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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
☒ |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended June 30, 2021
or
☐ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from ___________ to __________
Commission
file number: 001-34643
AYRO, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
98-0204758 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(I.R.S.
Employer
Identification
No.) |
900 E. Old Settlers Boulevard, Suite 100
Round Rock, Texas |
|
78664 |
(Address
of principal executive offices) |
|
(Zip
Code) |
(512)
994-4917
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each Class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock, par value $0.0001 per share |
|
AYRO |
|
The
NASDAQ Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
|
|
|
|
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
|
|
|
|
|
|
Emerging
growth company |
☐ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
As
of August 12, 2021, the registrant had 36,388,765
shares of common stock outstanding.
AYRO,
Inc.
Quarter
Ended June 30, 2021
Table
of Contents
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS (UNAUDITED)
AYRO,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| |
June 30, | | |
December 31, | |
| |
2021 | | |
2020 | |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 87,891,072 | | |
$ | 36,537,097 | |
Accounts receivable, net | |
| 1,057,534 | | |
| 765,850 | |
Inventory, net | |
| 1,728,817 | | |
| 1,173,254 | |
Prepaid expenses and other current assets | |
| 1,305,899 | | |
| 1,608,762 | |
Total current assets | |
| 91,983,322 | | |
| 40,084,963 | |
| |
| | | |
| | |
Property and equipment, net | |
| 947,974 | | |
| 611,312 | |
Intangible assets, net | |
| 137,334 | | |
| 143,845 | |
Operating lease – right-of-use asset | |
| 1,125,368 | | |
| 1,098,819 | |
Deposits and other assets | |
| 41,289 | | |
| 22,491 | |
Total assets | |
$ | 94,235,287 | | |
$ | 41,961,430 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 2,407,248 | | |
$ | 767,205 | |
Accrued expenses | |
| 1,614,102 | | |
| 665,068 | |
Contract liability | |
| - | | |
| 24,000 | |
Current portion long-term debt, net | |
| - | | |
| 7,548 | |
Current portion lease obligation – operating lease | |
| 245,801 | | |
| 123,139 | |
Total current liabilities | |
| 4,267,151 | | |
| 1,586,960 | |
| |
| | | |
| | |
Long-term debt, net | |
| - | | |
| 14,060 | |
Lease obligation - operating lease, net of current portion | |
| 933,563 | | |
| 1,002,794 | |
Total liabilities | |
| 5,200,714 | | |
| 2,603,814 | |
| |
| | | |
| | |
Commitments and contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Preferred Stock, (authorized – 20,000,000 shares) | |
| - | | |
| - | |
Convertible Preferred Stock Series H, ($0.0001 par value; authorized – 8,500 shares; issued
and outstanding – 8 shares as of June 30, 2021 and December 31, 2020) | |
| - | | |
| - | |
Convertible Preferred Stock Series H-3, ($.0001 par value; authorized – 8,461 shares; issued and outstanding – 1,234 shares as of June 30, 2021 and December 31, 2020) | |
| - | | |
| - | |
Convertible Preferred Stock Series H-6, ($.0001 par value; authorized – 50,000 shares; issued and outstanding – 50 shares as of June 30, 2021 and December 31, 2020) | |
| - | | |
| - | |
Common Stock, ($0.0001
par value; authorized – 100,000,000 shares;
issued and outstanding – 36,304,362 and 27,088,584
shares, as of June 30, 2021 and December 31, 2020) | |
| 3,630 | | |
| 2,709 | |
Additional paid-in capital | |
| 127,483,342 | | |
| 64,509,724 | |
Accumulated deficit | |
| (38,452,399 | ) | |
| (25,154,817 | ) |
Total stockholders’ equity | |
| 89,034,573 | | |
| 39,357,616 | |
Total liabilities and stockholders’ equity | |
$ | 94,235,287 | | |
$ | 41,961,430 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AYRO,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Revenue | |
$ | 522,067 | | |
$ | 285,927 | | |
$ | 1,310,936 | | |
$ | 432,743 | |
Cost of goods sold | |
| 430,478 | | |
| 205,637 | | |
| 1,074,981 | | |
| 318,792 | |
Gross profit | |
| 91,589 | | |
| 80,290 | | |
| 235,955 | | |
| 113,951 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 3,042,117 | | |
| 180,605 | | |
| 4,969,678 | | |
| 335,304 | |
Sales and marketing | |
| 668,838 | | |
| 239,065 | | |
| 1,227,242 | | |
| 558,519 | |
General and administrative | |
| 4,061,681 | | |
| 714,679 | | |
| 7,362,994 | | |
| 1,963,730 | |
Total operating expenses | |
| 7,772,636 | | |
| 1,134,349 | | |
| 13,559,914 | | |
| 2,857,553 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (7,681,047 | ) | |
| (1,054,059 | ) | |
| (13,323,959 | ) | |
| (2,743,602 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Other income, net | |
| 18,419 | | |
| 3 | | |
| 28,689 | | |
| 20 | |
Interest expense | |
| (1,121 | ) | |
| (123,576 | ) | |
| (2,312 | ) | |
| (229,202 | ) |
Loss on extinguishment of debt | |
| - | | |
| (353,225 | ) | |
| - | | |
| (353,225 | ) |
Other income (expense), net | |
| 17,298 | | |
| (476,798 | ) | |
| 26,377 | | |
| (582,407 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (7,663,749 | ) | |
$ | (1,530,857 | ) | |
$ | (13,297,582 | ) | |
$ | (3,326,009 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share, basic and diluted | |
$ | (0.22 | ) | |
$ | (0.18 | ) | |
$ | (0.39 | ) | |
$ | (0.54 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average Common Stock outstanding | |
| 35,315,044 | | |
| 8,291,351 | | |
| 33,678,834 | | |
| 6,131,712 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AYRO,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Series H | | |
Series H-3 | | |
Series H-6 | |
|
AYRO Series Seed |
| |
| | |
| | |
Additional | | |
| | |
| |
| |
Preferred Stock | | |
Preferred Stock | | |
Preferred Stock | |
|
Preferred Stock |
| |
Common Stock | | |
Paid-in | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | |
|
Shares |
|
Amount |
| |
Shares | | |
Amount | | |
Capital | | |
(Deficit) | | |
Total | |
Balance, December 31, 2020 | |
| 8 | | |
$ | - | | |
| 1,234 | | |
$ | - | | |
| 50 | | |
$ | - | |
|
- |
|
- |
| |
| 27,088,584 | | |
$ | 2,709 | | |
$ | 64,509,724 | | |
$ | (25,154,817 | ) | |
$ | 39,357,616 | |
Issuance of common stock for services | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock for services, shares | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Restricted stock vesting | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Restricted stock vesting, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion of AYRO Preferred Stock to common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion of AYRO Preferred Stock to
common stock, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H Preferred Stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H Preferred Stock in connection with the 2020 Merger, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H-3 Preferred Stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H-3 Preferred Stock
in connection with the 2020 Merger, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H-6 Preferred Stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Series H-6 Preferred
Stock in connection with the 2020 Merger, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Common Stock in connection with the 2020 Merger, net of fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of Common Stock in
connection with the 2020 Merger, net of fees, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exchange of debt for common stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exchange of debt for common stock in
connection with the 2020 Merger, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock in connection with debt offering | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of common stock in connection
with debt offering, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exercise of warrants, net of fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Exercise of warrants, net of fees, shares | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock Based Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| 1,699,423 | | |
| | | |
| 1,699,423 | |
Sale of common stock, net of fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
- |
|
- |
| |
| 8,035,835 | | |
| 804 | | |
| 58,269,025 | | |
| | | |
| 58,269,829 | |
Exercise Warrants | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| 13,642 | | |
| 1 | | |
| 99,999 | | |
| | | |
| 100,000 | |
Exercise Options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| 74,987 | | |
| 7 | | |
| 183,418 | | |
| | | |
| 183,425 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| (5,633,833 | ) | |
| (5,633,833 | ) |
Balance, March 31, 2021 | |
| 8 | | |
| - | | |
| 1,234 | | |
| - | | |
| 50 | | |
| - | |
|
- |
|
- |
| |
| 35,213,048 | | |
| 3,521 | | |
| 124,761,589 | | |
| (30,788,650 | ) | |
| 93,976,460 | |
Issuance of common stock for services | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | |
|
|
|
|
| |
| 15,000 | | |
| 2 | | |
| 42,298 | | |
| | | |
| 42,300 | |
Stock Based Compensation | |
| | | |
| - | | |
| | | |
| | | |
| | | |
| | |
|
- |
|
- |
| |
| | | |
| | | |
| 1,638,071 | | |
| | | |
| 1,638,071 | |
Exercise Options | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| 394,589 | | |
| 39 | | |
| 1,041,452 | | |
| | | |
| 1,041,491 | |
Restricted stock vesting | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| 681,725 | | |
| 68 | | |
| (68) | | |
| | | |
| 0 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| |
| | | |
| | | |
| | | |
| (7,663,749 | ) | |
| (7,663,749 | ) |
Balance, June 30, 2021 | |
| 8 | | |
$ | - | | |
| 1,234 | | |
$ | - | | |
| 50 | | |
$ | - | |
|
- |
|
- |
| |
| 36,304,362 | | |
$ | 3,630 | | |
$ | 127,483,342 | | |
$ | (38,452,399 | ) | |
$ | 89,034,573 | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
Series H | | |
Series H-3 | | |
Series H-6 | | |
AYRO Series Seed | | |
| | |
Additional | | |
| | |
| |
| |
Preferred
Stock | | |
Preferred
Stock | | |
Preferred
Stock | | |
Preferred
Stock | | |
Common
Stock | | |
Paid-in | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
(Deficit) | | |
Total | |
Balance, December 31, 2019 | |
| - | | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| 7,360,985 | | |
$ | 9,025,245 | | |
| 3,948,078 | | |
$ | 395 | | |
$ | 5,001,947 | | |
$ | (13,958,644 | ) | |
$ | 68,943 | |
Stock Based Compensation | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | | |
| | | |
| - | | |
| 156,459 | | |
| | | |
| 156,459 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,795,153 | ) | |
| (1,795,153 | ) |
Balance, March 31, 2020 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 7,360,985 | | |
$ | 9,025,245 | | |
| 3,948,078 | | |
$ | 395 | | |
$ | 5,158,406 | | |
$ | (15,753,797 | ) | |
$ | (1,569,751 | ) |
Conversion of AYRO Preferred Stock to common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (7,360,985 | ) | |
| (9,025,245 | ) | |
| 2,007,193 | | |
| 201 | | |
| 9,025,044 | | |
| | | |
| - | |
Issuance of Series H Preferred Stock in connection with the 2020 Merger | |
| 8 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | |
Issuance of Series H-3 Preferred Stock in connection with the 2020 Merger | |
| | | |
| | | |
| 2,189 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | |
Issuance of Series H-6 Preferred Stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| 7,883 | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| - | |
Issuance of Common Stock in connection with the 2020 Merger, net of
fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 4,939,045 | | |
| 493 | | |
| 4,451,237 | | |
| | | |
| 4,451,730 | |
Exchange of debt for common stock in connection with the 2020 Merger | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,030,585 | | |
| 103 | | |
| 999,897 | | |
| | | |
| 1,000,000 | |
Issuance of common stock in connection with debt offering | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 553,330 | | |
| 56 | | |
| 461,957 | | |
| | | |
| 462,013 | |
Sale of common stock, net of fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 2,200,000 | | |
| 220 | | |
| 5,064,780 | | |
| | | |
| 5,065,000 | |
Exercise of warrants, net of fees | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,831,733 | | |
| 183 | | |
| 515,155 | | |
| | | |
| 515,338 | |
Stock Based Compensation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 150,949 | | |
| | | |
| 150,949 | |
Net Loss | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,530,856 | ) | |
| (1,530,856 | ) |
Balance, June 30, 2020 | |
| 8 | | |
$ | - | | |
| 2,189 | | |
$ | - | | |
| 7,883 | | |
$ | - | | |
| - | | |
$ | - | | |
| 16,509,964 | | |
$ | 1,651 | | |
$ | 25,827,425 | | |
$ | (17,284,653 | ) | |
$ | 8,544,423 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AYRO,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
| | | |
| | |
| |
Six Months Ended | |
| |
June 30, | |
| |
2021 | | |
2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (13,297,582) | | |
$ | (3,326,009 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 253,675 | | |
| 228,464 | |
Stock-based compensation | |
| 3,337,494 | | |
| 307,408 | |
Amortization of debt discount | |
| - | | |
| 169,739 | |
Loss on extinguishment of debt | |
| - | | |
| 353,225 | |
Amortization of right-of-use asset | |
| 93,891 | | |
| 49,738 | |
Provision for bad debt expense | |
| 63,333 | | |
| 5,794 | |
Change in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (355,016 | ) | |
| (247,708 | ) |
Inventory | |
| (603,336 | ) | |
| 59,889 | |
Prepaid expenses and other current assets | |
| 302,859 | | |
| (110,848 | ) |
Deposits | |
| (18,797 | ) | |
| 26,265 | |
Accounts payable | |
| 1,640,043 | | |
| 58,468 | |
Accrued expenses | |
| 991,334 | | |
| (325,966 | ) |
Contract liability | |
| (24,000 | ) | |
| 63,904 | |
Lease obligations - operating leases | |
| (67,009 | ) | |
| (30,286 | ) |
Net cash used in operating activities | |
| (7,683,111 | ) | |
| (2,717,923 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| (482,541 | ) | |
| (243,928 | ) |
Purchase of intangible assets | |
| (53,512 | ) | |
| (8,520 | ) |
Proceeds from merger with ABC Merger Sub, Inc. | |
| - | | |
| 3,060,740 | |
Net cash provided by (used in) investing activities | |
| (536,053 | ) | |
| 2,808,292 | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from issuance debt | |
| - | | |
| 1,318,000 | |
Repayments of debt | |
| (21,608 | ) | |
| (1,103,401 | ) |
Proceeds from exercise of warrants | |
| 100,000 | | |
| 515,338 | |
Proceeds from exercise of stock options | |
| 1,224,918 | | |
| - | |
Proceeds from issuance of common stock, net of fees and expenses | |
| 58,269,829 | | |
| 6,455,992 | |
Net cash provided by financing activities | |
| 59,573,139 | | |
| 7,185,929 | |
| |
| | | |
| | |
Net change in cash | |
| 51,353,975 | | |
| 7,276,298 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 36,537,097 | | |
| 641,822 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 87,891,072 | | |
$ | 7,918,120 | |
| |
| | | |
| | |
Supplemental disclosure of cash and non-cash transactions: | |
| | | |
| | |
Cash paid for interest | |
$ | 1,971 | | |
$ | 58,366 | |
Cash paid for taxes | |
$ | - | | |
$ | - | |
Supplemental non-cash amounts of lease liabilities arising from obtaining right of use assets | |
$ | 120,440 | | |
$ | 1,210,680 | |
Conversion of debt to Common Stock | |
$ | - | | |
$ | 1,000,000 | |
Conversion of Preferred Stock to Common Stock | |
$ | - | | |
$ | 9,025,245 | |
Discount on debt from issuance of Common Stock and warrants | |
$ | - | | |
$ | 462,013 | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
AYRO,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1. ORGANIZATION AND NATURE OF OPERATIONS
AYRO,
Inc. (“AYRO” or the “Company”), a Delaware corporation formerly known as DropCar, Inc. (“DropCar”),
a corporation headquartered outside Austin, Texas, is the merger successor discussed below of AYRO Operating Company, Inc., which was
formed under the laws of the State of Texas on May 17, 2016 as Austin PRT Vehicle, Inc. and subsequently changed its name to Austin EV,
Inc. under an Amended and Restated Articles of Formation filed with the State of Texas on March 9, 2017. On July 24, 2019, the Company
changed its name to AYRO, Inc. and converted its corporate domicile to Delaware. The Company was founded on the basis of promoting resource
sustainability. The Company, and its wholly-owned subsidiaries, are principally engaged in manufacturing and sales of environmentally-conscious,
minimal-footprint electric vehicles. The all-electric vehicles are typically sold both directly and to dealers in the United States.
Merger
On
May 28, 2020, pursuant to the previously announced Agreement and Plan of Merger, dated December 19, 2019 (the “Merger Agreement”),
by and among AYRO, Inc., a Delaware corporation previously known as DropCar, Inc., ABC Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company (“Merger Sub”), and AYRO Operating Company (“AYRO Operating”), a Delaware
corporation previously known as AYRO, Inc., Merger Sub was merged with and into AYRO Operating, with AYRO Operating continuing after
the merger as the surviving entity and a wholly owned subsidiary of the Company (the “Merger”). At the effective time of
the Merger, without any action on the part of any stockholder, each issued and outstanding share of AYRO Operating’s common stock,
par value $0.001 per share (“AYRO Operating Common Stock”), including shares underlying AYRO Operating’s outstanding
equity awards and warrants, was converted into the right to receive 1.3634 pre-split and pre-stock dividend shares (the “Exchange
Ratio”) of the Company’s common stock, par value $0.0001 per share (“Company Common Stock”). Immediately following
the effective time of the Merger, the Company effected a 1-for-10 reverse stock split of the issued and outstanding Company Common Stock
(the “Reverse Stock Split”), and immediately following the Reverse Stock Split, the Company issued a stock dividend of one
share of Company Common Stock for each outstanding share of Common Stock to all holders of record immediately following the effective
time of the Reverse Stock Split (the “Stock Dividend”). The net result of the Reverse Stock Split and the Stock Dividend
was a 1-for-5 reverse stock split. As part of the Merger, the Company received cash of $3.06 million in consideration for 2,337,663 shares
of common stock. Upon completion of the Merger and the transactions contemplated in the Merger Agreement and assuming the exercise in
full of all pre-funded warrants issued pursuant thereto, (i) the former AYRO Operating equity holders (including the investors in a bridge
financing and private placements that closed prior to closing of the Merger) owned approximately 79% of the outstanding equity of the
Company; (ii) former DropCar stockholders owned approximately 18% of the outstanding equity of the Company; and (iii) a financial advisor
to DropCar and AYRO owned approximately 3% of the outstanding equity of the Company.
The
Merger was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes because
substantially all of DropCar, Inc.’s operations were disposed of as part of the consummation of the Merger and therefore no goodwill
or other intangible assets were recorded by the Company as a result of the Merger. AYRO Operating was treated as the accounting acquirer
as its stockholders controlled the Company after the Merger, even though DropCar, Inc. was the legal acquirer. As a result, the assets
and liabilities and the historical operations that are reflected in our consolidated financial statements are those of AYRO Operating
as if AYRO Operating had always been the reporting company.
