UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
For the quarterly period ended
or
For the transition period from ____________ to____________
Commission File Number:
(Exact name of registrant as specified in itscharter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices and ZipCode)
(Registrant’s telephone number, includingarea code)
Not Applicable
(Former name or former address, if changed sincelast report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
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 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days.
Indicate by check mark whether the registranthas submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.See 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 | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of August 18, 2025, the registrant had
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ECD AUTOMOTIVE DESIGN, INC
UNAUDITED CONDENSED CONSOLIDATED BALANCESHEETS
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Goodwill | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Right-of-use assets | ||||||||
| Deposit | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Lease liability, current | ||||||||
| Floor plan payable | ||||||||
| Other payables | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| Lease liability, non-current | ||||||||
| Convertible notes, net of debt discount | ||||||||
| Warrant liabilities, at fair value | ||||||||
| Conversion option, at fair value | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Series A preferred stock, $ | ||||||||
| Stockholders’ deficit: | ||||||||
| Series B preferred stock, $ | ||||||||
| Series C preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Other comprehensive income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements
1
ECD AUTOMOTIVE DESIGN, INC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold (exclusive of depreciation expense shown below) | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Advertising and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Provision for credit losses | ||||||||||||||||
| Depreciation and amortization expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||||||||||
| Change in fair value of conversion option liabilities | ( | ) | ( | ) | ||||||||||||
| Gain on conversion of debt to preferred stock | ||||||||||||||||
| Foreign exchange loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Resale commissions income | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (expense) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements
2
ECD AUTOMOTIVE DESIGN, INC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF CHANGES IN STOCKHOLDERS’ DEFICIT
THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND2024
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||
| Series A Shares | Amount | Series C Shares | Amount | Shares | Amount | Paid-In Capital | Accumulated Deficit | Income (loss) | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Reversal of conversion of redeemable preferred shares | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common shares | - | - | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of preferred stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Conversion of convertible notes to common stock | - | - | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
3
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||
| Series A Shares | Amount | Series C Shares | Amount | Shares | Amount | Paid-In Capital | Accumulated Deficit | Income (loss) | Equity (Deficit) | |||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | | - | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common shares | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Issuance of common share | - | - | ||||||||||||||||||||||||||||||||||||||
| Fair value of share based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements
4
ECD AUTOMOTIVE DESIGN, INC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||||||||
| Depreciation and amortization expense | ||||||||
| Gain on FV conversion of debt to preferred stock | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Change in fair value of conversion option liabilities | ( | ) | ||||||
| Noncash lease expense | ||||||||
| Income tax (benefit) expense | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Share-based compensation | ||||||||
| Provision for credit losses | ( | ) | ||||||
| Paid in kind interest | ||||||||
| Inventory write off | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ||||||||
| Prepaid and other current assets | ( | ) | ||||||
| Deposit | ||||||||
| Deferred tax asset | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Other payables | ( | ) | ||||||
| Deferred tax liability | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Disposal of asset | ||||||||
| Purchase of assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of floor plan payable | ( | ) | ( | ) | ||||
| Proceeds from floor plan payable | ||||||||
| Proceeds from convertible note | ||||||||
| Proceeds from notes payable | ||||||||
| Debt issuance costs | ( | ) | ||||||
| Repayment of notes payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of translation changes on cash | ( | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | $ | ||||||
| Supplemental cash flow disclosure: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of noncash cash flow information | ||||||||
| Conversion of convertible notes and interest to common stock | $ | $ | ||||||
| Conversion of convertible notes and interest to preferred stock | $ | |||||||
| Initial classification of warrant liabilities | $ | $ | ||||||
| Initial classification of conversion option liability | $ | $ | ||||||
| Issuance of common stock | $ | $ | ||||||
| Reversal of conversion of redeemable preferred stock into common stock | $ | ( | ) | $ | ||||
| Intangible asset acquired | $ | $ | ||||||
The accompanying notes are an integralpart of these unaudited condensed consolidated financial statements
5
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
ECD Automotive Design, Inc (the “Company,”“ECD,” “we,” “us,” or “our”) is engaged in the production and sale of Land Rover vehicles,Jaguar E-Types, Classic Ford Mustangs and Toyota FJ40s. Since the Company’s commencement of operations in 2013, it has establisheda facility geared towards producing the most customized Land Rovers with the highest quality of parts and the highest quality labor forcebuilding each vehicle. The Company primarily earns revenue from the sale of the customized vehicle delivered directly to the customer.Additionally, revenue is generated from providing repair or upgrade services to customers and from the sale of extended warranties.
The Company also consolidates, ECD Auto DesignUK LTD (“ECD UK”), a private limited company incorporated on July 16, 2021 in England and Wales. ECD UK was formed for thepurpose of procuring parts overseas for the Company. ECD UK is a consolidated variable interest entity (“VIE”) for whichthe company is the primary beneficiary. The Company is the primary beneficiary of ECD UK as it has both the power to direct the mostsignificant activities impacting on its economic performance and the obligation to absorb losses or receive benefits significant to them.
In April 2024, the Company acquired certain assetsof BNMC Continuation Cars LLC (“BNMC”). The assets and the ongoing performance of BNMC are now included in the consolidatedresults of operations of ECD.
NOTE 2. GOING CONCERN
As of June 30, 2025, the Company had cash andcash equivalents of approximately $
The Company’s primary source of operatingfunds since inception has been from cash receipts from sales and proceeds from loans payable.
Management’s assessment of the Company’sability to continue as a going concern involves making a judgment, at a particular point in time, about inherently uncertain futureoutcomes of events or conditions. Any judgment about the future is based on information available at the time at which the judgment ismade. Subsequent events may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made.
The Company’s future capital requirementswill depend on many factors, including the Company’s revenue growth rate. The Company will need to raise additional financing throughloans or through equity raises. The Company cannot provide any assurance that the new financing will be available to it on commerciallyacceptable terms, if at all. If the Company is unable to raise additional capital, the Company’s business, results of operationsand financial condition would be materially and adversely affected.
As a result of the above, inconnection with the Company’s assessment of going concern considerations in accordance with Financial Accounting StandardsBoard (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Going Concern (“ASC205”), Management has determined that the Company’s liquidity condition raises substantial doubt about theCompany’s ability to continue as a going concern within one year after the date these unaudited condensed consolidatedfinancial statements are available to be issued. These unaudited condensed consolidated financial statements do not include anyadjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary shouldthe Company be unable to continue as a going concern.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensedconsolidated financial statements include the accounts of ECD and ECD Auto Design UK Ltd. The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“U.S GAAP”, or “GAAP”), expressed in U.S. dollars. In the opinion of management, alladjustments necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. Allsuch adjustments consisted of all normal recurring items, including the elimination of all intercompany transactions and balances.References to GAAP issued by the FASB in these accompanying notes to the unaudited condensed consolidated financial statements areto the FASB Accounting Standards Codification (“ASC”).
The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements preparedin accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These operating results are not necessarilyindicative of the results that may be expected for the year ending December 31, 2025.
These unaudited interim condensed consolidatedfinancial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the yearended December 31, 2024 included in the 2024 Form 10-K/A, filed with the SEC on July 16, 2025.
6
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Emerging Growth Company Status
The Company is an emerging growth company, asdefined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issuedsubsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected touse this extended transition period for complying with new or revised accounting standards that have different effective dates for publicand private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocablyopts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable tocompanies that comply with the new or revised accounting pronouncements as of public company effective dates.
Use of Estimates
The preparation of the unaudited condensedconsolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from thoseestimates. Significant estimates include assumptions used in revenue recognition, useful life of assets, and allowance for creditlosses.
Segment Information
Operating segments are defined as componentsof an enterprise for which separate discrete financial information is evaluated regularly by the Company’s Chief Executive Officer(“CEO”), who is the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assessperformance. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluatingfinancial performance. Accordingly, the Company operates and manages its business as
Cash and Cash Equivalents
The Company considers all highly liquid investmentsacquired with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are statedat cost, which approximates market value, because of the short maturity of these instruments.
Credit Risk
Financial instruments that potentially subjectthe Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the FederalDeposit Insurance Corporation Coverage limit of $
Revenue Recognition
Revenue is recognized when the Company transferstitle of promised goods or provides services to the customer, in an amount that reflects the consideration that the Company expects toreceive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfillsits obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or servicesin the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether theyare distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration;(iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Companysatisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collectthe consideration it is entitled to in exchange for the goods or services it transfers to the customer.
No one customer exceeded 10% of revenue for thethree and six months ended June 30, 2025 and 2024.
Product Revenue – Builds
The Company generates revenue through the salesof rebuilt or upgraded Land Rover Defender, Range Rover Classics, Land Rover Series, Jaguar E-Types, and Mustang vehicles directly tocustomers. There is a single performance obligation in all of the Company’s contracts, which is the Company’s promise totransfer the Company’s product to customers based on the transfer of title or shipping terms in the arrangement. The entire transactionrevenue is allocated to this performance obligation.
Upon execution of the contract, the Company billsits customers the total consideration of the contract. The Company receives from
7
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Warranty and Other Revenue
The Company also generates revenue through thesale of extended warranties to customers. The customers agree to the terms and conditions at the time of purchase, which represents thecustomer arrangements. The period covered by the extended warranty is usually
The Company generates revenue through providingrepair services to customers. The Company agrees with the customer on consideration for the service to be provided. There is a singleperformance obligation, which is the Company’s promise to perform the retrofit or to execute the agreed upon repair work on thevehicle. The entire transaction price is allocated to this single performance obligation. Service revenue is recognized when the repairwork is completed, and the customer receives the vehicle.
Product Limited Warranty
Consistent with industry practice, the Companygenerally offers customers a limited warranty for work performed on the vehicle under the build/sales contract. The customers do nothave a contractual right of return. The Company only offers a limited warranty for the work performed on the vehicle under the contract.If a customer disputes any work performed, the Company will attempt to remedy the work, however, it shall not be required to discountthe transaction price. The Company considered this an assurance-type warranty and not a separate performance obligation.
Warranty Reserve
The Company provides for the estimated cost ofproduct warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, includingquality control test and driving vehicles, the warranty obligation is affected by historical warranty costs per vehicle. Should actualcosts differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.
Other Revenue Policies
Sales, value add, and other taxes collected onbehalf of third parties are excluded from revenue.
Applying the practical expedient in ASC 606,the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is thatthe period between payment by the customer and the transfer of the promised products to the customer will be one year or less, whichis the case with substantially all customers.
Applying the practical expedient in ASC 606,the Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transferthe associated products. The Company records the related costs as part of the cost of goods sold.
Disaggregation of Revenue
The following table summarizes the Company’snet revenues disaggregated by product category:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Builds | $ | $ | $ | $ | ||||||||||||
| Warranty and other | ||||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
Deferred revenue and remaining performance obligation:
| June 30, 2025 | December 31, 2024 | |||||||
| Beginning balance, January 1 | $ | $ | ||||||
| Additional deposits received | ||||||||
| Revenue Recognized during the year at a point-in-time | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
8
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
As of June 30, 2025 and December 31, 2024, theCompany had customer deposits in the amount of $
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the originalinvoice amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existingbalances. Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivablebalances are written off against the allowance upon management’s determination that such accounts are uncollectible. Recoveriesof accounts receivable previously written off are recorded when received. Management believes that credit risks on accounts receivablewill not be material to the financial position of the Company or results of operations. The Company had trade accounts receivable of$
As of June 30, 2025, amounts due from three customersexceeded
Inventories
Work in progress, work in progress – shippingand consumables, and work in progress – labor costs reported in inventories are carried at the lower of cost or net realizablevalue. Cost is determined on the basis of the direct and indirect costs that are directly attributable. The measurement of inventoriesis generally based on the weighted average method. Finished goods inventory is comprised of vehicles for which the build is completedbut title has not been legally transferred, or in some cases, the vehicle has not been delivered. The measurement of finished goods inventoriesis the total cost of the materials, shipping and consumables, and labor attributed to the build of each specific completed vehicle. Overheadcosts are allocated to inventory based on the rate of inventory turned for the period. As of June 30, 2025 and December 31, 2024, inventorywas $
Property and Equipment
Property and equipment are stated at cost, lessaccumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life of
Long-Lived Assets
The Company follows a “primary asset”approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting fora long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changesin circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is notrecoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
The Company evaluates the recoverability of long-livedassets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the assets willbe adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. No impairmentswere recognized for the three and six months ended June 30, 2025 and 2024.
Income taxes
The Company follows the asset and liability methodof accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoveredor settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includesthe enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to berealized.
9
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
The Company records deferred tax assets to theextent management believes that it is more likely than not that these assets will be realized in the future. Future realization of deferredincome tax assets (meaning, items that may provide tax deductions in future periods) requires evidence that there will be sufficienttaxable income in those future periods, or within any carryback periods available under tax law. The Company evaluates the realizabilityof its deferred tax assets on a quarterly basis. The majority of the Company’s deferred tax assets are comprised of income taxcarryforwards, including federal and state net operating loss carryforwards (“NOLs”) and non-deductible interest expensecarryforwards. Some of these carryforwards are subject to annual usage limitations and expiration, while other state NOLs and a portionof federal NOLs do not expire.
While the Company remains in a financial reportingloss position based on a cumulative pre-tax loss for the six month period ended June 30, 2025, the determination of the valuation allowanceis based on its evaluation of the periods over which future taxable items are expected to be utilized to offset tax loss and deductioncarryforward items in those future periods. That is, future forecasts of our taxable income are not considered in the evaluation of realizabilityof its deferred tax assets. Therefore, changes in its deferred tax asset valuation allowances will primarily be affected by changes inthe estimates of the time periods over which those future taxable items will occur.
ASC 740 prescribes a recognition thresholdand a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be takenin a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examinationby taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income taxexpense. Management has evaluated the Company’s tax positions, including its previous status as a pass-through entity forfederal and state tax purposes, and has determined that the Company has taken no uncertain tax positions that require adjustment tothe unaudited condensed consolidated financial statements. The Company’s reserve related to uncertain tax positions was
Loss Per Share
The Company accounts for net loss per share inaccordance with ASC subtopic 260, Earnings Per Share (“ASC 260”), which requires presentation of basic and dilutedearnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures andrequires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the dilutedEPS. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding duringeach period. It excludes the dilutive effects of any potentially issuable common shares. Diluted net loss per share is calculated byincluding any potentially dilutive share issuances in the denominator. For the three and six months ended June 30, 2025 and 2024, allpotentially dilutive securities were not included in the calculation of diluted net income (loss) per share as their effect would beanti-dilutive.
Leases
The Company determines if an arrangement is alease at inception. Operating lease right-of-use asset (“ROU asset”) and short-term and long-term lease liability are includedon the face of the unaudited condensed balance sheets.
ROU asset represents the right to use an underlyingasset for the lease term and lease liability represents the Company’s obligation to make lease payments arising from the lease.Operating lease ROU asset and liability are recognized at commencement date based on the present value of lease payments over the leaseterm. As the Company’s lease does not provide an implicit rate, the Company uses an incremental borrowing rate based on the informationavailable at commencement date over the respective lease term in determining the present value of lease payments. The Company’slease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.Lease expense for lease payments is recognized on a straight-line basis over the lease term. For lease agreements with terms less than12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease paymentson a straight-line basis over the lease term.
Fair Value of Financial Instruments
The Company calculates the fair value of itsassets and liabilities which qualify as financial instruments and includes this additional information in the notes to the unauditedcondensed consolidated financial statements when the fair value is different than the carrying value of these financial instruments.The estimated fair value of cash, accounts receivable, accounts payable and accrued expenses, and other payables approximate theircarrying amounts due to the relatively short maturity of these instruments. The carrying value of lease liability also approximatesfair value since the recognition of the instrument reflects a market rate of interest. None of these instruments are held fortrading purposes.
10
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Fair Value Measurements
Fair value is defined as the price thatwould be received for the sale of an asset or paid for transfer of a liability, in an orderly transaction between marketparticipants at the measurement date. ASC 820, Fair Value Measurement (“ASC 280”) establishes a three-tier fairvalue hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjustedquoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservableinputs (Level 3 measurements). These tiers include:
| ● | Level1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted pricesfor similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measurefair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement iscategorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Warrants
The Company determines the accounting classificationof warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classificationin accordance with ASC 480, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC480”), then in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). Under ASC 480, warrants are consideredliability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying sharesby paying cash or other assets, or warrants that must or may require settlement by issuing a variable number of shares. If warrants donot meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts thatrequire or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihoodof the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification underASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stockand whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Companyconcludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting atissuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations.Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.
Convertible Notes Payable
When the Company issues convertible debt, itfirst evaluates the balance sheet classification of the convertible instrument in its entirety to determine (1) whether theinstrument should be classified as a liability under ASC 480, and (2) whether the conversion feature should be accounted forseparately from the host instrument. A conversion feature of a convertible debt instrument would be separated from the convertibleinstrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definitionof a “derivative” in ASC 815. When a conversion featuremeets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivativeliability carried on the unaudited condensed consolidated balance sheet at fair value, with any changes in its fair value recognizedcurrently in the unaudited condensed consolidated statements of operations. See Note 10 “Debt”for further information.
Stock-based compensation
The Company accounts for its stock-based compensationawards in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based paymentsto employees and non-employees including grants of stock options, to be recognized as expense in the statements of operations based ontheir grant date fair values.
The Company periodically issues common stockand common stock options to employees and consultants for various services.
11
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Redeemable Preferred Stock
Accounting for convertible or redeemable equityinstruments in the Company’s own equity requires an evaluation of the hybrid security to determine if liability classificationis required under ASC 480. Liability classification is required for freestanding financial instruments that are not debt in legal formand are: (1) subject to an unconditional obligation requiring the issuer to redeem the instrument by transferring assets (i.e. mandatorilyredeemable), (2) instruments other than equity shares that embody an obligation of the issuer to repurchase its equity shares, or (3)certain types of instruments that obligate the issuer to issue a variable number of equity shares. Securities that do not meet the scopingcriteria to be classified as a liability under ASC 480 are subject to redeemable equity guidance, which prescribes securities that maybe subject to redemption upon an event not solely within the control of the issuer to be classified outside permanent equity (i.e., classifiedin temporary equity). Securities classified in temporary equity are initially measured at the proceeds received, net of issuance costsand excluding the fair value of bifurcated embedded derivatives (if any). Subsequent measurement of the carrying value is not requiredunless the instrument is probable of becoming redeemable or is currently redeemable. When the instruments are currently redeemable orprobable of becoming redeemable, the Company will recognize changes in the redemption value immediately as they occur and adjust thecarrying value of the security to equal the then current maximum redemption value at the end of each reporting period.
New Accounting Pronouncements
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09,“Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated informationabout a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intendedto benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. Thestandard will be effective for public companies for fiscal years beginning after December 15, 2024. Early adoption is permitted. TheCompany is currently evaluating the impact of this accounting standard update on its unaudited condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03,“Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation ofIncome Statement Expenses” (“ASU 2024-03”). The standard requires additional disclosure of certain costs and expenseswithin the notes to the financial statements. The provisions of the standard are effective for annual reporting periods beginning afterDecember 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. This accounting standardsupdate may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of this accounting standardupdate on its unaudited condensed consolidated financial statements.
All other new accounting pronouncements thathave been issued, but not yet effective are currently being evaluated and at this time are not expected to have a material impact onour unaudited condensed consolidated financial statements.
NOTE 4. INVENTORIES
Inventories consisted of the following:
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Inventory – work in progress | $ | $ | ||||||
| Inventory – work in progress shipping and consumables | ||||||||
| Inventory – work in progress labor | ||||||||
| Resale inventory | ||||||||
| Finished Goods | ||||||||
| Overhead allocated to inventory | ||||||||
| $ | $ | |||||||
NOTE 5. PREPAIDS AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted ofthe following:
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Prepaid insurance | ||||||||
| VAT receivable | ||||||||
| Other receivable | ||||||||
| $ | $ | |||||||
12
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Computer equipment | $ | $ | ||||||
| Office furniture | ||||||||
| Manufacturing equipment | ||||||||
| Vehicles | ||||||||
| Building improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense related to theCompany’s property and equipment was $
NOTE 7. LEASES
On August 11, 2021, the Company entered intoa lease agreement, whereby the Company agreed to lease office space in Kissimmee, Florida expiring
The Company also has a five-year lease in theUK for office space expiring
On March 23, 2023, the Company entered into alease agreement, whereby the Company agreed to lease warehouse space in Kissimmee, Florida expiring
Pursuant to the agreement with One Drivers Club,the Company is currently paying $
The Company’s commercial properties aresubject to Common Area Maintenance (“CAM”) charges, which represent the tenant’s pro-rata share of the operating expensesincurred by the landlord in the operation of the buildings. These expenses include, but are not limited to, property taxes, insurancepremiums, utilities for common areas, maintenance and service agreements and supplies and materials used in the operation and maintenanceof the property, cost of repairs and enhancements to common areas, owner’s association fees, and cost of capital improvements ormodifications only if the capital improvements reduce operating costs. The Company’s share of the CAM is paid by the Company asadditional rent based on the landlord’s written estimate of the CAM for the following year. Within 150 days following the end ofeach calendar year the landlord provides a statement to the Company reconciling the estimated CAM expenses for the year to the actualcosts incurred. The Company does not include CAM charges in the calculation of their right-of-use assets or lease liabilities.
Quantitative information regarding the Company’sleases is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Lease expenses | ||||||||||||||||
| Operating lease expenses | $ | $ | $ | $ | ||||||||||||
| Short-term lease costs | ||||||||||||||||
| Variable and other lease costs | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
Cash paid for operating leases was $
13
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
For operating lease assets and liabilities, theweighted average remaining lease term was
Maturity analysis under the lease agreement isas follows:
| Total | ||||
| 2025 (excluding six months ended June 30, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and beyond | ||||
| Less: present value discount | ( | ) | ||
| Lease liability | $ | |||
NOTE 8. ACCRUED EXPENSES
Accrued expenses consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Accrued interest | $ | $ | ||||||
| Consulting and professional fees | ||||||||
| Franchise tax | ||||||||
| Warranty reserve | ||||||||
| Accrued payroll | ||||||||
| Other | ||||||||
| $ | $ | |||||||
14
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
NOTE 9. OTHER PAYABLES
Other payables consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| PPG payable | $ | $ | ||||||
| Income tax payable | ||||||||
| Share issuance liability | ||||||||
| Other | ||||||||
| $ | $ | |||||||
NOTE 10. DEBT
Securities Purchase Agreement
On October 6, 2023 the Company entered into a Securities Purchase Agreement(the “SPA”) with an institutional Lender (the “Lender”) pursuant to which the Company issued to the Lender a seniorsecured convertible note (the “December 2023 Convertible Note”) in exchange for a loan in the principal amount of $
The Company reviewed the conversion uponevent of default feature under ASC 815 and determined that the conversion upon event of default feature is considered an embeddedderivative that should be bifurcated from the host instrument requiring fair value accounting at issuance with all changes in fairvalue after the issuance date recorded in the unaudited condensed statement of operations (See Note 15).
The December 2023 Convertible Note has a maturity date of December12, 2026 and will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries. The December 2023 ConvertibleNotes are secured by a first priority perfected security interest in all the existing and future assets of the Company and its directand indirect subsidiaries, including a pledge of all of the capital stock of each of the subsidiaries. The December 2023 Convertible Notealso provides that the Company and its subsidiaries execute a guaranty (the “Guaranty”) to guarantee the obligations underthe December 2023 Convertible Note and the Security Agreement, that all insider stockholders of the common stock shall execute a lock-upagreement (the “Lock-Up Agreement”) restricting their sale of the common stock until six months after the registration statementregistering the shares of common stock underlying the December 2023 Convertible Note is declared effective and a joinder agreement (the“Joinder Agreement”) pursuant to which the Company and its Subsidiaries agree and consent to be parties to the Security Agreement.
On August 9, 2024, the Company entered into aSPA with the Lender pursuant to which the Company issued to the Lender a senior secured convertible note (the “August 2024 ConvertibleNote”) in exchange for a loan in the principal amount of $
On January 8, 2025, the Company entered into aSPA (the “January 2025 SPA”) with the Lender pursuant to which the Lender agreed to waive the pre-existing events of defaultthat occurred under the August Note and the Company Preferred Stock and the Company agreed to execute and deliver to the Lender a seniorsecured convertible note (the “January 2025 Note”), in exchange for a loan in the principal amount of $
15
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Certain events of default under the December 2023 Convertible Noteand the Series A Convertible Preferred Stock have occurred based on the following: the Company’s failure to have its resale registrationstatement on Form S-1 declared effective by the SEC within sixty (60) days of December 12, 2023, the financial statements of the Company’ssubsidiary for the years ended December 31, 2022 and 2021 and the quarterly periods ended March 31, 2023, June 30, 2023, and September30, 2023 were required to be restated, the fact that the Company did not file its Annual Report on Form 10-K for the year ended December31, 2023 (the “Form 10-K”) within two (2) trading days of the filing due date of the Form 10-K and the Company did not fileits Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “Form 10-Q”) within two (2) trading daysof the filing due date of the Form 10-Q. The December 2023 Convertible Note and the Series A Convertible Preferred Stock each providefor certain remedies based upon the occurrence of an event of default. As a result of the default the Lender under the December 2023 ConvertibleNote who is also the holder of the Series A Convertible Preferred Stock calculated default interest on the December 2023 Convertible Noteof an additional
On June 5, 2025, the Company entered into aSPA (the “June 2025 SPA”) with the Lender for a series of senior secured convertible note up to $
During the three months ended June 30, 2025, theLender converted December 2023 Convertible Notes with principal amount of $
The December 2023 Convertible Note includesan original issue discount of $
Exchange Agreement
On May 14, 2025, the Company entered into an Amendment and ExchangeAgreement (the “Exchange Agreement”) with the Lender pursuant to which the Company shall authorize one or more series of anew series B convertible preferred stock of the Company, $
The table below summarizes the outstanding Convertible Notes as ofJune 30, 2025 and December 31, 2024:
| June 30, 2025 | December 31, 2024 | |||||||
| Principal value of Convertible Notes (1) | $ | $ | ||||||
| Debt discount, net of amortization(2) | ( | ) | ( | ) | ||||
| Convertible Notes payable | $ | $ | ||||||
| (1) | Includes $
Includes $ |
| (2) | Includes $
Includes $ |
16
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Floor Plan Payable
On May 15, 2024, the Company entered into a loanagreement for up to $
During May and June 2025, the Companyentered into three loan agreements for $
The outstanding balances on Floor Plan Financings as of June 30, 2025and December 31, 2024, was $
Business Loan and Security Agreement
On February 20, 2025, the Company entered intoa Business Loan and Security Agreement with Agile Lending, LLC (the “Lending Lender”) pursuant to which the Company receiveda term loan from the Lending Lender in the principal amount of $
On April 4, 2025, the Company entered into a newbusiness loan and security agreement with an effective date of April 4, 2025 (the “New Loan Agreement”) by and among an investor(the “New Lender”), a collateral agent (the “Collateral Agent”), the Company and its subsidiary, Humble ImportsInc., pursuant to which the Company received a term loan from the New Lender in the principal amount of $
The net proceeds of the New Loan were used topay off the Agile Loan in the discounted amount of $
The table below presents the disaggregation of interest expense forthe three and six months ended June 30, 2025:
| Three months ended June 30, 2025 | Six months ended June 30, 2025 | |||||||
| Contractual interest expense | $ | $ | ||||||
| Debt discount and issuance cost amortization | ||||||||
| Total | $ | $ | ||||||
17
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
NOTE 11. WARRANT LIABILITIES
As part of the December 2023 Convertible Note,the Company issued warrants to Defender SPV, LLC where each whole warrant entitles the holder to purchase one share of the Company’scommon stock at an exercise price of $
The Common Share warrants expire on the seventhanniversary of the issuance date provided that (x) if the Holder fails to acquire at least $
The Common Share Warrants and the PreferredShare Warrants are recognized as derivative liabilities in accordance with ASC 805. Accordingly, the Company recognized the warrantinstruments as liabilities at fair value as of the issuance date with the offsetting entry to debt discount. The carrying value ofthe instruments will be adjusted to fair value through other income (expense) on the unaudited condensed consolidated statement ofoperations at each reporting period until they are exercised or expire. As of June 30, 2025 and December 31, 2024, the fair value ofthe Common Share Warrants and the Preferred Share Warrants liabilities are presented within warrant liabilities on the unauditedcondensed consolidated balance sheet.
NOTE 12. PREFERRED STOCK
Series B and C Convertible Preferred Stock
At June 30, 2025, there were
On May 14, 2025, the Company entered into an Amendmentand the Exchange Agreement with the Lender pursuant to which the Company shall authorize one or more series of a new series B convertiblepreferred stock of the Company, $
In connection with the Amendment and Exchange Agreement, the SeriesB Preferred Stock shares were valued at $
On June 20, 2025, the Company entered into a SecondAmendment and Exchange Agreement (the “Second Exchange Agreement”) with the Lender pursuant to which the Company shall authorizeone or more series of a new series C convertible preferred stock of the Company, the terms of which are set forth in a certificate ofdesignation for such series of preferred stock designated as Series C Convertible Preferred Stock, $
18
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
The Second Exchange Agreement provides furtherthat, subject to the terms and conditions set forth in this Second Exchange Agreement, the Lender may require the Company to participatein one or more Additional Exchanges to exchange such portion of the amounts outstanding under the remaining Original Notes as set forthin such applicable closing notice related to such exchange into such aggregate number of shares of such new series of Series C PreferredStock as set forth in such additional closing notice related to such exchange, and such shares of Common Stock issuable pursuant to theterms of Series C Preferred Stock, including, without limitation, upon conversion of the shares of Series C Preferred Stock held by theLender or otherwise, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
In connection with the Second Exchange Agreement,the Board of Directors of the Company has approved and authorized the filing with the Secretary of State of the State of Delaware a Certificateof Designations, Preferences and Rights of Series C Convertible Preferred Stock of ECD Automotive Design, Inc. (the “Series C Certificate”)to authorize the Series C Preferred Stock as required by the Second Exchange Agreement.
Dividends
Unless converted or redeemed, the holder of SeriesC Preferred Stock shall receive an annual dividend at a rate of
Conversion Rights
At any time after issuance, the Series C PreferredStock are convertible, in whole or in part, at the holder’s option, into shares of the Company’s common stock, par value $
Alternate Optional Conversion. From and afterthe occurrence of a triggering event, each holder may alternatively elect to convert the Series C Preferred Stock into shares of our CommonStock at the “Alternate Conversion Price”, which is equal to the lowest of:
| ● | The Conversion Price then in effect; and |
| ● | the greater of: |
| ○ | The floor price then in effect; and |
| ○ |
The floor price is equal to $
Series A Convertible Preferred Stock
At June 30, 2025, there were
At December 31, 2024 there were
Dividend Rights
From and after the first date of issuance of anyinitial shares of Series A Convertible Preferred Stock (the “Initial Issuance Date”) and prior to the date of the initialexercise of the Preferred Warrants (the “Initial Preferred Warrant Exercise Date”), unless a triggering event has occurredand is continuing, holders of Series A Convertible Preferred Stock shall not be entitled to dividends. From and after the Initial PreferredWarrant Exercise Date, dividends on the Series A Convertible Preferred Stock shall commence accruing and shall be computed on the basisof a 360-day year and twelve 30-day months and shall be payable in arrears for on the first trading day of each fiscal quarter (each,an “Dividend Date”). Dividends shall be payable on each Dividend Date, to each record holder of Series A Convertible PreferredStock on the applicable Dividend Date, in shares of Common Stock (“Dividend Shares”) so long as there has been no Equity ConditionsFailure; provided however, that the Company may, at its option following notice to each holder, pay dividend on any Dividend Date in cash(“Cash Dividend”) or in a combination of Cash Dividend and Dividend Shares.
19
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Liquidation Preference
In the event of a liquidation, dissolution orwinding-up of the Company, whether voluntary or involuntary, the stockholders of Series A Convertible Preferred Stock shall be entitledto receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders(the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of junior stock, but pari passuwith any parity stock then outstanding, an amount per share of Series A Convertible Preferred Stock equal to the sum of (i) the BlackScholes Value (as defined in the Common Warrants) with respect to the outstanding portion of all Common Warrants held by such holder (withoutregard to any limitations on the exercise thereof) as of the date of such event and (ii) the greater of (A)
Conversion and Redemption Rights
At any time after the Business Combination, eachstockholder shall be entitled to convert any portion of the outstanding Series A Convertible Preferred Stock held by such stockholderinto validly issued, fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock issuable upon conversionof any Series A Convertible Preferred Stock shall be determined by dividing (i) the Conversion Amount (as defined in the Certificate ofDesignation) of such Series A Convertible Preferred Stock by (y) $
The stockholders of Series A Convertible PreferredStock have redemption rights upon the occurrence of a Triggering Event (as defined in the Certificate of Designation). The Company hasthe right to redeem all or any part of Series A Convertible Preferred Stock then outstanding.
Voting and Other Preferred Rights
Holders of Series A Convertible Preferred Stockshall have no voting rights, except as required by law (including without limitation, the DGCL) and as expressly provided in the Certificateof Designations.
NOTE 13. STOCKHOLDERS’ EQUITY
Common stock
During the three months ended June 30, 2025, theLender converted December 2023 Convertible Notes with principal amount of $
During the three months ended June 30, 2025,
On February 21, 2025, pursuant to the Advisorconsulting agreement, as defined below, the Company issued
On January 13, 2025, pursuant to the January 2025SPA, the Company issued
20
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Warrants
As part of the Company’s initial publicoffering (“IPO”), warrants were issued to third-party investors where each whole warrant entitles the holder to purchase
As of June 30, 2025 and December 31, 2024, therewere
The Public Warrants and the Private Warrants expireon December 12, 2026 or earlier upon redemption or liquidation and are currently exercisable, provided that the Company has an effectiveregistration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a currentprospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstancesspecified in the warrant agreement) and registered, qualified or exempt from registration under the securities, or blue sky, laws of thestate of residence of the holder.
Once the Public Warrants become exercisable, theCompany may redeem the outstanding Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon not less than | |
| ● | if, and only if, the last reported sale price of the Class A ordinary shares for any |
The Company accounts for the
In connection with the December 2023 ConvertibleNote the Company issued
On August 8, 2024, the Company entered into asubscription agreement with Second Investor pursuant to which the Company issued
Share-based Compensation
The Company has adopted the Equity Incentive Plan,which plan was approved by stockholders at the Special Meeting. The purposes of the Plan is to promote the interests of the Company andthe stockholders of Company by providing (i) executive officers and other employees of the Company and its Subsidiaries (as defined below),(ii) certain consultants and advisors who perform services for the Company and its Subsidiaries and (iii) non-employee members of theBoard with appropriate incentives and rewards to encourage them to enter into and continue in the employ and service of the Company andto acquire a proprietary interest in the long-term success of the Company, as well as to reward the performance of these individuals infulfilling their personal responsibilities for long-range and annual achievements. Eligible individuals under the Plan may receive awardsof Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Awards and Other Stock-Based Awards.
21
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
The maximum number of shares reserved for the grant of awards underthe Plan shall be
The authority to manage the operation of and administerthe Plan shall be vested in a committee (the “Committee”), which shall have all the powers vested in it by the terms of thePlan, including exclusive authority to select the participants to the Plan; to make awards; to determine the type, size, terms and timingof the awards (which need not be uniform); to accelerate the vesting of awards granted pursuant to the Plan, including upon the occurrenceof a change of control of the Company; to prescribe the form of the award agreement; to modify, amend or adjust the terms and conditionsof any award; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from timeto time, deem advisable; to interpret the terms and provisions of the Plan and any award issued pursuant to the Plan. The Committee shallbe selected by the Board of Directors and shall consist solely of non-employee directors within the meaning of Rule 16b-3 that are outsidedirectors within the meaning of Code Section 162(m).
Grants may be made under the Plan through thetenth (10th) anniversary of the date it is adopted by the Board and approved by the Committee. Awards outstanding as of the date of terminationof the Plan shall not be affected or impaired by the termination of the Plan.
As of June 30, 2025, awards were granted under the EquityIncentive Plan.
Each of its four non-employee directors receiveda one-time grant of stock options to purchase up to
In February 2024, the Company entered into a one-yearconsulting agreement (the “Agreement”) with an investor relations firm for the purposes of developing, implementing and maintainingan ongoing stock market support system for the Company with the general objective of expanding awareness in the Company. In connectionwith this agreement, the Company has committed to pay $
| ● | If within six (6) months of the Effective Date of the Agreement, investors hold |
| ● | If within six (6) months of the Effective Date of the Agreement, investors hold |
| ● | If within six (6) months of the Effective Date of the Agreement, investors hold |
| ● | If within nine (9) months of the Effective Date of the Agreement the ten (10) day Volume Weighted Average Price (“VWAP”) of Company common stock equals or exceeds $ |
| ● | If within twelve (12) months of the Effective Date of the Agreement the ten (10) day Volume Weighted Average Price (“VWAP”) of Company common stock equals or exceeds $ |
In January 2025, pursuant to the employmentagreement for the Company’s prior Chief Financial Officer the Company recognized stock-based compensationfor
22
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
In February 2025, the Company entered into a thirteenmonth consulting agreement (the “Second Agreement”) with an advisory firm (the “Advisors”) for business advisory services.In connection with this agreement, the Company recognized stock-based compensation and issued
In March 2025, into a one month consulting agreement(the “Third Agreement”) with the Advisors for business advisory services. In connection with this agreement, the Company recognizedstock-based compensation for
On March 31, 2025, the Company entered intoan amended consulting agreement. Pursuant to the terms of the amendment, the Company issued
For the three months ended June 30, 2025 and2024, pursuant to the compensation plan for the Company’s non-employee directors in which the non-employee directors willreceive a payment of $
The Equity Purchase Facility Agreement
On June 20, 2025, the Company and an unrelatedthird party accredited investor (the “Investor”) entered into an equity purchase facility agreement (the “EPFA”).Pursuant to the EPFA, the Company has the right to issue and sell to the Investor, from time to time as provided therein, and the Investormust purchase from the Company, up to an aggregate of $
NOTE 14. COMMITMENTS AND CONTINGENCIES
From time to time in the ordinary course of business,the Company may be subject to various claims, charges, and litigation. At June 30, 2025 and 2024, the Company did not have any pendingclaims, charges or litigation that were expected to have a material adverse impact on its financial position, results of operations orcash flows.
Agreement with One Drivers Club
As previously disclosed in ECD’s CurrentReport on Form 8-K filed on December 6, 2024, on December 3, 2024, ECD announced that it entered into agreements One Drivers Club in furtheranceof the ECD’s retail strategy. Specifically, on November 14, 2024, ECD entered into a Strategic Partnership Agreement (the “ODCAgreement”) and a Usage Agreement (the “Usage Agreement”) with Member Hubs Palm Beach, LLC (“One Drivers Club”)to launch ECD’s first retail showroom in West Palm Beach, Florida. One Drivers Club is the premier destination for automotive enthusiastswho view their vehicles as not just machines, but drivers of their lifestyles. With facilities located in Bedford, NY, Chicago, IL, WestPalm Beach, FL, and Seattle WA, One Drivers Club redefines luxury car care through unparalleled concierge storage and full-service collectionmanagement. Beyond exceptional car care, One Drivers Club is a community-a place where like-minded drivers connect over shared passionsand Members celebrate the art and prestige of driving, collecting, and owning remarkable vehicles. The ODC Agreement, entitles ECD touse a portion of One Drivers Club’s facility in West Palm Beach, Florida (the “ODC Premises”) for the operation of anECD showroom for ECD vehicles and sale of ECD vehicles, subject to the terms of the Usage Agreement. Pursuant to the ODC Agreement, OneDrivers Club grants to ECD a non-exclusive, royalty-free, fully paid up, non-transferable and terminable right and license to use themarks designated by One Drivers Club, and ECD grants to One Drivers Club, a non-exclusive, royalty-free, fully paid up, non-transferableand terminable right and license to use the marks designated by ECD, for the limited purpose of the operation of the ECD showroom andfor the limited purpose of the operation of the ECD showroom and advertisement of ECD and the ECD Automobiles. Pursuant to the Usage Agreement,(i) ECD shall pay One Drivers Club base rent of $
23
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
Relationship with Ten Easy Street
On December 12, 2024, ECD signed with Ten EasyStreet of Nantucket (“TES”), a concept showroom, showhouse and gathering space, to expand ECD’s retail presence andshowcase its one-of-one vehicles as part of their curated creative lifestyle brands, furnishings and social opportunities.
TES has agreed to showcase the Company’scustom vehicles in the designated parking spots located at TES from April 1, 2025 to December 31, 2025 (the “Showcase Term”).The Company will pay TES $
NOTE 15. FAIR VALUE MEASUREMENTS
The Company accounts for certain assets and liabilitiesat fair value and classifies these assets and liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3).
Assets and liabilities subject to fair value measurementsare as follows:
| As of June 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liabilities – Common Share Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liabilities – Preferred Share Warrants | ||||||||||||||||
| Derivative Liability | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liabilities – Common Share Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liabilities – Preferred Share Warrants | ||||||||||||||||
| Derivative Liability | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
The Common Share Warrants and the Preferred ShareWarrants were valued using a Black-Scholes option pricing model utilizing assumptions related to the contractual terms of the instruments,estimated volatility of the price of the Common Stock and current interest rates.
The following table provides quantitative informationregarding Level 3 fair value measurements for Common Share Warrants and Preferred Share Warrants as of June 30, 2025:
| Preferred Share Warrant June 30, 2025 | Common Share Warrant June 30, 2025 | |||||||
| Exercise price | $ | $ | ||||||
| Share price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Expected life | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | ||||||||
24
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
The following table provides quantitative informationregarding Level 3 fair value measurements for initial value of the Common Share Warrants as of January 13, 2025.
| Common Share Warrant January 13, 2025 | ||||
| Exercise price | $ | |||
| Share price | $ | |||
| Volatility | % | |||
| Expected life | ||||
| Risk-free rate | % | |||
| Dividend yield | ||||
The following table presents a summary of the changes in the fair valueof the Private Warrants and Representative’s Warrants, a Level 3 liability, measured on a recurring basis.
| Common Share Warrants | Preferred Share Warrants | Warrant Liability | ||||||||||
| Fair value as of December 31, 2024 | $ | $ | $ | |||||||||
| Initial Measurement, January 13, 2025 | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of June 30, 2025 | ||||||||||||
The conversion upon the event of default derivative liability of theConvertible Promissory Note was valued using a Black Scholes option pricing model terms related to the terms of the Convertible PromissoryNote (see Note 10), estimated volatility of the price of the Common Stock and current interest rates.
The following table provides quantitative informationregarding Level 3 fair value measurements for the conversion upon the event of default derivative liability as of June 30, 2025:
| June 30, 2025 | ||||
| Exercise price | $ | |||
| Share price | $ | |||
| Volatility | % | |||
| Expected life | ||||
| Risk-free rate | % | |||
| Dividend yield | ||||
The following table presents a summary of thechanges in the fair value of the conversion upon the event of default derivative liability, a Level 3 liability, measured on a recurringbasis.
| Derivative liability | ||||
| Fair value as of December 31, 2024 | $ | |||
| Initial measurement, January 13, 2025 | ||||
| Change in fair value | ( | ) | ||
| Fair value as of June 30, 2025 | $ | |||
25
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
NOTE 16. RELATED PARTY TRANSACTIONS
Related Party Policy
ECD’s Code of Ethics requires it to avoid,wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelinesapproved by the Board (or the audit committee). The Code of Ethics defines related party transactions as transactions in which (i) theaggregate amount involved will or may be expected to exceed $
ECD’s audit committee, pursuant to its writtencharter, is responsible for reviewing and approving related party transactions to the extent that ECD enters into such transactions. Allongoing and future transactions between ECD and any of ECD’s officers and directors or their respective affiliates will be on termsbelieved by ECD to be no less favorable to ECD than are available from unaffiliated third parties. Such transactions will require priorapproval by ECD’s audit committee and a majority of ECD’s uninterested “independent” directors, or the membersof the Board who do not have an interest in the transaction, in either case who had access, at ECD’s expense, to ECD’s attorneysor independent legal counsel. We will not enter into any such transaction unless ECD’s audit committee and a majority of ECD’sdisinterested “independent” directors determine that the terms of such transaction are no less favorable to ECD than thosethat would be available to ECD with respect to such a transaction from unaffiliated third parties. Additionally, ECD requires each ofECD’s directors and executive officers to complete a directors’ and officers’ questionnaire that elicits informationabout related party transactions.
These procedures are intended to determine whetherany such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director,employee or officer.
Certain Transactions of ECD
Beginning on January 5, 2021, ECD enteredinto a verbal agreement with Overland Auto Transport Inc d/b/a Luxury Automotive Transport, Inc. (“TransportCo”), acompany which is
26
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
The Company has no commercial agreement withBritish Food Stop. British Food Stop sells breakfast and lunch to employees via a food truck on site. The owners of British FoodStop are the parents of Emily Humble, the Company’s President, Secretary, and Director. As of June 30, 2025, and December 31,2024, the Company had no amounts outstanding under this agreement included in accounts payable in the accompanying unauditedcondensed condensed consolidated balance sheet.
The following table shows the Company’sexpenses incurred with related parties and the relationship:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| Relationship | 2025 | 2024 | 2025 | 2024 | ||||||||||||||
| Luxury Automotive Transport, Inc. | $ | $ | $ | $ | ||||||||||||||
| British Food Stop | ||||||||||||||||||
| Total expenses, net | $ | $ | $ | $ | ||||||||||||||
NOTE 17. SEGMENT
ASC Topic 280, “Segment Reporting,”establishes standards for companies to report in their financial statement information about operating segments, products, services, geographicareas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities fromwhich it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluatedby the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The CODM assesses performance for the single segmentand decides how to allocate resources based on net income or loss that also is reported on the statement of operations as net income orloss. The measure of segment assets and liabilities is reported on the balance sheets as total assets and total liabilities.
| June 30, | December 31, | |||||||
| 2025 | 2024, | |||||||
| Inventory | $ | $ | ||||||
| Deferred revenue | $ | ( | ) | $ | ( | ) | ||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Less: Cost of goods sold | $ | $ | $ | $ | ||||||||||||
| Gross Profit | $ | $ | $ | $ | ||||||||||||
NOTE 18. SUBSEQUENT EVENTS
Subsequent events have been evaluated throughAugust 19, 2025, which represents the date the financial statements were available to be issued, and no events, other than discussed belowhave occurred through that date that would impact the financial statements.
Third Amendment and Exchange Agreement
On July 7, 2025, the Company and Lender enteredinto the Third Amendment and Exchange Agreement (the “Third Exchange Agreement”). Pursuant to the Third Exchange Agreement,on July 7, 2025, the Lender converted the $
27
ECD AUTOMOTIVE DESIGN, INC
NOTES TO UNAUDITED CONDENSEDCONSOLIDATED FINANCIAL STATEMENT
July 2025 Note
The Company entered into a SPA dated June 5, 2025,(the “June 5, 2025 SPA”), with the Lender for a series of senior secured convertible notes up to an aggregate amount of $
Exchange of Convertible Notes to PreferredSeries C Equity
In connection with the Second Exchange Agreement,on August 4, 2025, the Lender provided the Company with notice to exchange $
Securities Purchase Agreement
On August 13, 2025, theCompany entered into a SPA by and between the Company and the Holder. Pursuant to the SPA the Holder purchased, and the Company sold
The SPA provides furtherthat the Holder may require the Company to participate in one or more Additional Closings for purchase by the Holder, and the sale bythe Company, of up to the aggregate number of shares of Series C Preferred Stock, which aggregate number for all Buyers shall not exceed
The aggregate purchaseprice for the Initial Preferred Shares to be purchased by Holder (the “Initial Purchase Price”) shall be $
Appointment of Chief Financial Officer
On August 15, 2025, the Board appointed VictoriaHay as the Chief Financial Officer and principal financial officer of the Company. Since March 2025, the Company has engaged FlexibleConsulting, LLC, where Mrs. Hay is President and which she co-owns, to provide accounting and finance services relating to the Company’squarterly and monthly reporting. The total value of services provided to date is $
28
Item 2. Management’s Discussion and Analysis of FinancialCondition and Results of Operations
References to the “Company,” “our,”“us” or “we” refer to ECD Automotive Design, Inc. The following discussion and analysis of the Company’sfinancial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and thenotes thereto contained elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and the Annual Report onForm 10-K and Risk Factors contained therein. Certain information contained in the discussion and analysis set forth below includes forward-lookingstatements that involve risks and uncertainties.
Cautionary Note Regarding Forward-LookingStatements
This Quarterly Report on Form 10-Q includesforward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-lookingstatements on our current expectations and projections about future events. These forward-looking statements are subject to known andunknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievementsto be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-lookingstatements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,”“could,” “would,” “expect,” “plan,” “anticipate,” “believe,”“estimate,” and “continue,” or the negative of such terms or other similar expressions. Such statements include,but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statementsother than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include,but are not limited to, those described in our other SEC filings. Except as expressly required by applicable securities law, we disclaimany intention or obligation to update or revise any forward-looking statements whether as a result of new information, future eventsor otherwise.
Business Overview and Strategy
ECD is an award winning, custom-car builder with a focus on Britishclassic vehicles. We provide clients a one-of-a kind immersive luxury automotive design experience for each of its unique custom builds,where customers may design every aspect of the vehicle. In sequence, our highly trained technicians, master-certified ASE craftsmen, hand-built,from the ground up, in 2,200 man-hours, a completely restored vehicle, replacing substantially its every single component– customizingthe engine, the color, the seating, the stitching, the electronics and the cosmetic finishes. All elements of the process are completedin-house. We primarily earn our revenue from the sale of the customized vehicle directly to the customer, as well as by providing repairor upgrade services to customers, and from the sale of extended warranties. Occasionally we earn commissions on resale of used vehicles.Our revenues, net, were $7.0 million and $6.5 million for the three months ended June 30, 2025 and 2024, respectively. Our revenues,net, were $13.4 million in each of the six months ended June 30, 2025 and 2024. We had net loss of $4.3 million and $7.0 millionand $2.0 million and $4.9 million for the three and six months ended June 30, 2025 and 2024, respectively.
The Company’s business is subject to retailindustry trends and conditions and the sales of new and used vehicles. Worldwide economic conditions impact consumer spending and ifthe global macroeconomic environment deteriorates, this could have a negative effect on the Company’s revenues and earnings.
Although we believe that our product is gearedtowards a certain customer base that is not as vulnerable to the global economic conditions, there are certain levels of volatility relatedto domestic and international markets, increased competition by manufacturers, technological advancements, customer acceptance, discretionaryconsumer spending and general economic conditions. All of our products are subject to price fluctuations in materials and laborcosts, which could affect the carrying value of inventories and gross margins in the future.
Our headquarters, known as the “Rover Dome,” isa 100,000-square-foot facility located in Kissimmee, FL, where as of June 30, 2025, there were 98 employees located. ECD, by means ofECD UK, operates a logistics center in the United Kingdom where its professionals work to source and transport over-25-year-old vehiclesback to the United States for restoration.
29
Securities Purchase Agreement
On October 6, 2023, the Company entered into a Securities PurchaseAgreement (the “SPA”) with an institutional Lender (the “Lender”) pursuant to which the Company issued to theLender a senior secured convertible note (the “December 2023 Convertible Note”) in exchange for a loan in the principal amountof $15,819,209. The December 2023 Convertible Note shall accrue interest at an annual rate equal to the Prime Interest rate plus 5% perannum which is payable quarterly in cash, or upon the Company’s option, in securities of the Company provided certain conditionsare met at the increased interest rate of the Prime Interest rate plus 8% per annum. The Company is required to pay a late charge of 12%per annum (“Late Charges”) on any amount of principal or other amounts that are not paid when due. The December 2023 ConvertibleNote is convertible into shares of the Company’s common stock, par value $0.0001 per share at the option of the Lender at a conversionprice of $10.00 per share, subject to a one-time downward adjustment on the effective date of the registration statement providing forthe resale of the common stock issuable upon conversion of the December 2023 Convertible Note to a conversion price equal to the prior5-day volume weighted average price, subject to a floor of $6.00. The conversion price is subject to a downward adjustment if the Companyissues equity in the future at a price less than $10.00, except for equity issued in connection with certain strategic acquisitions. Theconversion price is also subject to a downward adjustment if the Company fails to satisfy certain performance conditions set forth inthe December 2023 Convertible Note. Upon the Lender’s conversion, the conversion amount shall be equal to 115% of the principalamount to be converted under the December 2023 Convertible Note plus any accrued and unpaid interest and accrued and unpaid Late Chargeson such principal and interest, if any (the “Conversion Rate”). Lender’s ability to convert the December 2023 ConvertibleNote into shares of common stock is subject to a 4.99% blocker, such that Lender cannot convert the December 2023 Convertible Note intoshares of common stock to the extent it will make the Lender a beneficial owner of more than 4.99% of the common stock. The Company hasthe option to prepay the December 2023 Convertible Note, upon thirty (30) business day written notice, by paying the product of the 20%redemption premium multiplied by the greater of (i) the conversion amount to be redeemed and (ii) the product of (x) the Conversion Ratewith respect to the conversion amount to be redeemed multiplied by (y) the greatest closing sale price of the Company’s common stockon any trading day immediately preceding such notice of redemption and the date the Company makes the entire payment required.
The December 2023 Convertible Note has a maturitydate of December 12, 2026, and will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries. The December2023 Convertible Notes are secured by a first priority perfected security interest in all the existing and future assets of the Companyand its direct and indirect subsidiaries, including a pledge of all of the capital stock of each of the subsidiaries. The December 2023Convertible Note also provides that the Company and its subsidiaries execute a guaranty (the “Guaranty”) to guaranty theobligations under the December 2023 Convertible Note and the Security Agreement, that all insider stockholders of the common stock shallexecute a lock-up agreement (the “Lock-Up Agreement”) restricting their sale of the common stock until six months after theregistration statement registering the shares of common stock underlying the December 2023 Convertible Note is declared effective anda joinder agreement (the “Joinder Agreement”) pursuant to which the Company and its Subsidiaries agree and consent to beparties to the Security Agreement.
Additional Financings from Defender SPV LLC
On August 9, 2024, the Company entered into aSPA with the Lender pursuant to which the Company issued to the Lender a senior secured convertible note (the “August 2024 ConvertibleNote”) in exchange for a loan in the principal amount of $1,154,681. The August 2024 Convertible Note has the same terms and conditionsas the December 2023 Convertible Note.
On January 8, 2025, the Company entered intoa SPA (the “January 2025 SPA”) with the Lender pursuant to which the Lender agreed to waive the pre-existing events of defaultthat occurred under the August Note and the Company Preferred Stock and the Company agreed to execute and deliver to the Lender a seniorsecured convertible note (the “January 2025 Note”), in exchange for a loan in the principal amount of $1,724,100. The January2025 Convertible Note has the same terms and conditions as the December 2023 Convertible Note.
The January 2025 SPA also provides that in connectionwith the January 2025 Note, the Company will also issue to the Lender at no additional cost 500,000 shares of Common Stock and a warrant,dated January 13, 2025, to purchase 398,364 shares of Common Stock at an exercise price of $11.50 per share (the “Common ShareWarrant”). The foregoing summary of the Common Share Warrant does not purport to be complete and is qualified in its entirety byreference to the actual Common Share Warrant a form of which is filed with the Current Report on Form 8-K filed on January 14, 2025,as Exhibit 10.3, and is incorporated herein by reference.
On June 5, 2025, the Company entered into a SPA (the “June 2025SPA”) with the Lender for a series of senior secured convertible note up to $21,972,275.38 and pursuant to which the Company executedand delivered to the Lender a senior secured convertible note, dated June 5, 2025 (the “June 2025 Convertible Note”), in exchangefor a loan in the original principal amount of $823,960.33. The foregoing summary of the June 2025 SPA, the June 2025 Aggregate Note andthe June 2025 Initial Closing Note does not purport to be complete and is qualified in its entirety by reference to the actual agreementsforms of which hereto as Exhibit 10.11 (the June 2025 SPA) and Exhibit 10.12(the June 2025 Convertible Note), and are incorporated herein by reference.
30
Exchange Agreement
On May 14, 2025, the Company entered into an Amendment and ExchangeAgreement (the “Exchange Agreement”) with an institutional investor (the “Lender”) pursuant to which the Companyshall authorize one or more series of a new series B convertible preferred stock of the Company, $0.0001 par value (see Note 12, PreferredStock). The Exchange Agreement provides that the Holder shall have the option exchange some or all of the amounts outstanding under theDecember 2023 Convertible Note, August 2024 Convertible Note and/or the January 2025 Convertible Note (collectively the “OriginalNotes”). At the initial closing the Lender has determined to convert $1,284,881. which is the principal amount plus all accruedinterest due under the August 2024 Convertible Note, into 4,000 shares of Series B Preferred Stock. The foregoing summary of the ExchangeAgreement is not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement a form of which is attachedhereto as Exhibit 10.11 and is incorporated herein by reference.
Second Exchange Agreement
On June 20, 2025, the Company entered into aSecond Amendment and Exchange Agreement (the “Second Exchange Agreement”) with the Lender pursuant to which the Company shallauthorize one or more series of a new series C convertible preferred stock of the Company, the terms of which are set forth in a certificateof designation for such series of preferred stock designated as Series C Convertible Preferred Stock, $0.0001 par value (the “SeriesC Preferred Stock”), which Series C Preferred Stock shall be convertible into shares of Common Stock. The Second Exchange Agreementprovides that the Holder shall have the option to exchange (a) some or all of the amounts outstanding under the Original Notes, and (b)the 4,000 shares of Series B Preferred Stock. At the initial closing the Lender determined to convert the 4,000 shares of Series B PreferredStock, into 4,000 shares of Series C Preferred Stock, and such shares of Common Stock issuable pursuant to the terms of the Series CPreferred Stock, including, without limitation, upon conversion or otherwise, in reliance on the exemption from registration providedby Section 3(a)(9) of the Securities Act.
The Second Exchange Agreement provides furtherthat, subject to the terms and conditions set forth in this Second Exchange Agreement, the Lender may require the Company to participatein one or more Additional Exchanges to exchange such portion of the amounts outstanding under the remaining Original Notes as set forthin such applicable closing notice related to such exchange into such aggregate number of shares of such new series of Series C PreferredStock as set forth in such additional closing notice related to such exchange, and such shares of Common Stock issuable pursuant to theterms of Series C Preferred Stock, including, without limitation, upon conversion of the shares of Series C Preferred Stock held by theLender or otherwise, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
In connection with the Second Exchange Agreement,the Board of Directors of the Company has approved and authorized the filing with the Secretary of State of the State of Delaware a Certificateof Designations, Preferences and Rights of Series C Convertible Preferred Stock of ECD Automotive Design, Inc. (the “Series C Certificate”)to authorize the Series C Preferred Stock as required by the Second Exchange Agreement.
The foregoing summary of the Second Exchange Agreementdoes not purport to be complete and is qualified in its entirety by reference to the Second Exchange Agreement which is attached heretoas Exhibit 10.13, and is incorporated herein by reference.
Reversal of Series A Convertible PreferredStock Conversion
In January 2025 the conversion of the 18,500shares of Series A Convertible Preferred Stock into 1,850,000 shares of common stock was reversed by the Company’s transfer agentdue to the terms of the agreement that a stockholder’s ability to convert Series A Convertible Preferred Stock into shares of CommonStock is subject to a 4.99% blocker, that precluded the stockholder from converting its Series A Convertible Preferred Stock into sharesof Common Stock to the extent it will made the stockholder a beneficial owner of more than 4.99% of the Common Stock.
Business Loan and Security Agreement
On February 20, 2025, the Company entered intoa Business Loan and Security Agreement with Agile Lending, LLC (the “Lending Lender”) pursuant to which the Company receiveda term loan from the Lending Lender in the principal amount of $1,575,000 (the “Agile Loan”). The principal amount of theAgile Loan included an administrative agent fee of $75,000.
On April 4, 2025, the Company entered into anew business loan and security agreement with an effective date of April 4, 2025 (the “New Loan Agreement”) by and amongan investor (the “New Lender”), a collateral agent (the “Collateral Agent”), the Company and its subsidiary,Humble Imports Inc., pursuant to which the Company received a term loan from the New Lender in the principal amount of $1,824,300 (the“New Loan”). The New Loan agreement stipulates the Loan should be repaid through sixty-nine (69) equal weekly payments ofprincipal and interest in the aggregate amount of $35,693 per week commencing on April 15, 2025 and ending August 4, 2026 (the “Term”).During the Term, the New Loan will accrue interest in the aggregate amount of $638,505 unless, in the event of default, the New Loanwill accrue interest at a fixed per annum rate equal to the rate that is otherwise applicable plus 5% (the “Default Rate”).The New Loan included an administrative expense fee of $40,000 and a lender’s legal fee of $35,000, which sum was netted out ofthe New Loan. The New Loan is secured by all properties, rights and assets of the Company and Collateral Agent is designated as the collateralagent under the New Loan Agreement. The New Loan Agreement contains customary representations and warranties and affirmative and negativecovenants. Among other things, these covenants restrict the Company’s ability to incur certain types or amounts of indebtedness,incur liens on certain assets, dispose of material assets, enter into certain restrictive agreements, or engage in certain transactionswith affiliates. Additionally, the New Loan Agreement contains customary default provisions including, but not limited to, failure topay interest or principal when due. To evidence the New Loan, the Company executed a secured promissory note, the form of which is anexhibit to the New Loan Agreement
31
The net proceeds of the New Loan were used topay off the Agile Loan in the discounted amount of $1,749,300, including principal and interest. Accordingly, the Agile Loan is paidoff and satisfied.
The foregoing description of the New LoanAgreement is qualified in its entirety by reference to the full text of the form of the New Loan Agreement, a copy of which isattached hereto as Exhibit 10.1, and is incorporated herein by reference.
The outstanding balance on the New Loan as ofJune 30, 2025 was $1,824,300 and interest expense and debt discount amortization for the three and six months ended June 30, 2025 was$136,109 and $13,398, respectively.
Consulting Agreement
On February 20, 2025, the Company entered intoa consulting agreement (“Consulting Agreement”) with an advisor (the “Advisor”) for business advisory services,guidance on growth strategies, and networking with its contacts on a non-exclusive basis for general business purposes. Pursuant to theconsulting agreement, the Company issued 236,000 shares of the Company’s common stock to the Advisor on the Effective Date.
Equity Purchase Facility Agreement
On June 20, 2025, the Company also entered into an Equity Purchase FacilityAgreement (“EPFA”) with an unrelated accredited investor, allowing the Company, at its discretion, to sell up to $500 millionof its common stock over time, subject to terms and conditions. In connection with the EPFA the Company issued 100,000 shares of commonstock as a commitment fee (the “Commitment Shares”) to the investor.
The foregoing description of the EPFA is qualifiedin its entirety by reference to the full text of the form of EFPA, a copy of which is attached hereto as Exhibit 10.18,and is incorporatedherein by reference.
Key Factors Affecting Results of Operations
We have set out below a discussion of the keyfactors that have affected our financial performance and that are expected to impact our performance going forward. These factors presentsignificant opportunities for us but also pose risks and challenges, including those discussed below and under the heading “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Supply Chain Management
We continue to explore opportunities to reduceour costs, improve efficiencies, and increase our margins. As a result of these efforts, in July 2021, two shareholders of the Companyopened ECD UK. ECD UK was formed to facilitate procuring parts and vehicles overseas for the Company.
We continue to focus on cash flow and anticipatehaving sufficient resources to operate during 2025.
Manufacturing Facility Expansion
On August 11, 2021, we entered into a lease agreement,whereby the Company agreed to lease 100,000 sq. ft. of manufacturing, warehouse, and office space in Kissimmee, Florida, for a term of125 months following the lease commencement date. The new state-of-the art facility allows for production efficiencies, enables us toscale our productions, and positions us for extensive growth. We increased our production by approximately 20% in 2023 utilizing oneshift. We added an additional 10,000 sq. ft. space in the second half of 2024 to accommodate the storage of delivery ready vehicles aswell as base vehicles shipped from ECD UK.
Our Growth Plans
We introduced Jaguar E-type in 2022, which wesell at a higher price point and with a higher gross margin as compared to our traditional Land Rover Defender, Range Rover and LandRover Series models. In April 2024, we purchase the assets of Brand New Muscle Car (BNMC). We plan to leverage the assets of the productionof Mustangs in 2024 and 2025. The asset purchase resulted in 6 Mustang contracts. We currently use a third of our production floor forquality control and warranty services. We plan to relocate our quality and warranty services in 2025 to a new facility that will functionas a warranty, used vehicles sales, and service center, and to add a third production area that will focus on iconic American vehicles.We expect our margins to further improve as we increase scale, resulting in lower component costs and improved absorption of our fixedmanufacturing overhead.
We have opened new marketing channels in 2025.This includes retail locations in West Palm Beach, FL and Nantucket, MA.
32
Key Business Metrics
We use certain key metrics and financial measuresnot prepared in accordance with GAAP to evaluate and manage our business.
Adjusted EBITDA
We define adjusted EBITDA, a non-GAAP financialmeasure, as earnings (loss) before interest expense, income tax expense (benefit), non-recurring fees, equity compensation, other (income)expenses, foreign exchange gains and losses, and depreciation and amortization, as adjusted to exclude transaction expenses. We utilizeadjusted EBITDA as an internal performance measure in the management of our operations because we believe the exclusion of these non-cashand non-recurring charges allow for a more relevant comparison of our results of operations to other companies in our industry. AdjustedEBITDA should not be viewed as a substitute for net loss calculated in accordance with GAAP, and other companies may define adjustedEBITDA differently.
In addition to our financial results determinedin accordance with U.S. generally accepted accounting principles (“U.S. GAAP” or “GAAP”), we believe EBITDA, asa non-GAAP measure, is useful in evaluating our operating performance. EBITDA, as used in this Quarterly Report on Form 10-Q,is a non-GAAP financial measure that is presented as supplemental disclosures and should not be construed as an alternativeto net loss or any other GAAP measure as an indicator of operating performance.
We present EBITDA because it is used by managementto assess our financial performance, excluding certain expenses that management believes do not reflect the ongoing operating performanceof the business. Management uses EBITDA to supplement GAAP measures of performance when evaluating our business strategies, making budgetingdecisions and comparing performance against peer companies.
The following table provides a reconciliationof net loss to adjusted EBITDA to net loss for the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net (loss) income | $ | (4,270,294 | ) | $ | (2,029,495 | ) | $ | (7,020,611 | ) | $ | (4,889,357 | ) | ||||
| Excluding: | ||||||||||||||||
| Interest expense | 2,105,348 | 1,306,524 | 3,962,327 | 2,442,824 | ||||||||||||
| Income tax (benefit) expense | - | (9,712 | ) | (400,000 | ) | 522,568 | ||||||||||
| Equity compensation expense | 1,064,630 | 117,500 | 1,540,180 | 117,500 | ||||||||||||
| Non-recurring professional fees* | - | 408,936 | - | 408,936 | ||||||||||||
| Gain on FV conversion of debt to preferred stock | (433,881 | ) | - | (433,881 | ) | - | ||||||||||
| Other (income) expense, net | 117,902 | (267,386 | ) | 257,223 | (225,812 | ) | ||||||||||
| Change in FV of warrant liabilities | (42,744 | ) | 286,684 | (519,327 | ) | 452,045 | ||||||||||
| Change in FV of conversion option liabilities | (88,510 | ) | 176,194 | (360,989 | ) | 236,859 | ||||||||||
| Foreign exchange loss | 15,338 | 5,816 | 8,829 | 10,520 | ||||||||||||
| Depreciation | 25,757 | 32,347 | 51,121 | 75,099 | ||||||||||||
| Adjusted EBITDA | $ | (1,506,454 | ) | $ | 27,408 | $ | (2,915,128 | ) | $ | (848,818 | ) | |||||
| * | The Company has included non-recurring professional fees as a component of adjusted EBITDA as these expenses were incurred in connection with the restatements of the 2022, 2023 and first half 2024 financial statements, the suspension of BF Borgers CPA PC as the Company’s previous independent registered public accounting firm and related matters. |
Adjusted EBITDA decreased $1,533,862 and $2,066,310for the three and six months ended June 30, 2025 as compared to same periods ended June 30, 2024.
Components of Results of Operations
We manage our business globally within one operatingsegment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions, and assessesoperating performance.
Results of Operations
To provide readers with meaningfulcomparisons, the following analysis provides comparisons of the financial results for the three months ended June 30, 2025 and 2024.We analyze and explain the differences between periods in the specific line items of the Unaudited Condensed consolidated Statementsof Operations and Comprehensive (Loss) Income.
33
Three Months Ended June 30, 2025 Comparedto the Three Months Ended June 30, 2024
The following table sets forth our results ofoperations for the periods presented:
| For the three months ended | ||||||||||||||||
| June 30, | Variance | Variance | ||||||||||||||
| 2025 | 2024 | ($) | ()% | |||||||||||||
| Revenue, net | $ | 7,015,892 | 6,454,418 | 561,474 | 9 | % | ||||||||||
| Cost of goods sold | 5,627,448 | 4,399,575 | 1,227,873 | 28 | % | |||||||||||
| Gross profit | 1,388,444 | 2,054,843 | (666,399 | ) | (32 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | 281,503 | 284,572 | (3,069 | ) | (1 | )% | ||||||||||
| General and administrative expenses | 3,674,492 | 2,269,299 | 1,405,193 | 62 | % | |||||||||||
| Provision for credit losses | 20,213 | - | 20,213 | 100 | % | |||||||||||
| Depreciation and amortization expenses | 25,757 | 32,347 | (6,590 | ) | (20 | )% | ||||||||||
| Total operating expenses | 4,001,965 | 2,586,218 | 1,415,747 | 55 | % | |||||||||||
| Income (loss) from operations | (2,613,521 | ) | (531,375 | ) | (2,082,146 | ) | 392 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (2,105,348 | ) | (1,306,524 | ) | (798,824 | ) | 61 | % | ||||||||
| Change in fair value of warrant liabilities | 42,744 | (286,684 | ) | 329,428 | (115 | )% | ||||||||||
| Change in fair value of conversion option | 88,510 | (176,194 | ) | 264,704 | (150 | )% | ||||||||||
| Gain on FV conversion of debt to preferred stock | 433,881 | - | 433,881 | 100 | % | |||||||||||
| Resale commissions income | 16,680 | - | 16,680 | 100 | % | |||||||||||
| Foreign exchange loss | (15,338 | ) | (5,816 | ) | (9,522 | ) | 164 | % | ||||||||
| Other income (expense), net | (117,902 | ) | 267,386 | (385,288 | ) | (144 | )% | |||||||||
| Total other income (loss) | (1,656,773 | ) | (1,507,832 | ) | (148,941 | ) | 10 | % | ||||||||
| Loss before income taxes | (4,270,294 | ) | (2,039,207 | ) | (2,231,087 | ) | 109 | % | ||||||||
| Income tax benefit (expense) | - | 9,712 | (9,712 | ) | (100 | )% | ||||||||||
| Net loss | $ | (4,270,294 | ) | (2,029,495 | ) | (2,240,799 | ) | 110 | % | |||||||
Revenue
Revenue increased $561,474 for the three monthsended June 30, 2025, as compared to the same period ended June 30, 2024 driven by an increase in build revenue.
Gross Profit
Gross profit decreased by $666,399 for the three months ended June30, 2025 as compared to the same period ended June 30, 2024 driven by the increase in shipping and custom fees.
Operating Expense
The Company experienced an overall increase inoperating expenses of $1,405,193 for the three months ended June 30, 2025, as compared to the same period ended June 30, 2024 primarilydriven by an increase in general and administrative costs and increased equity compensation expense and a provision for credit lossesbooked in the three months ended June 30, 2025.
34
Other Expense, Net
For the three months ended June 30, 2025, otherexpense, net increased $148,941, as compared to the same period ended June 30, 2024.
For the three months ended June 30, 2025, interestexpense increased $798,824 as compared to the same period ended June 30, 2024 driven primarily by additional debt taken out in the secondhalf of 2024 and the six months ended June 30, 2025 and the early repayment of the Agile Loan in April 2025.
A gain in fair value of warrant liabilities andconversion option liabilities of $42,744 and $88,510, respectively, was reported for the three months ended June 30, 2025, compared toa loss of $286,684 and $176,194, respectively, for the same period ended June 30, 2024. A gain on the conversion of the August 2024 ConvertibleNote to series B convertible preferred stock of $433,881 was reported for the three months ended June 30, 2025. The gains are largelya function of the decrease in the Company’s share price as a key input in the valuation calculations utilized.
