UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For the fiscal year ended:
For the transition period from ____________ to _____________
Commission File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
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 |
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
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12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the 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 check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether registrant is a
shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of June 30, 2024, based upon the last reported
trade on that date, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $
As of July 14, 2025, there were a total of
EXPLANATORY NOTE
1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents
F-1
Certified Public Accountants and Advisors
A PCAOB Registered Firm
713-489-5635 bartoncpafirm.com Cypress, Texas
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of ECD Automotive Design, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying balance sheets of ECD Automotive Design, Inc. and Subsidiaries (Humble Imports, Inc. d/b/a ECD Auto Design) (the “Company”) as of December 31, 2024 and 2023, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
Other Matters
Going Concern
As described in Note 2 to the financial statements, the Company has sustained significant losses and negative cash flows from operations and are dependent on debt and equity financing to fund operations. If the Company is unable to raise sufficient funding, it may struggle to reach its future obligations.
Accordingly, the Company has determined that these factors raise substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the date these financial statements are issued.
Management plans to identify adequate sources of funding to provide operating capital for continued growth. Auditing the Company’s assessment and related disclosures regarding its ability to continue as a going concern required significant auditor judgment. This is due to the high level of uncertainty surrounding the projections and assumptions related to the timing and likelihood of future cash flows, including external funding. Assessing whether the Company’s disclosures adequately reflect the uncertainty and risks associated with its going concern status also demanded considerable auditor judgment and effort.
We have served as the Company’s auditor since 2024.
April 15, 2025
F-3
ECD AUTOMOTIVE DESIGN, INC
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| 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-to-use asset | ||||||||
| Deferred tax asset | - | |||||||
| Deposit | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Floor plan payable | ||||||||
| Lease liability, current | ||||||||
| Other payable | ||||||||
| Total current liabilities | ||||||||
| Lease liability, non-current | ||||||||
| Warrant liabilities, at fair value | ||||||||
| Conversion option, at fair value | ||||||||
| Convertible note, net of debt discount | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 19) | ||||||||
| Redeemable preferred stock, $ | ||||||||
| Stockholders’ deficit | ||||||||
| 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 integral part of these consolidated financial statements
F-4
ECD AUTOMOTIVE DESIGN, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Revenue, net | $ | $ | ||||||
| Cost of goods sold (exclusive of depreciation and amortization 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 (expense) income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Change in fair value of conversion option liabilities | ( | ) | ||||||
| Gain on forgiveness of payable | ||||||||
| Resale commissions income | ||||||||
| FX exchange gain (loss) | ( | ) | ||||||
| Other income, net | ||||||||
| Total (expense) income, net | ( | ) | ( | ) | ||||
| Loss before income tax benefit | ( | ) | ( | ) | ||||
| Income tax (expense) benefit | ( | ) | ||||||
| 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 integral part of these consolidated financial statements
F-5
ECD AUTOMOTIVE DESIGN, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
YEAR ENDED DECEMBER 31, 2024 AND 2023
| Redeemable Preferred Stock | Common Stock | Additional Paid-in | Other comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Deficit | |||||||||||||||||||||||||
| Balance – December 31, 2022, as restated | - | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Stockholder distributions | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Forgiveness of stockholder loans | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of preferred and common shares, net of issuance costs | ||||||||||||||||||||||||||||||||
| Issuance of stock upon Business Combination | ||||||||||||||||||||||||||||||||
| Assets and liabilities assumed from Special Purpose Acquisition Company (“SPAC”) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance – December 31, 2023 as restated | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of common shares | ||||||||||||||||||||||||||||||||
| Issuance of common shares to vendors | ||||||||||||||||||||||||||||||||