On
December 19, 2019, DropCar entered into an asset purchase agreement (the “Asset Purchase Agreement”) with DC Partners Acquisition,
LLC (“DC Partners”), Spencer Richardson and David Newman, pursuant to which DropCar agreed to sell substantially all of the
assets associated with its business of providing vehicle support, fleet logistics and concierge services for both consumers and the automotive
industry to an entity controlled by Messrs. Richardson and Newman, the Company’s Chief Executive Officer and Chief Business Development
Officer at the time, respectively. The aggregate purchase price for the purchased assets consisted of the cancellation of certain liabilities
pursuant to those certain employment agreements by and between DropCar and each of Messrs. Richardson and Newman, plus the assumption
of certain liabilities relating to, or arising out of, workers’ compensation claims that occurred prior to the closing date of
the Asset Purchase Agreement.
On
May 28, 2020, the parties to the Asset Purchase Agreement entered into Amendment No. 1 to the Asset Purchase Agreement (the “Asset
Purchase Agreement Amendment”), which Asset Purchase Agreement Amendment (i) provides for the inclusion of up to $30,000 in refunds
associated with certain insurance premiums as assets being purchased by DC Partners, (ii) amends the covenant associated with the funding
of the DropCar business, such that DropCar provided the DropCar business with additional funding of $175,000 at the closing of the transactions
contemplated by the Asset Purchase Agreement and (iii) provides for a current employee of the Company being transferred to DC Partners
to provide transition services to the Company for a period of three months after the closing of the transactions contemplated by the
Asset Purchase Agreement. The Asset Purchase Agreement closed on May 28, 2020, immediately following the consummation of the Merger.
NOTE
2. LIQUIDITY AND OTHER UNCERTAINTIES
Liquidity
and Other Uncertainties
The
unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles
in the United States (“GAAP”), which contemplates continuation of the Company as a going concern. The Company is subject
to a number of risks similar to those of earlier stage commercial companies, including dependence on key individuals and products, the
difficulties inherent in the development of a commercial market, the potential need to obtain additional capital, competition from larger
companies, other technology companies and other technologies. The Company has a limited operating history and the sales and income potential
of its business and market are unproven. The Company incurred net losses of $7,663,749 and $13,297,582 for the three and six months ended
June 30, 2021, respectively, and negative cash flows from operations of $7,683,111 for the six months ended June 30, 2021. At June 30,
2021, the Company had cash balances totaling $87,891,072. In addition, overall working capital increased by $49,218,168 during the six
months ended June 30, 2021. Management believes that the existing cash at June 30, 2021 will be sufficient to fund operations for at
least the next twelve months following the issuance of these unaudited condensed consolidated financial statements.
Since
early 2020, when the World Health Organization declared the spread of the transmissible and pathogenic coronavirus a global pandemic,
there have been business slowdowns and decreased demand for AYRO products. The outbreak of such a communicable disease has resulted in
a widespread health crisis which has adversely affected general commercial activity and the economies and financial markets of many countries,
including the United States. As the outbreak of the disease has continued through 2020 and into 2021, the measures taken by the governments
of countries affected has adversely affected the Company’s business, financial condition, and results of operations. The pandemic
had an adverse impact on AYRO’s sales and the demand for AYRO products in 2020 and in the first and second quarters of 2021, resulting
in sales that were less than expected in the first half of 2021. AYRO expects the pandemic to continue to have an adverse impact on sales
and demand for products throughout the remainder of 2021.
NOTE
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Principles of Consolidation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation
S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”).
The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, AYRO Operating
and DropCar Operating Company, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. The
unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in
the opinion of management, necessary for a fair presentation of such statements. The results of operations for the three and six months
ended June 30, 2021, are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed
consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes
for the fiscal year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC
on March 31, 2021, as amended on April 30, 2021.
Use
of Estimates
The
preparation of the accompanying unaudited condensed consolidated financial statements, in conformity with GAAP, requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the accompanying unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses
during the reporting period.
The
Company’s most significant estimates include allowance for doubtful accounts, valuation of inventory reserve, valuation of deferred
tax asset allowance, and the measurement of stock-based compensation expenses. Actual results could differ from these estimates.
Reclassification
Certain
reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation.
These reclassifications had no effect on net earnings or cash flows as previously reported.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that
an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled to receive in exchange for those goods or services.
To
achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to
performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.
Nature
of goods and services
The
following is a description of the Company’s products and services from which the Company generates revenue, as well as the nature,
timing of satisfaction of performance obligations, and significant payment terms for each:
Product
revenue
Product
revenue from customer contracts is recognized on the sale of each electric vehicle as vehicles are shipped to customers. The majority
of the Company’s vehicle sales orders generally have only one performance obligation: sale and delivery of complete vehicles. Ownership
and risk of loss transfers to the customer based on FOB shipping point and freight charges are the responsibility of the customer. Revenue
is typically recognized at the point control transfers or in accordance with payment terms customary to the business. The Company provides
product warranties to assure that the product assembly complies with agreed upon specifications. The Company’s product warranty
is identical to the product warranties provided by the Company’s suppliers, therefore minimizing the warranty liability to the
standard labor rates associated with the defective part replacement. Customers do not have the option to purchase a warranty separately;
as such, warranty is not accounted for as a separate performance obligation. The Company’s policy is to exclude taxes collected
from a customer from the transaction price of automotive contracts.
Shipping
revenue
Amounts
billed to customers related to shipping and handling are classified as shipping revenue. The Company has elected to recognize the cost
for freight and shipping when control over vehicles has transferred to the customer as an operating expense. The Company has reported
shipping expenses of $59,229 and $16,640 for the three months ended June 30, 2021 and 2020 and $109,855 and $30,790 for the six months
June 30, 2021 and 2020, respectively, included in SG&A.
Subscription
revenue
Subscription
revenue from revenue sharing with Destination Fleet Operators (“DFO”) and other vehicle rental agreements is recorded in
the month the vehicles in the Company’s fleet is rented. The Company established its rental fleet in late March 2019 which is recorded
in the property and equipment section of the accompanying unaudited condensed consolidated balance sheets. For the rental fleet, the
Company retains title and ownership to the vehicles and places them in DFO’s in resort communities that typically rent golf cars
for use in those communities. In August 2020, the Company phased-out the production of its 311 line which were the vehicles used in the
rental offering as it is working to develop a new line of vehicles. The change in production did not represent a strategic shift that
will have a major effect on the Company’s operations or financial results.
Services
and other revenue
Services
and other revenue consist of non-warranty after-sales vehicle services. Revenue is typically recognized at a point in time when services
and replacement parts are provided.
Warrants
and Preferred Shares
The
accounting treatment of warrants and preferred share series issued is determined pursuant to the guidance provided by ASC 470, Debt,
ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, as applicable. Each feature of a
freestanding financial instruments including, without limitation, any rights relating to subsequent dilutive issuances, dividend issuances,
equity sales, rights offerings, forced conversions, optional redemptions, automatic monthly conversions, dividends and exercise are assessed
with determinations made regarding the proper classification in the Company’s financial statements.
Stock-Based
Compensation
The
Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). The
Company recognizes all employee share-based compensation as an expense in the financial statements on a straight-line basis over the
requisite service period, based on the terms of the awards. Equity-classified awards principally related to stock options, restricted
stock awards (“RSAs”) and equity-based compensation, are measured at the grant date fair value of the award. The Company
determines grant date fair value of stock option awards using the Black-Scholes option-pricing model. The fair value of RSAs is determined
using the closing price of the Company’s common stock on the grant date. For service based vesting grants, expense is recognized
ratably over the requisite service period based on the number of options or shares. Stock-based compensation is reversed for forfeitures
in the period of forfeiture.
In
June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Unit (“ASU”) 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”).
ASU 2018-07 expands the guidance in ASC 718 to include share-based payments for goods and services to non-employees and generally aligns
it with the guidance for share-based payments to employees. In accordance with ASU 2018-07, these stock options and warrants issued as
compensation for services provided to the Company are accounted for based upon the fair value of the underlying equity instrument. The
attribution of the fair value of the equity instrument is charged directly to compensation expense over the period during which services
are rendered.
Basic
and Diluted Loss Per Share
Basic
and diluted net loss per share is determined by dividing net loss by the weighted average ordinary shares outstanding during the period.
For all periods presented with a net loss, the shares underlying the ordinary share options and warrants have been excluded from the
calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic
and diluted loss per share are the same for periods with a net loss. “Penny warrants” were included in the calculation of
outstanding shares for purposes of basic earnings per share.
On
May 28, 2020, pursuant to the previously announced Merger Agreement, dated December 19, 2019, the Company issued prefunded common stock
warrants to purchase 1,193,391 shares of the Company’s common stock to certain investors (“Penny Warrants”). All Penny
Warrants were fully exercised by December 31, 2020.
The
following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as they
would be anti-dilutive:
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Options to purchase common stock | |
| 1,448,193 | | |
| 1,060,254 | | |
| 1,448,193 | | |
| 1,060,254 | |
Restricted Stock Unvested | |
| 520,167 | | |
| - | | |
| 520,167 | | |
| - | |
Series H-1, H-3, H-4, H-5, I, J, pre-merger AYRO Merger common stock purchase warrants and post-merger AYRO warrants issued | |
| 7,346,447 | | |
| 4,006,205 | | |
| 7,346,447 | | |
| 4,006,205 | |
Series H, H-3, H-6, and pre-merger AYRO Seed Preferred Stock | |
| 2,475 | | |
| 278,862 | | |
| 2,475 | | |
| 278,862 | |
Totals | |
| 9,317,282 | | |
| 5,345,321 | | |
| 9,317,282 | | |
| 5,345,321 | |
NOTE
4. REVENUES
Disaggregation
of Revenue
Revenue
by type was as follows:
SCHEDULE OF DISAGGREGATION OF REVENUE
| |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Revenue type | |
| | | |
| | | |
| | | |
| | |
Product revenue | |
$ | 506,369 | | |
$ | 263,465 | | |
$ | 1,216,568 | | |
$ | 393,091 | |
Shipping revenue | |
| 15,698 | | |
| 22,462 | | |
| 57,681 | | |
| 37,867 | |
Subscription revenue | |
| - | | |
| - | | |
| - | | |
| 1,785 | |
Service income | |
| - | | |
| - | | |
| 36,687 | | |
| - | |
| |
$ | 522,067 | | |
$ | 285,927 | | |
$ | 1,310,936 | | |
$ | 432,743 | |
Contract
Liabilities
The
Company recognizes a contract liability when a consideration is received, or if the Company has the unconditional right to receive consideration,
in advance of satisfying the performance obligation. A contract liability is the Company’s obligation to transfer goods or services
to a customer for which the Company has received consideration, or an amount of consideration is due from the customer.
The
table below details the activity in the Company’s contract liabilities as of June 30, 2021 and December 31, 2020. The balance at
the end of each period is reported as contract liability in the Company’s unaudited condensed consolidated balance sheet.
SCHEDULE OF CONTRACT LIABILITIES
| |
Six Months Ended June 30, | | |
Year Ended December 31, | |
| |
2021 | | |
2020 | |
Balance, beginning of period | |
$ | 24,000 | | |
$ | - | |
Additions | |
| - | | |
| 183,319 | |
Transfer to revenue | |
| (24,000 | ) | |
| (159,319 | ) |
Balance, end of period | |
$ | - | | |
$ | 24,000 | |
Warranty
Reserve
The
Company records a reserve for warranty repairs upon the initial delivery of vehicles to its dealer network. The Company provides a product
warranty on each vehicle including powertrain, battery pack and electronics package. Such warranty matches the product warranty provided
by its supply chain for warranty parts for all unaltered vehicles and is not considered a separate performance obligation. The supply
chain warranty does not cover warranty-based labor needed to replace a part under warranty. Warranty reserves include management’s
best estimate of the projected cost of labor to repair/replace all items under warranty. The Company reserves a percentage of all dealer-based
sales to cover an industry-standard warranty fund to support dealer labor warranty repairs.
Such
percentage is recorded as a component of cost of revenues in the statement of operations. As of June 30, 2021 and December 31, 2020,
warranty reserves were recorded within accrued expenses of $61,592 and $43,278, respectively.
NOTE
5. ACCOUNTS RECEIVABLE, NET
Accounts
receivable, net, consists of amounts due from invoiced customers and product deliveries and were as follows:
SCHEDULE OF ACCOUNTS RECEIVABLE
| |
2021 | | |
2020 | |
| |
June 30, | | |
December 31, | |
| |
2021 | | |
2020 | |
Trade receivables | |
$ | 1,194,696 | | |
$ | 839,679 | |
Less: Allowance for doubtful accounts | |
| (137,162 | ) | |
| (73,829 | ) |
Accounts receivable,
net | |
$ | 1,057,534 | | |
$ | 765,850 | |
NOTE
6. INVENTORY, NET
Inventory
consisted of the following:
SCHEDULE OF INVENTORY
| |
2021 | | |
2020 | |
| |
June 30, | | |
December 31, | |
| |
2021 | | |
2020 | |
Raw materials | |
$ | 1,177,314 | | |
$ | 634,085 | |
Work-in-progress | |
| - | | |
| - | |
Finished goods | |
| 551,503 | | |
| 539,169 | |
Inventory | |
$ | 1,728,817 | | |
$ | 1,173,254 | |
Depreciation
expense for fleet inventory for the three months ended June 30, 2021 and 2020 was $23,886 and $0, and for the six months ended June 30,
2021 and 2020, $47,772 and $0, respectively. Management has determined that no reserve for inventory obsolescence was required as of
June 30, 2021 and December 31, 2020.
NOTE
7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
| |
2021 | | |
2020 | |
| |
June 30, | | |
December 31, | |
| |
2021 | | |
2020 | |
Prepaid final assembly services | |
$ | 409,740 | | |
$ | 520,000 | |
Prepayments for inventory | |
| 766,429 | | |
| 976,512 | |
Prepaid other | |
| 129,730 | | |
| 112,250 | |
Prepaid Expenses
And Other Current Assets | |
$ | 1,305,899 | | |
$ | 1,608,762 | |
NOTE
8. PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
2021 | | |
2020 | |
| |
June 30, | | |
December 31, | |
| |
2021 | | |
2020 | |
Computer and equipment | |
$ | 841,270 | | |
$ | 815,704 | |
Furniture and fixtures | |
| 170,357 | | |
| 127,401 | |
Lease improvements | |
| 242,024 | | |
| 221,802 | |
Prototypes | |
| 300,376 | | |
| 300,376 | |
Computer software | |
| 455,875 | | |
| 62,077 | |
Property and equipment | |
| 2,009,902 | | |
| 1,527,360 | |
Less: Accumulated depreciation | |
| (1,061,928 | ) | |
| (916,048 | ) |
Property and equipment,
net | |
$ | 947,974 | | |
$ | 611,312 | |
Depreciation
expense for the three months ended June 30, 2021 and 2020 was $74,752 and $85,554, and for the six months ended June 30, 2021 and 2020
was $145,880 and $171,612, respectively.
NOTE
9. INTANGIBLE ASSETS, NET
Intangible
assets consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
| |
June 30, 2021 | |
| |
| | |
| | |
| | |
Weighted- | |
| |
| | |
| | |
Net | | |
Average | |
| |
Gross | | |
Accumulated | | |
Carrying | | |
Amortization | |
| |
Amount | | |
Amortization | | |
Amount | | |
Period | |
Supply chain development | |
$ | 404,622 | | |
$ | (341,548 | ) | |
$ | 63,074 | | |
| 0.62 yrs. | |
Patents and trademarks | |
| 114,573 | | |
| (40,313 | ) | |
| 74,260 | | |
| 2.59 yrs. | |
| |
$ | 519,195 | | |
$ | (381,861 | ) | |
$ | 137,334 | | |
| | |
| |
December 31, 2020 | |
| |
| | |
| | |
| | |
Weighted- | |
| |
| | |
| | |
Net | | |
Average | |
| |
Gross | | |
Accumulated | | |
Carrying | | |
Amortization | |
| |
Amount | | |
Amortization | | |
Amount | | |
Period | |
Supply chain development | |
$ | 395,248 | | |
$ | (291,937 | ) | |
$ | 103,311 | | |
| 1.05 yrs. | |
Patents | |
| 70,435 | | |
| (29,901 | ) | |
| 40,534 | | |
| 2.45 yrs. | |
| |
$ | 465,683 | | |
$ | (321,838 | ) | |
$ | 143,845 | | |
| | |
Amortization
expense for the three months ended June 30, 2021 and 2020, was $30,839 and $28,635 and for the six months ended June 30, 2021 and 2020,
was $60,023 and $56,852, respectively. The definite lived intangible assets have no residual value at the end of their useful lives.
NOTE
10. STOCKHOLDERS’ EQUITY
Common
Stock
In
April 2020, the Company issued 553,330 shares of common stock in connection with the issuance of the 2020 $600,000 Bridge Note.
On
June 17, 2020, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company
sold, in a registered public offering by the Company directly to the investors an aggregate of 2,200,000 shares of common stock, par
value $0.0001 per share, at an offering price of $2.50 per share for gross proceeds of $5,500,000 before offering expenses of $435,000.
On
July 6, 2020, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company
sold, in a registered public offering by the Company directly to the investors an aggregate of 3,157,895 shares of common stock, par
value $0.0001 per share, at an offering price of $4.75 per share for gross proceeds of $15,000,000 before offering expenses of $1,249,200.
On
July 21, 2020, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company
sold, in a registered public offering by the Company directly to the investors an aggregate of 1,850,000 shares of common stock, par
value $0.0001 per share, at an offering price of $5.00 per share for gross proceeds of $9,250,000 before offering expenses of $740,000.
Each purchaser also had the right to purchase, on or before October 19, 2020, additional shares of common stock (the “Additional
Shares”) equal to the full amount of 75% of the common stock it purchased at the initial closing, or an aggregate of 1,387,500
shares, at an offering price of $5.00 per share. On October 16, 2020, the Company entered into an addendum to the Agreement (the “Addendum”),
which extended the deadline for each purchaser to exercise the right to purchase the Additional Shares by one year, to October 19, 2021.
As of December 31, 2020, investors had elected to purchase 420,000 of the Additional Shares of common stock of AYRO, par value $0.0001
per share, at an offering price of $5.00 per share, for gross proceeds of approximately $2,100,000 before offering expenses of $168,000.
During
July 2020, the Company issued 225,590 shares of common stock from the conversion of 7,833 shares of Series H-6 Preferred Stock.
On
November 22, 2020, the Company entered into a Securities Purchase Agreement with certain institutional and accredited investors, pursuant
to which such stockholders agreed to purchase an aggregate of 1,650,164 shares of AYRO common stock, par value $0.0001 per share, at
an offering price of $6.06 per share, for gross proceeds of approximately $10,000,000 before the deduction of fees and offering expenses
of $847,619.
