability of saleable vehicles. Additionally, the emergence and effects of public health crises, such as pandemics and epidemics and the consequences of the ongoing war between Russia and Ukraine and between Israel and Hamas, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.

Current wording

Currently, the Company is experiencing supply chain shortages, including with respect to lithium-ion battery cells, integrated circuits, vehicle control chips, and displays. Certain production-ready components may be delayed in shipment to Company facilities, which has and may continue to cause delays in validation and testing for these components, which would in turn create a delay in the availability of saleable vehicles. Additionally, the emergence and effects of public health crises, such as pandemics and epidemics and the consequences of the ongoing war between Russia and Ukraine and between Israel and various factors in the Middle East, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations.