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LIQUIDITY

12 Months Ended

Dec. 31, 2022

2.	LIQUIDITY

The Company has a history of net losses, including in the accompanying financial statements for the years ended December 31, 2022 and 2021 where the Company had net losses of $19.7 million (which includes $9.1 million of non-cash expenses) and $6.6 million (which includes $1.3 million of non-cash expenses), respectively, and net cash used in operating activities of $18.1 million and $6.4 million, respectively. During 2022, the $18.1 million of operating cash usage included $9.0 million increase in inventory and inventory-related prepayments to vendors 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 forecasted requirements.

At December 31, 2022, the Company had a cash balance of $1.7 million and working capital of $6.8 million. The working capital balance has been reduced by a current liability of $6.8 million for contingent consideration, which is non-cash. 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 the date of this report. In September 2022, the Company entered into a Common Stock Purchase Agreement and Registration Rights Agreement with B. Riley Principal Capital II, LLC (“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 shares of its common stock over a period of 24 months in its sole discretion (see note 11 for further information). The Company issued 37,741 shares in January and February 2023 for $.7 million under this agreement. Furthermore, we could pursue other equity or debt financings. In addition, the Company’s outstanding warrants have generated $0.5 million and $2.9 million of proceeds during the year ended December 31, 2022 and 2021, respectively. 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. 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.