During
the year ended December 31, 2020, the Company issued 5,074,645 shares of common stock from the exercise of 5,092,806 warrants and received
net cash proceeds of $3,926,818.
During
the year ended December 31, 2020, the Company issued 1,030,585 shares of common stock from the conversion of the 2019 $1,000,000 Convertible
Bridge.
During
the year ended December 31, 2020, the Company issued 2,337,663 shares of common stock from the closing of the Merger in consideration
for $3,060,740 of cash and equity of Merger Sub.
During
the year ended December 31, 2020, the Company issued 1,573,218 shares of common stock, par value $0.0001 per share, for proceeds of $2,000,000
net of offering fees and expenses of $609,010, pursuant to Stock Purchase Agreements entered into on December 19, 2019, as a component
of the Merger Agreement and contingent upon closing of the Merger.
During
the year ended December 31, 2020, the Company issued 1,037,496 shares of common stock to advisors in connection with the Merger.
In
December 2020, based on its contract, the Company agreed to issue 15,000 shares of common stock to COR Prominence LLC, the Company’s
investor relations firm. The shares were immediately vested and were issued in April 2021. An expense of $42,300 was recorded for the
year ended December 31, 2020.
During
the year ended December 31, 2020, the Company issued 2,007,193 shares of the common stock from the conversion of 7,360,985 shares of
AYRO Seed Preferred Stock.
During
the year ended December 31, 2020, the Company issued 6,817 shares of common stock from the exercise of stock options and received cash
proceeds of $16,669.
During
the year ended December 31, 2020, the Company issued 795 shares of common stock from the conversion of 955 shares of H-3 Preferred Stock.
On
January 25, 2021, AYRO entered into a Securities Purchase Agreement with certain institutional and accredited investors, pursuant to
which AYRO agreed to issue and sell in a registered direct offering (the “January 2021 Offering”) an aggregate of 3,333,334
shares of common stock of AYRO, par value $0.0001 per share, at an offering price of $6.00 per share, for gross proceeds of $20,000,004
before the deduction of fees and offering expenses of $1,648,608.
On
February 11, 2021, AYRO entered into a Securities Purchase Agreement with certain institutional and accredited investors, pursuant to
which AYRO agreed to issue and sell in a registered direct offering (the “February 2021 Offering”) an aggregate of 4,400,001
shares of common stock of AYRO, par value $0.0001 per share, at an offering price of $9.50 per share, for gross proceeds of $41,800,008
before the deduction of fees and offering expenses of $3,394,054. Each purchaser was also granted an option to purchase, on or before
February 16, 2022, additional shares of common stock equal to the full amount of 75% of the common stock it purchased at the initial
closing, or an aggregate of 3,300,001 shares, at an exercise price of $11.50 per share.
On
March 17, 2021, in connection with that certain Agreement and Plan of Merger dated December 19, 2019, whereby certain former stockholders
of AYRO Operating entered into lock-up agreements (collectively, the “May Lock-Up Agreements”) pursuant to which they agreed
to certain restrictions on the transfer or sale of shares of the Company’s common stock for the one-year period following the Merger,
AYRO modified the May Lock-Up Agreements to allow each stockholder party to a May Lock-Up Agreement to (i) sell up to 5% of such stockholder’s
holdings in the Company’s common stock on any trading day (with such 5% limitation to be measured as of the date of each sale)
and (ii) allow for unlimited sales of the Company’s common stock for any sales made at $10.00 per share or greater. As of May 28,
2021, all of the May Lock-up Agreements were expired.
Pursuant
to the Securities Purchase Agreement dated July 21, 2020, during the six months ended June 30, 2021 investors purchased 302,500 of the
Additional Shares of common stock of AYRO, par value $0.0001 per share, at an offering price of $5.00 per share, for gross proceeds of
$1,512,500.
During
February 2021, the Company issued 13,642 shares of common stock from the exercise of warrants and received cash proceeds of $100,000.
During
the six months ended June 30, 2021, the Company issued 469,576 shares of common stock from the exercise of stock options and received
cash proceeds of $1,224,917.
During
the six months ended June 30, 2021, the Company issued 681,725 shares of common stock upon the vesting of restricted stock.
Restricted
Stock
During
the year ended December 31, 2020, the Company issued 1,087,618 shares of restricted common stock valued based on the stock price at the
date of issuance with a weighted average price of $5.27 per share, pursuant to the AYRO, Inc. 2020 Long-Term Incentive Plan, See Note
11. Of which 15,115 shares were vested during the year ended December 31, 2020. On February 24, 2021, pursuant to the AYRO, Inc. 2020
Long-Term Incentive Plan, the Company issued 172,000 shares of restricted stock to non-executive directors at a value of $7.66 per share.
During the six month ended June 30, 2021, 681,724 additional shares vested. The Company recognized stock-based compensation expense during
the three and six months ended June 30, 2021 of $1,407,012 and $2,836,541, respectively.
Preferred
Stock
Upon
closing of the Merger, the Company assumed the Series H, H-3 and H-6 preferred stock of DropCar, Inc., which respective conversion prices
have been adjusted to reflect the May 2020 one-for-five reverse split.
Series
H Convertible Preferred Stock
Under
the terms of the Series H Certificate of Designation, each share of the Company’s Series H Convertible Preferred Stock (the “Series
H Preferred Stock”) has a stated value of $154 and is convertible into shares of the Company’s Common Stock, equal to the
stated value divided by the conversion price of $184.80 per share (subject to adjustment in the event of stock splits or dividends).
The Company is prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion,
the holder would beneficially own more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common
stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion. In the event of liquidation,
the holders of the Series H Preferred Stock are entitled, pari passu with the holders of common stock, to receive a payment in the amount
the holder would receive if such holder converted the Series H Preferred Stock into common stock immediately prior to the date of such
payment.
As
of June 30, 2021, such payment would be calculated as follows:
SCHEDULE OF PAYMENT OF PREFERRED STOCK
Number of Series H Preferred Stock outstanding as of June 30, 2021 | |
| 8 | |
Multiplied by the stated value | |
$ | 154.00 | |
Equals the gross stated value | |
$ | 1,232 | |
Divided by the conversion price | |
$ | 184.80 | |
Equals the convertible shares of Company Common Stock | |
| 7 | |
Multiplied by the fair market value of Company Common Stock as of June 30, 2021 | |
$ | 4.88 | |
Equals the payment | |
$ | 34 | |
Series
H-3 Convertible Preferred Stock
Pursuant
to the Series H-3 Certificate of Designation (as defined below), the holders of the Company’s Series H-3 Convertible Preferred
Stock (the “Series H-3 Preferred Stock”) are entitled to elect up to two members of a seven-member Board, subject to certain
step downs; pursuant to the Series H-3 securities purchase agreement, the Company agreed to effectuate the appointment of the designees
specified by the Series H-3 investors as directors of the Company.
Under
the terms of the Series H-3 Certificate of Designation, each share of the Series H-3 Preferred Stock has a stated value of $138 and is
convertible into shares of common stock, equal to the stated value divided by the conversion price of $165.60 per share (subject to adjustment
in the event of stock splits and dividends). The Company is prohibited from effecting the conversion of the Series H-3 Preferred Stock
to the extent that, as a result of such conversion, the holder or any of its affiliates would beneficially own more than 9.99%, in the
aggregate, of the issued and outstanding shares of common stock calculated immediately after giving effect to the issuance of shares
of common stock upon the conversion of the Series H-3 Preferred Stock.
In
the event of liquidation, the holders of the Series H-3 Preferred Stock are entitled, pari passu with the holders of common stock, to
receive a payment in the amount the holder would receive if such holder converted the Series H-3 Preferred Stock into common stock immediately
prior to the date of such payment.
As
of June 30, 2021, such payment would be calculated as follows:
SCHEDULE OF PAYMENT OF PREFERRED STOCK
Number of Series H-3 Preferred Stock outstanding as of June 30, 2021 | |
| 1,234 | |
Multiplied by the stated value | |
$ | 138 | |
Equals the gross stated value | |
$ | 170,292 | |
Divided by the conversion price | |
$ | 165.60 | |
Equals the convertible shares of Company Common Stock | |
| 1,028 | |
Multiplied by the fair market value of Company Common Stock as of June 30, 2021 | |
$ | 4.88 | |
Equals the payment | |
$ | 5,017 | |
Series
H-6 Convertible Preferred Stock
On
February 5, 2020, the Company filed the Certificate of Designations, Preferences and Rights of the Series H-6 Preferred Stock (the “Series
H-6 Certificate of Designation”) with the Secretary of State of the State of Delaware, establishing and designating the rights,
powers and preferences of the Series H-6 Preferred Stock. The Company designated up to 50,000 shares of Series H-6 Preferred Stock and
each share has a stated value of $72.00 (the “H-6 Stated Value”). Each share of Series H-6 Preferred Stock is convertible
at any time at the option of the holder thereof, into a number of shares of common stock of the Company determined by dividing the H-6
Stated Value by the initial conversion price of $3.60 per share, which was then further reduced to $2.50 under the anti-dilution adjustment
provision, subject to a 9.99% blocker provision. The Series H-6 Preferred Stock has the same dividend rights as the common stock, except
as provided for in the Series H-6 Certificate of Designation or as otherwise required by law.
