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LIQUIDITY

9 Months Ended

Sep. 30, 2022

2.	LIQUIDITY

The Company has a history of net losses. For the nine months ended September 30, 2022 and 2021, the Company had net losses of $11.9 million (which includes $5.1 million of non-cash expenses) and $4.6 million (which included $0.9 million of non-cash expenses), respectively, and net cash used in operating activities of $15.7 million and $5.2 million, respectively. During the first nine months of 2022, the $15.7 million of operating cash usage included $9.1 million to purchase inventory and to prepay vendors for inventory to reduce the risk of potential shortages of cells required for battery manufacturing, and to increase work in process and finished inventory of EV ARC™ units based on a strong revenue forecast. The prepayment and inventory balances are not expected to continue to increase and utilize cash at the same rate as the first nine months, but rather should level off or reduce to lower levels over the next 12 months.

At September 30, 2022, the Company had a cash balance of $4.7 million and working capital of $12.8 million. Based on the Company’s current operating plan, the Company believes that it has the ability to fund its operations and meet contractual obligations for at least twelve months from September 30, 2022. The Company believes that it will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. Should the Company need to raise additional capital, in September 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley under which the Company has the right, but not the obligation, to sell up to $30.0 million shares or a maximum of 2.0 million of its common stock over a period of 24 months in its sole discretion (see note 10 for further information). Furthermore, we could pursue other equity or debt financings. In addition, the Company’s outstanding warrants have generated $0.3 million and $2.7 million of proceeds during the nine months ended September 30, 2022 and 2021, respectively. There is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt financing will be available.