For the three months ended June 30, 2025, otherexpense of $117,902 was driven primarily by a loss on sale of trade vehicles. For the three months ended June 30, 2024, other incomeof $267,386 included interest income.
Six Months Ended June 30, 2025 Comparedto the Six Months Ended June 30, 2024
The following table sets forth our results ofoperations for the periods presented:
| For the six months ended | ||||||||||||||||
| June 30, | Variance | Variance | ||||||||||||||
| 2025 | 2024 | ($) | ()% | |||||||||||||
| Revenue, net | $ | 13,437,263 | $ | 13,444,164 | $ | (6,901 | ) | - | % | |||||||
| Cost of goods sold | 10,284,247 | 9,863,688 | 420,559 | 4 | % | |||||||||||
| Gross profit | 3,153,016 | 3,580,476 | $ | (427,460 | ) | (12 | )% | |||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | 572,382 | 627,981 | (55,599 | ) | (9 | )% | ||||||||||
| General and administrative expenses | 7,068,034 | 4,412,849 | 2,655,185 | 60 | % | |||||||||||
| Provision for credit losses | 29,508 | - | 29,508 | 100 | % | |||||||||||
| Depreciation and amortization expenses | 51,121 | 75,099 | (23,978 | ) | (32 | )% | ||||||||||
| Total operating expenses | 7,721,045 | 5,115,929 | 2,605,116 | 51 | % | |||||||||||
| Income (loss) from operations | (4,568,029 | ) | (1,535,453 | ) | (3,032,576 | ) | 198 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (3,962,327 | ) | (2,442,824 | ) | (1,519,503 | ) | 62 | % | ||||||||
| Change in fair value of warrant liabilities | 519,327 | (452,045 | ) | 971,372 | (215 | )% | ||||||||||
| Change in fair value of conversion option | 360,989 | (236,859 | ) | 597,848 | (252 | )% | ||||||||||
| Gain on FV conversion of debt to preferred stock | 433,881 | - | 433,881 | 100 | % | |||||||||||
| Resale commissions income | 61,600 | 85,100 | (23,500 | ) | (28 | )% | ||||||||||
| Foreign exchange loss | (8,829 | ) | (10,520 | ) | 1,691 | (16 | )% | |||||||||
| Other income (expense), net | (257,223 | ) | 225,812 | (483,035 | ) | (214 | )% | |||||||||
| Total other income (loss) | (2,852,582 | ) | (2,831,336 | ) | (21,246 | ) | 1 | % | ||||||||
| Loss before income taxes | (7,420,611 | ) | (4,366,789 | ) | (3,053,822 | ) | 70 | % | ||||||||
| Income tax benefit (expense) | 400,000 | (522,568 | ) | 922,568 | (177 | )% | ||||||||||
| Net loss | $ | (7,020,611 | ) | $ | (4,889,357 | ) | $ | (2,131,254 | ) | 44 | % | |||||
35
Revenue
Revenue decreased $6,901 for the six months endedJune 30, 2025, as compared to the same period ended June 30, 2024.
Gross Profit
Gross profit decreased by $427,460 during thesix months ended June 30, 2025, compared to the same period ended June 30, 2024 due to an increase in shipping and customs fees.
Operating Expenses
Operating expenses increased by $2,605,116 forthe six months ended June 30, 2025, as compared to the same period ended June 30, 2024 primarily driven by an increase in general andadministrative expenses due to increased headcount, an inventory write off expense of $353,377 and increased equity compensation expense.
Other Expense, Net
For the six months ended June 30, 2025, otherexpense, net increased $21,246, as compared to the same period ended June 30, 2024 primarily driven by the gains on fair value of warrantliabilities and the convertible option and the gain on the conversion of debt to preferred stock, partially offset by increased interestand other expense.
For the six months ended June 30, 2025, the gainin fair value on warrant and conversion option liabilities was $519,327 and $360,989, respectively. For the six months ended June 30,2024, the loss on fair value of warrant and conversion option liabilities was $452,045 and $236,859, respectively. A gain on the conversionof the August 2024 Convertible Note to series B convertible preferred stock of $433,881 was reported for the three months ended June30, 2025.
For the six months ended June 30, 2025, interestexpense increased $1,519,503, as compared to the same period ended June 30, 2024 due to additional debt taken out in the second halfof 2024 and the six months ended June 30, 2025 and the early repayment of the Agile Loan in April 2025.
For the six months ended June 30, 2025, Otherexpense was $257,223 relating mainly to the loss on sale of a trade in vehicle. For the six months ended June 30, 2024, other incomewas $225,812 comprising mainly interest income.
Liquidity and Capital Resources
Uses and Availability of Funds
Our primary sources of funds are customer deposits,collections of deferred revenue, and proceeds from loan payable. The Company relies on customer deposits to fund working capital requirements.Upon execution of the contract, the Company bills its customers the total consideration of the contract. The Company receives from 25%to 50% of the total consideration of the contract, except for upgrades, from its customers as acceptance of contract, which are initiallyrecorded in customer deposits, and are recognized as net revenue when the products are titled or delivered. As of June 30, 2025, theCompany had customer deposits in the amount of $7,988,974 and deferred revenue for vehicles that were completed, but title had not beentransferred to the customer as of June 30, 2025 of $980,696.
Our primary uses of funds are inventory purchases,manufacturing costs, compensation and related expenses, advertising and marketing, legal and other regulatory expenses, general administrativecosts, and capital expenditures. Our capital requirements will depend on many factors, including our revenue growth rate, the timingand amount of cash received from customers, the expansion of sales and marketing activities and the timing and extent of spending tosupport development efforts.
36
Financial Condition
We are subject to credit risks, particularlyif any of the deferred revenue represents a limited number of customers. If we are unable to collect our deferred revenue as it becomesdue, it could adversely affect our liquidity and working capital position.
Generally, we have been able to collect our deferredrevenue in the ordinary course of business. We hold vehicles as collateral to secure payment from customers. We do not have trade creditinsurance for any of our customers to mitigate accounts receivable risk.
As of June 30, 2025, we had cash and cash equivalents of $605,305.The Company’s primary source of operating funds since inception has been from cash receipts from sales and proceeds from loans payable.
Management’s assessment of the Company’sability to continue as a going concern involves making a judgment, at a particular point in time, about inherently uncertain futureoutcomes of events or conditions. Any judgment about the future is based on information available at the time at which the judgment ismade. Subsequent events may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made.
The Company’s future capital requirementswill depend on many factors, including the Company’s revenue growth rate. The Company will need to raise additional financing throughloans or through equity raises. The Company cannot provide any assurance that the new financing will be available to it on commerciallyacceptable terms, if at all. If the Company is unable to raise additional capital, the Company’s business, results of operationsand financial condition would be materially and adversely affected.
As a result of the above, in connection withthe Company’s assessment of going concern considerations in accordance with ASC 205-40, Going Concern (“ASC205”), Management has determined that the Company’s liquidity condition raises substantial doubt about theCompany’s ability to continue as a going concern within one year after the date these unaudited condensed consolidatedfinancial statements are available to be issued. These unaudited condensed consolidated financial statements do not include anyadjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary shouldthe Company be unable to continue as a going concern.
Cash Flows
Cash flows for the six months ended June 30,2025 and 2024
The following table summarizes our cash flowactivity for the periods presented:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Provided By (Used In): | ||||||||
| Operating Activities | $ | (4,243,007 | ) | $ | (3,777,501 | ) | ||
| Investing Activities | - | (17,046 | ) | |||||
| Financing Activities | 3,373,127 | 1,321,000 | ||||||
| Effect of translation changes on cash | (1,665 | ) | - | |||||
| Net decrease in cash and cash equivalents | $ | (871,545 | ) | $ | (2,473,547 | ) | ||
Net cash used in operating activities
Operating activities used cash of $4,243,007for the six months ended June 30, 2025 of which $1,207,662 was used to fund working capital.
Operating activities used cash of $3,777,501for the six months ended June 30, 2024 of which $946,372 was used to fund working capital.
37
Net cash used in investing activities
No cash was used for investing activities forthe six months ended June 30, 2025.
Investing activities used cash of $17,046 forthe six months ended June 30, 2024, related to purchase of warehouse equipment.
Net cash provided by financing activities
Financing activities provided cash of $3,373,127 for the six monthsended June 30, 2025, primarily related to proceeds from the January 2025 and June 2025 Convertible Notes and the notes payable receivedin April 2025, partially offset by the repayment of the Agile Loan and repayments on the Floor Loan.
Financing activities provided cash of $1,321,000for the six months ended June 30, 2024 relating to proceeds from the Floor plan loan.
We regularly review our cash funding requirements and attempt to meetthose requirements through a combination of cash on hand, cash provided by operations, available borrowings and possible future publicor private debt and/or equity offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementaryto ours, which transactions may require the use of cash. We may require additional funds in the future to support our working capitalrequirements, or for other purposes, and may seek to raise such additional funds through the sale of public or private equity and/or debtfinancings, as well as from other sources. No assurance can be given that additional financing will be available in the future or thatif available, such financing will be obtainable on terms favorable when required.
Critical Accounting Policies and Estimates
General
Management’s discussion and analysisof our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, whichare prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of thesefinancial statements requires us to make certain estimates, judgments, and assumptions that we believe are reasonable based upon theinformation available. These estimates and assumptions can be subjective and complex and may affect the reported amounts of assetsand liabilities, revenues, and expenses reported in those financial statements. As a result, actual results could differ from suchestimates and assumptions.
While our significant accounting policiesare described in more detail in Note 3 to our unaudited condensed consolidated financial statements appearing elsewhere in thisQuarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments andestimates used in the preparation of our unaudited condensed consolidated financial statements.
Revenue Recognition
Revenue is recognized when the Company transferstitle of promised goods or provides services to the customer, in an amount that reflects the consideration that the Company expects toreceive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfillsits obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or servicesin the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether theyare distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration;(iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Companysatisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collectthe consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Product Revenue – Builds
The Company generates revenue through the salesof vehicles directly to customers. The Company considers the build/sales contracts to be the contracts with the customer. There is asingle performance obligation in all of the Company’s contracts, which is to build a vehicle based on customer specifications,transfer title or delivery of product under the terms in the arrangement. Product revenue is recognized when the product build is completedand title has been transferred, or product is delivered. The Company concluded that this was the appropriate time to record revenue basedon the following criteria. (1) ECD has a right to full payment for the product. (2) The customer has legal title to the product and (3)The customer has the significant risks and rewards of ownership of the asset. There are certain build contacts, “owner donor vehicles”where title remains with the customer for the entire project. Under these contracts, revenue is recognized at a point in time when thetruck is delivered back to the customer.
38
Upon execution of the contract, the Company billsits customers the total consideration of the contract. The Company receives approximately 25% to 50% of the total consideration of thecontract from its customers as acceptance of contract, which is initially recorded as deferred revenue. Upon completion of the buildthe remaining 50%-75% is billed and initially recorded as deferred revenue, and recognized as net revenue when the product build is completed,and title is legally transferred.
Warranty and Other Revenue
The Company generates revenue through the saleof extended warranties to customers. The customers agree to the terms and conditions at the time of purchase, which represents the customerarrangements. The period covered by the extended warranty is usually one year. The Company has elected to apply the optional exemptionprovided in ASC 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performanceobligations that are unsatisfied or partially unsatisfied at the end of the reporting period.
The Company also generates revenue through providingrepair services to customers. The Company agrees with the customer on a budget. There is a single performance obligation, which is theCompany’s promise to perform the retrofit or repair work on the vehicle. The entire transaction price is allocated to this singleperformance obligation. Service revenue is recognized when the repair work is completed, and the customer receives the vehicle.
Product Limited Warranty
Consistent with industry practice, the Companygenerally offers customers a limited warranty for work performed on the vehicle under the builds/sales contract. The customers do nothave a contractual right of return. The Company only offers a limited warranty for the work performed on the vehicle under the contract.If a customer disputes any work performed, the Company will attempt to remedy the work however, it shall not be required to discountthe transaction price. The Company considered this an assurance-type warranty and not a separate performance obligation.