The
Series H-6 Preferred Stock also has the same voting rights as the common stock, except that in no event shall a holder of Series H-6
Preferred Stock be permitted to exercise a greater number of votes than such holder would have been entitled to cast if the Series H-6
Preferred Stock had immediately been converted into shares of common stock at a conversion price equal to $3.60. In addition, a holder
(together with its affiliates) may not be permitted to vote Series H-6 Preferred Stock held by such holder to the extent that such holder
would beneficially own more than 9.99% of our common stock. In the event of any liquidation or dissolution, the Series H-6 Preferred
Stock ranks senior to the common stock in the distribution of assets, to the extent legally available for distribution.
The
holders of Series H-6 Preferred Stock are entitled to certain anti-dilution adjustments if the Company issues shares of its common stock
at a lower price per share than the applicable conversion price of the Series H-6 Preferred Stock. If any such dilutive issuance occurs
prior to the conversion of the Series H-6 Preferred Stock, the conversion price will be adjusted downward to a price that cannot be less
than 20% of the exercise price of $3.60.
In
the event of liquidation, the holders of the Series H-6 Preferred Stock are entitled, pari passu with the holders of common stock, to
receive a payment in the amount the holder would receive if such holder converted the Series H-6 Preferred Stock into common stock immediately
prior to the date of such payment.
As
of June 30, 2021, such payment would be calculated as follows:
SCHEDULE OF PAYMENT OF PREFERRED STOCK
Number of Series H-6 Preferred Stock outstanding as of June 30, 2021 | |
| 50 | |
Multiplied by the stated value | |
$ | 72.00 | |
Equals the gross stated value | |
$ | 3,600 | |
Divided by the conversion price | |
$ | 2.50 | |
Equals the convertible shares of Company Common Stock | |
| 1,440 | |
Multiplied by the fair market value of Company Common Stock as of June 30, 2021 | |
$ | 4.88 | |
Equals the payment | |
$ | 7,027 | |
Warrants
AYRO
Seed Warrants
Prior
to the Merger, the Company issued 461,647 warrants (the “AYRO Seed Warrants”) with an exercise price $7.33. The AYRO Seed
Warrants terminate five years from the grant date. During February 2021, AYRO Seed Warrants were exercised for proceeds of $100,000 and
the Company issued 13,642 shares of its Common Stock. As of June 30, 2021, there were 448,005 AYRO
Seed Warrants outstanding. The Company recorded warrant expense of $0 and $36,760 related to the AYRO Seed Warrants for the six months
ended June 30, 2021 and 2020, respectively.
Series
I, J, H, H-1, H-3, H-4 and H-5 warrants transferred to AYRO common stock pursuant to the Merger.
Series
I Warrants
As
a result of the Merger, 14,636 Series I Warrants transferred to AYRO and have an exercise price of $69.00 per share. If at any time (i)
the volume weighted average price (“VWAP”) of the Common Stock exceeds $138.00 for not less than the mandatory exercise measuring
period; (ii) the daily average number of shares of Common Stock traded during the mandatory exercise measuring period equals or exceeds
25,000; and (iii) no equity conditions failure has occurred as of such date, then the Company shall have the right to require the holder
to exercise all or any portion of the Series I Warrants. During the six months ended June 30, 2021, all 14,636 Series I Warrants expired.
Series
H-3 Warrants
As
a result of the Merger, 2,800 Series H-3 Warrants transferred to AYRO and have an exercise price of $165.60 per share, subject to adjustments
(the “Series H-3 Warrants”). Subject to certain ownership limitations, the Series H-3 Warrants are immediately exercisable
from the issuance date and will be exercisable for a period of five (5) years from the issuance date. As of June 30, 2021, there were
2,800 Series H-3 Warrants outstanding.
Exercise
of Series H-4 Warrants and Issuance of Series J Warrants
Series
H-4 Warrants
As
a result of the Merger, 37,453 Series H-4 Warrants transferred to AYRO and have an exercise price of $15.60. The Series H-4 Warrants
contain an anti-dilution price protection, and the warrants cannot be less than $15.60 per share. As of June 30, 2021, there were 37,453
Series H-4 Warrants outstanding.
As
a result of the Merger, 52,023 Series J Warrants transferred to AYRO. The terms of the Series J Warrants are substantially identical
to the terms of the Series H-4 Warrants except that (i) the exercise price is equal to $30.00 per share, (ii) the Series J Warrants may
be exercised at all times beginning on the 6-month anniversary of the issuance date on a cash basis and also on a cashless basis, (iii)
the Series J Warrants do not contain any provisions for anti-dilution adjustment and (iv) the Company has the right to require the Holders
to exercise all or any portion of the Series J Warrants still unexercised for a cash exercise if the volume-weighted average price (VWAP)
(as defined in the Series J Warrant) for the Company’s common stock equals or exceeds $45.00 for not less than ten consecutive
trading days.
If
at any time (i) the VWAP of the Common Stock exceeds $9.00 for not less than the mandatory exercise measuring period; (ii) the daily
average number of shares of Common Stock traded during the mandatory exercise measuring period equals or exceeds 25,000; and (iii) no
equity conditions failure has occurred as of such date, then the Company shall have the right to require the holder to exercise all or
any portion of the Series J Warrants still unexercised for a cash exercise. As of June 30, 2021, there were 52,023 Series J Warrants
outstanding.
Series
H-5 Warrants
As
a result of the Merger, 296,389 Series H-5 Warrants were transferred to AYRO and have an exercise price of $2.50 per share. Subject to
certain ownership limitations, the H-5 Warrants became exercisable beginning six months from the issuance date and will be exercisable
for a period of five years from the initial issuance date.
The
H-5 Warrants are entitled to certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per
share than the applicable exercise price (subject to a floor of $0.792 per share). An anti-dilution adjustment was triggered resulting
in an adjusted exercise price per share from $3.96 to $2.50, resulting in an issuance of an additional 173,091 warrants that are exercisable
at $2.50 per share. As of June 30, 2021, there were 348,476 Series H-5 Warrants outstanding.
The
Company considers the change in exercise price due to the anti-dilution trigger related to the Series H-5 Warrants to be of an equity
nature, as the issuance allowed the warrant holders to exercise warrants in exchange for common stock, which represents an equity for
equity exchange. Therefore, the change in the fair value before and after the effect of the anti-dilution triggering event and the fair
value of the Series H-5 warrants will be treated as a deemed dividend in the amount of $432,727. Cash received upon exercise in excess
of par value is accounted for through additional paid in capital. The Company valued the deemed dividend as the difference between: (a)
the modified fair value of the Series H-5 Warrants in the amount of $967,143 and (b) the fair value of the original award prior to the
modification of $534,416.
The
warrants were valued using the Black-Scholes option pricing model on the date of the modification and issuance using the following assumptions:
(a) fair value of common stock of $2.77 per share, (b) expected volatility of 89.96%, (c) dividend yield of 0%, (d) risk-free interest
rate of 0.24%, and (e) expected life of 5 years. The Series H-5 Warrants were exercisable beginning June 6, 2020.
The
Series H-1, H-3, H-4, J and H-5 Warrants expire through the years 2022-2024.
Other
AYRO Warrants
On
June 19, 2020, the Company agreed to issue finder warrants (the “June Finder Warrants”) to purchase 27,273 shares of the
Company’s common stock at an exercise price of $2.75 per share to a finder or its designees, and the Company agreed to issue warrants
to Palladium (the “June Placement Agent Warrants”) to purchase 126,000 shares of the Company’s common stock at an exercise
price of $2.875 per share. The June Finder Warrants and June Placement Agent Warrants terminate after a period of 5 years on June 19,
2020. As of December 31, 2020, 126,000 of the June Placement Agent Warrants had been exercised. As of June 30, 2021, the 27,273 June
Finder Warrants were outstanding.
On
July 8, 2020, the Company agreed to issue finder warrants (the “July 8 Finder Warrants”) to purchase 71,770 shares of the
Company’s common stock at an exercise price of $5.225 per share to a finder or its designees, and the Company agreed to issue warrants
to Palladium (the “July 8 Placement Agent Warrants”) to purchase 147,368 shares of the Company’s common stock at an
exercise price of $5.4625 per share.
The
July 8 Finder Warrants and July 8 Placement Agent Warrants terminate after a period of 5 years on July 8, 2020. As of June 30, 2021,
there were 71,770 July 8 Finder Warrants and 147,368 July 8 Placement Agent Warrants were outstanding.
On
July 22, 2020, the Company agreed to issue warrants to Palladium (the “July 22 Placement Agent Warrants”) to purchase 129,500
shares of the Company’s common stock at an exercise price of $5.750 per share. The July 22 Placement Agent Warrants terminate after
a period of 5 years on July 22, 2020. As of June 30, 2021, there were 129,500 July 22 Placement
Agent Warrants outstanding.
On
September 25, 2020, the Company issued a warrant (the “September Warrant”) to purchase 31,348 shares of the Company’s
common stock at an exercise price of $3.19 per share to a vendor for facilitating a manufacturing agreement. The September Warrant is
immediately exercisable and expires on September 25, 2025. The September Warrant was classified as equity and the estimated fair value
of $2.13 per share was computed as of September 25, 2020, using the Black-Scholes model. The Company recorded $66,845 as stock-based
compensation expense during the fourth quarter in 2020 for the total fair value of the September Warrant. As of June 30,
2021, there were 31,348 September Warrants outstanding.
