Annual report pursuant to Section 13 and 15(d)

Concentrations and Credit Risk

v3.21.1
Concentrations and Credit Risk
12 Months Ended
Dec. 31, 2020
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. 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. As such, one customer accounted for approximately 68% and 75% of the Company’s revenues for the years ended December 31, 2020 and 2019, respectively.

 

In 2020, the Company phased-out the production of its 311 line of vehicles in order 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.

 

Accounts Receivable

 

One customer accounted for approximately 74% and 69% of the Company’s gross accounts receivable for the years ended December 31, 2020 and 2019, respectively.

 

Purchasing

 

The Company places orders with various suppliers. During the years ended December 31, 2020 and 2019, multiple suppliers accounted for more than 10% of the Company’s raw materials. One supplier, Cenntro Automotive Group (“Cenntro”), a related party – see Note 13 – accounted for approximately 54% and 66%, respectively, of the Company’s purchases of raw materials. Another supplier accounted for approximately 11% during 2020 and a third supplier accounted for approximately 14% in 2019. Any disruption in the operation of this supplier could adversely affect the Company’s operations. Additionally, the Company is dependent on the manufacturing license it has with Cenntro. If the Company fails to comply with its obligations in the agreement with Cenntro, it could lose the ability to manufacture its vehicles.

 

Manufacturing

 

Cenntro owns the design of the AYRO 411 model and has granted the Company an exclusive license to manufacture 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 required to purchase the minimum volume of product units from Cenntro, among other obligations.