Warranty Reserve
The Company provides for the estimated cost ofproduct warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, includingquality control test driving vehicles, the warranty obligation is affected by historical warranty costs per vehicle. Should actual costsdiffer from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.
Other Revenue Policies
Sales, value add, and other taxes collected onbehalf of third parties are excluded from revenue.
Applying the practical expedient in ASC 606,the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is thatthe period between payment by the customer and the transfer of the promised products to the customer will be one year or less, whichis the case with substantially all customers.
Applying the practical expedient in ASC 606,the Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transferthe associated products. The Company records the related costs as part of the cost of goods good.
Inventories
Work in progress – shipping and consumables,and work in progress – labor costs reported in inventories are carried at a lower of cost or net realizable value. Cost is determinedon the basis of the direct and indirect costs that are directly attributable to the product. The measurement of inventories is generallybased on the weighted average method. Cost is determined on the basis of the direct and indirect costs that are directly attributable.The measurement of work in progress inventories is generally based on the weighted average method. Finished goods inventory is comprisedof vehicles for which the build is completed but title has not been legally transferred, or, in some cases, the vehicle has not beendelivered. The measurement of finished goods inventories is the total cost of the materials, shipping and consumables, and labor attributedto the build of each specific completed vehicle. Overhead costs are allocated to inventory based on the rate of inventory turned forthe period.
39
Fair Value of Financial Instruments
The Company calculates the fair value of itsassets and liabilities which qualify as financial instruments and includes this additional information in the notes to the unauditedcondensed consolidated financial statements when the fair value is different than the carrying value of these financial instruments.The estimated fair value of cash, accounts receivable, accounts payable and accrued expenses, and loan payable approximate theircarrying amounts due to the relatively short maturity of these instruments. The carrying value of lease liability also approximatesfair value since the instrument bears market rates of interest. None of these instruments are held for trading purposes.
Warrants
The Company determines the accountingclassification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liabilityclassification in accordance with ASC 480, Accounting for Certain Financial Instruments with Characteristics of both Liabilities andEquity (“ASC 480”), then in accordance with ASC 815 (“ASC 815”), Accounting for Derivative FinancialInstruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liabilityclassified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares bypaying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants donot meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contractsthat require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of thelikelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liabilityclassification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants areindexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After allrelevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classifiedwarrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after theissuance date recorded in the unaudited condensed consolidated statements of operations. Equity classified warrants only requirefair value accounting at issuance with no changes recognized subsequent to the issuance date.
Convertible Notes Payable
When the Company issues convertible debt, itfirst evaluates the balance sheet classification of the convertible instrument in its entirety to determine (1) whether theinstrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity, and (2) whether the conversionfeature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument would beseparated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standaloneinstrument, meets the definition of a “derivative” in ASC 815, Derivatives and Hedging. When a conversion feature meetsthe definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liabilitycarried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the unauditedcondensed consolidated statements of operations.
Redeemable Preferred Stock
Accounting for convertible or redeemable equityinstruments in the Company’s own equity requires an evaluation of the hybrid security to determine if liability classificationis required under ASC 480-10. Liability classification is required for freestanding financial instruments that are not debt in legalform and are: (1) subject to an unconditional obligation requiring the issuer to redeem the instrument by transferring assets (i.e. mandatorilyredeemable), (2) instruments other than equity shares that embody an obligation of the issuer to repurchase its equity shares, or (3)certain types of instruments that obligate the issuer to issue a variable number of equity shares. Securities that do not meet the scopingcriteria to be classified as a liability under ASC 480 are subject to redeemable equity guidance, which prescribes securities that maybe subject to redemption upon an event not solely within the control of the issuer to be classified outside permanent equity (i.e., classifiedin temporary equity). Securities classified in temporary equity are initially measured at the proceeds received, net of issuance costsand excluding the fair value of bifurcated embedded derivatives (if any). Subsequent measurement of the carrying value is not requiredunless the instrument is probable of becoming redeemable or is currently redeemable. When the instruments are currently redeemable orprobable of becoming redeemable, the Company will recognize changes in the redemption value immediately as they occur and adjust thecarrying value of the security to equal the then current maximum redemption value at the end of each reporting period.
40
SUBSEQUENT EVENTS
Subsequent events have been evaluated through August19, 2025, which represents the date the financial statements were available to be issued, and no events, other than discussed below haveoccurred through that date that would impact the financial statements.
Third Amendment and Exchange Agreement
On July 7, 2025, the Company and Lender entered intothe Third Amendment and Exchange Agreement (the “Third Exchange Agreement”). Pursuant to the Third Exchange Agreement, onJuly 7, 2025, the Lender converted the $2,462,805 under the Loan Agreement into 5,000 shares of the Company’s Series C PreferredStock, and such shares of Common Stock issuable pursuant to the terms of the Series C Preferred Stock, including, without limitation,upon conversion or otherwise, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
The foregoing description of the Third Exchange Agreementis qualified in its entirety by reference to the full text of the form of Third Exchange Agreement, a copy of which is attached heretoas Exhibit 10.14,and is incorporated herein by reference.
July 2025 Note
The Company entered into a SPA dated June 5, 2025,(the “June 5, 2025 SPA”), with the Lender for a series of senior secured convertible notes up to an aggregate amount of $21,972,275.38(See Note 10). On July 7, 2025, the Company executed and delivered to the Lender a senior secured convertible note, dated July 7, 2025(the “July 2025 Note”), in exchange for a loan in the original principal amount of $823,960. The July 2025 Note has the sameterms and conditions as the terms of the June 2025 Note.
Exchange of Convertible Notes to Preferred SeriesC Equity
In connection with the Second Exchange Agreement,on August 4, 2025, the Lender provided the Company with notice to exchange $10,000,000 principal from the December 2023 Convertible Noteinto 15,000 shares of Series C Preferred Stock (the “August 4, 2025 Exchange Notice”), which is a partial exchange of theDecember 2023 Convertible Note. On August 7, 2025, the Company issued to the Lender 15,000 shares of the Series C Preferred Stock.
Securities Purchase Agreement
On August 13, 2025, the Companyentered into a SPA by and between the Company and the Holder. Pursuant to the SPA the Holder purchased, and the Company sold 1,111 sharesof the Company’s Series C Convertible Preferred Stock (the “Initial Preferred Shares”, and the shares of Common Stockissuable pursuant to the terms of the Certificate of Designations, including, without limitation, upon conversion or otherwise of theInitial Preferred Shares, collectively, the “Initial Conversion Shares”) for a discounted purchase price of $999,900.
The SPA provides furtherthat the Holder may require the Company to participate in one or more Additional Closings for purchase by the Holder, and the sale bythe Company, of up to the aggregate number of shares of Series C Preferred Stock, which aggregate number for all Buyers shall not exceed25,000 shares of Series C Preferred Stock (collectively, the “Additional Preferred Shares”, and together with the InitialPreferred Shares, the “Preferred Shares”, and the shares of Common Stock issuable pursuant to the terms of the Certificateof Designations, including, without limitation, upon conversion or otherwise of the Additional Preferred Shares, collectively, the “AdditionalConversion Shares”, and together with the Initial Conversion Shares, the “Conversion Shares”).
The aggregate purchase pricefor the Initial Preferred Shares to be purchased by Holder (the “Initial Purchase Price”) shall be $999,900 or approximately$900 for each $1,000 of Stated Value (as defined in the Certificate of Designations) of the Initial Preferred Shares to be purchased byHolder at the Initial Closing. The aggregate purchase price for the Additional Preferred Shares to be purchased by Holder at any givenAdditional Closing (each, an “Additional Purchase Price”, and together with the Initial Purchase Price, each, a “PurchasePrice”) shall be $900 for each $1,000 of Stated Value of Additional Preferred Shares to be issued in such Additional Closing.
The foregoing description of the SPA is qualifiedin its entirety by reference to the full text of the form of SPA, a copy of which is attached hereto as Exhibit 10.15,and is incorporatedherein by reference.
Appointment of Chief Financial Officer
On August 15, 2025, the Board appointed Victoria Hayas the Chief Financial Officer and principal financial officer of the Company. Since March 2025, the Company has engaged Flexible Consulting,LLC, where Mrs. Hay is President and which she co-owns, to provide accounting and finance services relating to the Company’s quarterlyand monthly reporting. The total value of services provided to date is $123,000 as of August 15, 2025.
41
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not requiredto provide the information required by this Item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controlsand other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulatedand communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regardingrequired disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 underthe Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the designand operation of our disclosure controls and procedures as of June 30, 2025. Based on this evaluation, our Chief Executive Officer andChief Financial Officer have concluded that our disclosure controls and procedures were not effective, due solely to the material weaknessin our internal control over financial reporting, including the application of accounting policies for revenue recognition and inventoryand technical accounting areas. As a result, we performed additional analysis as deemed necessary to ensure that our financial statementswere prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this QuarterlyReport on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periodpresented.
Management intends to implement remediation stepsto improve our disclosure controls and procedures and our internal control over financial reporting. Specifically, we intend to expandand improve our review process for complex transactions. We plan to further improve this process by enhancing access to accounting literature,identification of third-party professionals with whom to consult regarding complex accounting applications, and consideration of additionalstaff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control Over FinancialReporting
There was no change in our internal control overfinancial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period from January 1, 2025 throughJune 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
42
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not party to any material legal proceedings.From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. The outcomeof litigation is inherently uncertain, and there can be no assurances that favorable outcomes will be obtained. In addition, regardlessof the outcome, such proceedings or claims can have an adverse impact on us, which may be material because of defense and settlementcosts, diversion of resources and other factors.
Item 1A. Risk Factors.
The risks described under the heading “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31, 2024 could materially and adversely affect our business,financial condition, results of operations, cash flows, future prospects, and the trading price of our Class A Common Stock. The risksand uncertainties described therein are not the only ones we face. Additional risks and uncertainties that we are unaware of or thatwe currently deem immaterial may also become important factors that adversely affect our business.
You should carefully read and consider suchrisks, together with all of the other information in our Annual Report on Form 10-K for the year ended December 31, 2024, in thisQuarterly Report on Form 10-Q (including the disclosures in the section titled “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” and in our unaudited condensed consolidated financial statements and relatednotes), and in the other documents that we file with the SEC.
There have been no material changes from therisk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December31, 2024.
Item 2. Unregistered Sales of Equity Securitiesand Use of Proceeds.
(a) During the quarter ended June 30, 2025, therewere no unregistered sales of our securities that were not reported in a Current Report on Form 8-K.
(b) Not applicable.
(c) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
43
Item6. Exhibits.
The following exhibits are filed as part of, or incorporated by referenceinto, this Quarterly Report on Form 10-Q.
| # | Previously filed |
| * | Filed herewith. |
| ** | Furnished herewith. |
44
SIGNATURES
Pursuant to the requirements of Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: August 19, 2025 | ||
| ECD Automotive Design, Inc. | ||
| /s/ Scott Wallace | ||
| Name: | Scott Wallace | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Victoria Hay | ||
| Name: | Victoria Hay | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
45
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO
EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott Wallace, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of ECD Automotive Design, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 19, 2025 | /s/ Scott Wallace |
| Scott Wallace | |
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO
EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Victoria Hay, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of ECD Automotive Design, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 19, 2025 | /s/ Victoria Hay |
| Victoria Hay | |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002
In connection with thisQuarterly Report of ECD Automotive Design, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Scott Wallace, Chief ExecutiveOfficer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 19, 2025 | /s/ Scott Wallace |
| Scott Wallace | |
Chief Executive Officer (Principal Executive Officer) |
A signed original of this written statement requiredby Section 906 has been provided to ECD Automotive Design, Inc. and will be retained by ECD Automotive Design, Inc. and furnished tothe Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnishedto the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whethermade before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002
In connection with thisQuarterly Report of ECD Automotive Design, Inc. (the ” Company”) on Form 10-Q for the period ended June 30, 2025 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Victoria Hay, Chief FinancialOfficer (Principal Financial and Accounting Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 19, 2025 | /s/ Victoria Hay |
| Victoria Hay | |
Chief Financial Officer (Principal Financial and Accounting Officer) |
A signed original of this written statement requiredby Section 906 has been provided to ECD Automotive Design, Inc. and will be retained by ECD Automotive Design, Inc. and furnished tothe Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnishedto the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whethermade before or after the date hereof, regardless of any general incorporation language in such filing.