The
following assumptions were used to determine the fair value of the September Warrants:
SCHEDULE OF FAIR VALUE ASSUMPTIONS OF WARRANTS
| |
As of September 25, 2020 | |
Dividend | |
| - | % |
Risk Free Rate | |
| 0.30 | % |
Exercise Price | |
$ | 2.90 | |
Strike Price | |
$ | 3.19 | |
Term | |
| 5.00 | |
Volatility | |
| 102 | % |
On
November 22, 2020, the Company entered into a Securities Purchase Agreement with new and current stockholders of the Company, pursuant
to which such stockholders agreed to purchase shares of AYRO’s Common Stock, Series A Warrants and Series B Warrants to purchase
AYRO’s Common Stock for an aggregate purchase price of $9,999,997. Each purchaser additionally purchased and received Series A
Warrants and Series B Warrants equal to 75% and 50% of the purchased shares, for a total of 1,237,624 Series A Warrants and 825,084 Series
B Warrants. The Series A Warrants were immediately exercisable, in whole or in part at a strike price of $8.09 and expired on May 24,
2021. The Series B Warrants are immediately exercisable, in whole or in part, at a strike price of $8.90, and terminate five years from
the date issuance on November 24, 2025. As of June 30, 2021, there were no Series A Warrants
and 825,084 Series B Warrants outstanding.
On
November 22, 2020, the Company agreed to issue finder
warrants (the “November Finder Warrants”) to purchase 56,256 shares of the Company’s common stock at an exercise price
of $6.6660 per share to a finder or its designees, and the Company agreed to issue warrants to Palladium (the “November Placement
Agent Warrants”) to purchase 57,756 shares of the Company’s common stock at an exercise price of $6.9690 per share.
The
November Finder Warrants and November Placement Agent Warrants terminate after a period of 5 years on November 22, 2025. As of June 30,
2021, there were 56,256 November Finder Warrants and 57,756 November Placement Agent Warrants were outstanding.
On
January 25, 2021, AYRO entered into a Securities Purchase Agreement with certain institutional and accredited investors, pursuant to
which AYRO agreed to issue and sell in a registered direct offering (the “January 2021 Offering”) an aggregate of 3,333,334
shares of common stock of AYRO, par value $0.0001 per share, at an offering price of $6.00 per share, for gross proceeds of approximately
$20.0 million before the deduction of fees and offering expenses.
Each
purchaser was also granted a warrant to purchase, between July 26, 2021 and July 26, 2023, additional shares of common stock equal to
the full amount of the common stock it purchased at the initial closing, or an aggregate of 3,333,334 shares at an exercise price of
$6.93 per share.
On
January 25, 2021, the Company agreed to issue warrants to Palladium, the placement agent for the January 2021 offering to purchase 233,334
shares of the Company’s common stock at an exercise price of $6.93 per share. The warrants are exercisable six months following
issuance and terminate on July 23, 2023.
On
February 11, 2021, the Company agreed to issue warrants to Spartan Capital Securities, LLC and its affiliates (the “February Finder
Warrants”) to purchase 15,574 shares of the Company’s common stock at an exercise price of $10.925 per share and to purchase
35,885 shares of the Company’s common stock at an exercise price of $10.45 per share to a finder or its designees. In addition,
the Company agreed to issue warrants to Palladium (the “February Placement Agent Warrants”) to purchase 255,584 shares of
the Company’s common stock at an exercise price of $10.925 per share. The February Finder Warrants and February Placement Agent
Warrants terminate after a period of 5 years on February 26, 2026. As of June 30, 2021, there were 51,459 February Finder Warrants and
255,584 February Placement Agent Warrants were outstanding.
A
summary of the Company’s warrants to purchase common stock activity is as follows:
SCHEDULE OF WARRANT ACTIVITY
| |
Shares Underlying Warrants | | |
Weighted Average
Exercise
Price | | |
Weighted Average Remaining Contractual Term (in
years) | |
Outstanding at December 31, 2020 | |
| 3,501,014 | | |
$ | 8.03 | | |
| 2.87 | |
Granted | |
| 3,873,711 | | |
$ | 7.24 | | |
| | |
Exercised | |
| (13,642 | ) | |
$ | 7.33 | | |
| | |
Expired | |
| (1,252,260 | ) | |
$ | 8.80 | | |
| | |
Outstanding at June 30, 2021 | |
| 6,108,823 | | |
$ | 7.37 | | |
| 2.82 | |
NOTE
11. STOCK-BASED COMPENSATION
AYRO
2020 Long Term Incentive Plan
On
May 28, 2020, the Company’s shareholders approved the AYRO, Inc. 2020 Long Term Incentive Plan for future grants of incentive stock
options, nonqualified stock, stock appreciation rights, restricted stock, restricted stock units, performance and other awards. The Company
has reserved a total of 4,089,650 shares of its common stock pursuant to the AYRO, Inc. 2020 Long-Term Incentive Plan, including shares
of restricted stock that have been issued. The Company has 1,874,037 stock options, restricted stock and warrants remaining under this
plan as of June 30, 2021.
AYRO
2017 Long Term Incentive Plan
Prior
to the Merger, the Company granted stock options and warrants pursuant to the 2017 Long Term Incentive Plan effective January 1, 2017.
As of June 30, 2021, the 2017 Long Term Incentive Plan remains active, but no additional awards may be granted.
DropCar
Amended and Restated 2014 Equity Incentive Plan
The
DropCar Amended and Restated 2014 Equity Incentive Plan was amended in 2018 to increase the number of shares of Company common stock
available for issuance. Pursuant to the 2014 Equity Incentive Plan (the “2014 Plan”), 141,326 shares of common stock were
reserved for issuance and there are options to purchase 61,440 shares outstanding as of June 30, 2021. As of June 30, 2021, there were
zero shares available for grant under the 2014 Plan.
Stock-based
compensation, including restricted stock awards, stock options and warrants is included in the unaudited condensed consolidated statement
of operations as follows:
SCHEDULE OF STOCK-BASED COMPENSATION
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Research and development | |
$ | 20,708 | | |
$ | 15,873 | | |
$ | 44,194 | | |
$ | 31,745 | |
Sales and marketing | |
| 60,633 | | |
| 38,120 | | |
| 124,082 | | |
| 72,705 | |
General and administrative | |
| 1,556,730 | | |
| 96,956 | | |
| 3,169,218 | | |
| 202,958 | |
Total | |
$ | 1,638,071 | | |
$ | 150,949 | | |
$ | 3,337,494 | | |
$ | 307,408 | |
Options
The
following table reflects the stock option activity:
SCHEDULE OF STOCK-BASED COMPENSATION, STOCK OPTIONS, ACTIVITY
| |
Number of Shares | | |
Weighted Average Exercise Price | | |
Contractual Life (Years) | |
Outstanding at December 31, 2020 | |
| 1,920,269 | | |
$ | 4.40 | | |
| 8.66 | |
Exercised | |
| (469,576 | ) | |
| (2.25 | ) | |
| | |
Forfeitures | |
| (2,500 | ) | |
| (2.52 | ) | |
| | |
Outstanding at June 30, 2021 | |
| 1,448,193 | | |
$ | 4.98 | | |
| 8.46 | |
Of
the outstanding options, 575,600 were vested and exercisable as of June 30, 2021. At June 30, 2021 the aggregate intrinsic value of stock
options vested and exercisable was $1,534,567.
The
Company recognized $231,059 and $136,244 of stock option expense for the three months ended June 30, 2021 and June 30, 2020, and $500,953
and $270,647 for the six months ended June 30, 2021 and June 30, 2020, respectively. Total compensation cost related to non-vested stock
option awards not yet recognized as of June 30, 2021 was $1,472,752 and will be recognized
on a straight-line basis through the end of the vesting periods through October 2023. The amount of future stock option compensation
expense could be affected by any future option grants or by any forfeitures.
Determining
the appropriate fair value of the stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s
common stock, and for stock options, the expected life of the option, and the expected stock price volatility. The Company uses the Black-Scholes
option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent
management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result,
if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future
awards.
The
Company uses the following inputs when valuing stock-based awards.
SCHEDULE OF STOCK-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS
| |
Six Months Ended June 30, | |
| |
2021 | | |
2020 | |
Expected life (years) | |
| N/A | | |
| 5.0 | |
Risk-free interest rate | |
| N/A | | |
| 0.70 | % |
Expected volatility | |
| N/A | | |
| 4.40 | % |
Total grant date fair value | |
$ | N/A | | |
$ | 3.84 | |
The
expected life of the employee stock options was estimated using the “simplified method,” as the Company has no historical
information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. No
employee stock options were awarded in the six months ended June 30, 2021.
The
simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected life of awards
that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses public
company compatibles and historical private placement data as a basis for its expected volatility to calculate the fair value of option
grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the
grant-date.
Restricted
Stock
The following table reflects the restricted stock activity:
SCHEDULE OF STOCK-BASED COMPENSATION, STOCK OPTIONS, ACTIVITY
| |
Number of
Shares | | |
Weighted
Average
Grant Price | |
Outstanding at December 31, 2020 | |
| 1,072,503 | | |
$ | 5.30 | |
Granted | |
| 172,000 | | |
| 7.66 | |
Vested | |
| (681,724 | ) | |
| 4.85 | |
Forfeitures | |
| (42,612 | ) | |
| 3.17 | |
Outstanding at June 30, 2021 | |
| 520,167 | | |
$ | 6.84 | |
In
September 2020, the Company issued 436,368 shares of restricted stock to non-executive directors, of which 15,115 immediately vested
and the remainder to vest in December 2020, which was subsequently modified to vest in full in May 2021. During May 2021, of the remaining
outstanding restricted stock 378,641 vested and 42,612 were forfeited. The Company recognized compensation expense during the three and
six months ended June 30, 2021 of $198,763 and $699,528, respectively.
