Quarterly report pursuant to Section 13 or 15(d)

CONCENTRATIONS AND CREDIT RISK

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CONCENTRATIONS AND CREDIT RISK
9 Months Ended
Sep. 30, 2021
Risks and Uncertainties [Abstract]  
CONCENTRATIONS AND CREDIT RISK

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 three months ended September 30, 2021 and 2020, two customers accounted for the Company’s revenues, one for 99% and 84% and the second for 1% and 13%, respectively, and one for 71% and 84% and the second for 28% and 15% for the nine months ended September 30, 2021 and 2020, respectively.

 

Accounts Receivable

 

As of September 30, 2021 and December 31, 2020, two customers accounted for more than 10% of the Company’s accounts receivable. One customer accounted for approximately 84% and 74% as of September 30, 2021 and December 31, 2020, respectively. A second customer accounted for approximately 13% and 11% as of September 30, 2021 and December 31, 2020, respectively.

 

Purchasing

 

The Company places orders with various suppliers. During the nine months ended September 30, 2021 and 2020, two suppliers provided more than 10% of the Company’s raw materials purchases. One supplier, Cenntro, accounted for approximately 51% and 68%, respectively, and another supplier accounted for approximately 11% and 11%, respectively, for the nine months ended September 30, 2021, and 2020. The Company’s purchases from its top two suppliers for raw materials were approximately 56% and 16% for the three months ended September 30, 2021, and approximately 73% and 12% for the three months ended September 30, 2020. Any disruption in the operation of the Company’s primary 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 411x model and has granted the Company an exclusive license to manufacture the AYRO 411x 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 411x in the United States, and the Company is required to purchase the minimum volume of product units from Cenntro, among other obligations.