In
December 2020, based on objectives achieved, the Company issued 651,250 shares of restricted stock to Rodney C. Keller, Jr. (“the
“Keller Restricted Stock”) that vest according to the following vesting schedule: one-third will vest on May 28, 2021, one-third
will vest on December 4, 2021 and one-third will vest on December 4, 2022. Compensation expense recognized for the Keller Restricted
Stock for the three and six months ended June 30, 2021 was $732,472 and $1,478,247, respectively. Total compensation cost related to
non-vested restricted stock not yet recognized as of June 30, 2021 was $2,648,371 and will be recognized on a straight-line basis through
the end of the vesting periods through December 4, 2022.
On
February 24, 2021, pursuant to the AYRO, Inc. 2020 Long-Term Incentive Plan, the Company issued 172,000 shares of restricted stock to
non-executive directors at a value of $7.66 per share. The shares vest 50% at June 30, 2021, 25% at September 30, 2021 and 25% at December
31, 2021. The Company recognized compensation expense during the three and six months ended June 30, 2021 of $475,771 and $658,760. Total
compensation cost related to non-vested restricted stock not yet recognized as of June 30, 2021 was $658,760 and will be recognized on
a straight-line basis through the end of the vesting periods through December 31, 2021.
Other
Share-Based Payments
The
Company granted stock warrants pursuant to the 2017 Long Term Incentive Plan (“LTIP”) effective January 1, 2017. The Company
measured consultant stock-based awards at grant-date fair value and recognizes contractor consulting expense for contractor warrants
on a straight-line method basis over the vesting period of the award. Grants to consultants are expensed at the earlier of (i) the date
at which a commitment for performance by the service provider to earn the equity instrument is reached and (ii) the date at which the
service provider’s performance is complete.
The
Company recognized $0 and $14,704 of warrant expense related to consulting services for the three months ended June 30, 2021 and 2020,
and $0 and $36,760 for the six months ended June 30, 2021 and 2020, respectively.
NOTE 12. CONCENTRATIONS AND CREDIT RISK
Revenues
In
March 2019, the Company entered into a five-year Master Procurement Agreement, or the MPA, with Club Car for the sale of AYRO’s
four-wheeled vehicle. The MPA grants Club Car the exclusive right to sell AYRO’s four-wheeled vehicle in North America, provided
that Club Car orders at least 500 vehicles per year. Although Club Car did not meet the volume threshold for 2020, we currently do not
intend to sell our four-wheeled vehicles other than exclusively through Club Car. The MPA has an initial term of five (5) years commencing
January 1, 2019 and may be renewed by Club Car for successive one-year periods upon 60 days’ prior written notice. For the six
months ended June 30, 2021 and 2020, two customers accounted for the Company’s revenues, one for 59% and 81% and the second for
40% and 17%, respectively, and one for 39% and 76% and the second for 65% and 25% for the three months ended
June 30, 2021 and 2020, respectively.
Accounts
Receivable
As
of June 30, 2021 and December 31, 2020, two customers accounted for more than 10% of the Company’s accounts receivable. One customer
accounted for approximately 45% and 74% as of June 30, 2021 and December 31, 2020, respectively. A second customer accounted for approximately
44% and 11% as of June 30, 2021 and December 31, 2020, respectively.
Purchasing
The
Company places orders with various suppliers. During the six months ended June 30, 2021 and 2020, two suppliers provided more than 10%
of the Company’s raw materials purchases. During the six months ended June 30, 2021, one supplier, Cenntro, accounted for
approximately 45% and another supplier accounted for approximately 12%. The Company’s purchases of raw materials from one supplier
accounted for approximately 57%, another supplier accounted for approximately 25% for the six months ended June 30, 2020. The Company’s
purchases for raw materials were approximately 63% and 8% for the three months ended June 30, 2021, and approximately 28%
and 12% for the three months ended June 30, 2020. Any disruption in the operation of this supplier, Cenntro could adversely
affect the Company’s operations.
Manufacturing
Cenntro
Automotive Group (“Cenntro”), a related party in 2020, owns the design of the AYRO 411 model and has granted the Company
an exclusive license to manufacture the AYRO 411 model for sale in North America. The Company’s business is dependent on such license,
and if it fails to comply with its obligations to maintain that license, the Company’s business will be substantially harmed. Under
the Manufacturing License Agreement, dated April 27, 2017, between Cenntro and the Company, the Company is granted an exclusive license
to manufacture and sell AYRO 411 in the United States, and the Company is required to purchase the minimum volume of product units from
Cenntro, among other obligations.
NOTE
13. RELATED PARTY TRANSACTIONS
Supply
Chain Agreements
In
2017, the Company executed a supply chain contract with Cenntro, the Company’s primary supplier, a manufacturer located in the
People’s Republic of China. Prior to the Merger, Cenntro was a significant shareholder in AYRO Operating. Through the partnership,
Cenntro acquired 19% of AYRO Operating’s common stock. Cenntro owns the design of the AYRO 411 Fleet vehicles and has granted the
Company an exclusive license to purchase the AYRO 411 Fleet vehicles for sale in North America. Currently, the Company purchases 100%
of its vehicle chassis, cabs and wheels through this supply chain relationship with Cenntro. The Company must sell a minimum number of
units in order to maintain its exclusive supply chain contract upon availability of the next-generation AYRO 411, the 411x. As of June
30, 2021 and December 31, 2020, the amounts outstanding to Cenntro as a component of accounts payable were $16,635 and $44,594, respectively.
See Note 12 for concentration amounts.
Under
a memo of understanding signed between the Company and Cenntro on March 22, 2020, the Company agreed to purchase 300 units within the
following twelve months of signing the memo of understanding, and 500 and 800 in each of the following respective twelve-month periods.
On July 9, 2020, in exchange for certain percentage discounts for raw materials, the Company made a $1.2 million prepayment for inventory.
During the six months ended June 30, 2021, the Company made an additional deposit of $100,000, as prepayment for additional inventory
for 2021. As of June 30, 2021 and December 31, 2020, the prepayment deposits were $711,634 and $976,512, respectively.
Other
The
Company had received short-term expense advances from its founders. As of June 30, 2021 and December 31, 2020, the amounts outstanding
were $15,000 for each year and recorded as a component of accounts payable on the accompanying unaudited condensed consolidated balance
sheets.
NOTE
14. COMMITMENTS AND CONTINGENCIES
Lease
Agreements
In
2019 the Company entered into a new lease agreement for office and manufacturing space. The lease commencement date was January 16, 2020.
Prior to the commencement date of the new lease agreement, the Company leased other office and manufacturing space on a short-term basis.
The Company determined if an arrangement is a lease at inception of the contract and whether a contract is or contains a lease by determining
whether it conveys the right to control the use of identified asset for a period of time. The contact provides the right to substantially
all the economic benefits from the use of the identified asset and the right to direct use of the identified asset, as such, the contract
is, or contains, a lease. In connection with the adoption of ASC 842, Leases, the Company has elected to treat the lease and non-lease
components as a single component.
During
March 2021, the Company subleased additional office space to support the Company’s expansion plan. The term is for 16 months with
a total lease obligation of $131,408. In connection with the adoption of ASC 842, Leases, the Company has elected to treat the
lease and non-lease components as a single component.
Leases
were classified as an operating lease at inception. An operating lease results in the recognition of a Right-of-Use (“ROU”)
assets and lease liability on the balance sheet. ROU assets and operating lease liabilities are recognized based on the present value
of lease payments over the lease term as of the commencement date. Because the lease does not provide an explicit or implicit rate of
return, the Company determines incremental borrowing rate based on the information available at the commencement date in determining
the present value of lease payments on an individual lease basis.
The
incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount
equal to the lease payments for the asset under similar term, which is 10.41%. Lease expense for the lease is recognized on a straight-line
basis over the lease term.
The
Company’s leases do not contain any residual value guarantees or material restrictive covenants. Leases with a lease term of 12
months or less are not recorded on the balance sheet and lease expense is recognized on a straight-line basis over the lease term. The
remaining terms for the Company’s leases as of June 30, 2021 are 5.75 and 1.00 years, respectively. The Company currently has no
finance leases.
During
the six months ended June 30, 2021 and 2020, cash paid for amounts included in the measurement of lease liabilities- operating cash flows
from operating lease was $67,009 and $30,286, respectively.
The
components of lease expense consist of the following:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE
| |
|
2021 | | |
|
2020 | | |
|
2021 | | |
|
2020 | |
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2021 | | |
2020 | | |
2021 | | |
2020 | |
Operating lease expense | |
$ | 127,463 | | |
$ | 61,196 | | |
$ | 196,258 | | |
$ | 107,064 | |
Short-term lease expense | |
| 1,956 | | |
| 8,026 | | |
| 5,489 | | |
| 54,854 | |
Total lease cost | |
$ | 129,419 | | |
$ | 69,222 | | |
$ | 201,747 | | |
$ | 161,918 | |
Balance
sheet information related to leases consists of the following:
SCHEDULE OF OPERATING LEASES RIGHT OF USE ASSETS AND LIABILITIES
| |
June 30, 2021 | | |
December 31, 2020 | |
Assets | |
| | | |
| | |
Operating lease – right-of-use asset, net | |
$ | 1,125,368 | | |
$ | 1,098,819 | |
Total lease assets | |
$ | 1,125,368 | | |
$ | 1,098,819 | |
| |
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Liabilities | |
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Current liabilities: | |
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