| Fair value of share based compensation | - | - | ||||||||||||||||||||||||||||||
| Proceeds allocated to warrants | - | - | ||||||||||||||||||||||||||||||
| Stock issuance costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Conversion of redeemable preferred shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance – December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-6
ECD AUTOMOTIVE DESIGN, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
| Year Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||||||||
| Depreciation and amortization expenses | ||||||||
| Gain on forgiveness of payable | ||||||||
| Change in fair value of derivatives | ||||||||
| Amortization of right-to-use asset | ||||||||
| Amortization of debt discount | ||||||||
| Equity based compensation | ||||||||
| Provision for credit losses | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid and other current assets | ( | ) | ( | ) | ||||
| Deferred tax asset | ( | ) | ||||||
| Deposit | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Deferred revenue and customer deposits | ( | ) | ( | ) | ||||
| Other payable | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from sale of asset | ||||||||
| Purchase of assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Repayment of loan payable | ( | ) | ||||||
| Repayment of floor loan | ( | ) | ||||||
| Proceeds from floor loan | ||||||||
| Proceeds from convertible note | ||||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Assets and liabilities assumed from Business Combination | ( | ) | ||||||
| Issuance of preferred and common shares, net of issuance costs | ||||||||
| Cash distributed to stockholders | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of translation changes on cash | ( | ) | ||||||
| Net increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of noncash cash flow information | ||||||||
| Transfer of property and equipment to inventory | $ | $ | ||||||
| Initial classification of warrant liabilities | $ | $ | ||||||
| Initial classification of conversion option liability | $ | $ | ||||||
| Assets and liabilities acquired with the business combination | $ | $ | ||||||
| Conversion of preferred shares into common shares | $ | $ | ||||||
| Paid in kind interest on convertible note | $ | $ | ||||||
| Record right-to-use asset and lease liability per ASC 842 | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
F-7
NOTE 1. NATURE OF OPERATIONS
ECD Automotive Design, Inc (the “Company,” “ECD,” “we,” “us,” or “our), formerly known as EF Hutton Acquisition Corporation I (“EFHAC”) (the Company) is engaged in the production and sale of Land Rover vehicle. Since the Company’s commencement of operations in 2013, they have established a facility geared towards producing the most customized Land Rovers with the highest quality of parts and the highest quality labor force building each vehicle. The Company primarily earns revenue from the sale of the customized vehicle directly to the customer. Additionally, revenue is generated from providing repair or upgrade services to customers and from the sale of extended warranties.
On December 12, 2023, ECD completed the business combination contemplated by the merger agreement dated as of March 3, 2023 (the “Merger Agreement”) by and among EFHAC, Humble Imports Inc., d/b/a ECD Auto Design, a Florida corporation (“Humble” or “ECD”), ECD Auto Design UK, Ltd., an England and Wales corporation (the “ECD UK”), EFHAC Merger Sub, Inc., a Florida corporation (“Merger Sub”) and wholly-owned subsidiary of EFHAC, and Scott Wallace, as the Securityholder Representative. At part of the closing Merger Sub merged with and into ECD with ECD as the surviving corporation and becoming a wholly-owned subsidiary of EFHAC. In connection with the Merger, EFHAC changed its name to “ECD Automotive Design Inc.” or such other name designated by E.C.D. by notice to EFHAC. See Note 5 for further information.
The business combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, although EFHAC acquired the outstanding equity interest in ECD in the business combination, EFHAC is treated as the “acquired company” and ECD was treated as the accounting acquirer for financial statement purposes. Accordingly, the Business Combination was treated as the equivalent of ECD issuing stock for the net assets of EFHAC, accompanied by a recapitalization. The net assets of EFHAC are stated at historical cost, with no goodwill or other intangible assets recorded.
Furthermore, the historical financial statements of ECD became the historical financial statements of the Company upon the consummation of the merger. As a result, the financial statements included in this Annual Report reflect (i) the historical operating results of ECD prior to the merger; (ii) the combined results of EFHAC and ECD following the close of the merger; (iii) the assets and liabilities of ECD at their historical cost and (iv) ECD’s equity structure for all periods presented, as affected by the recapitalization presentation after completion of the merger. See Note 5 - Reverse Capitalization for further details of the merger.
The Company also consolidates, ECD Audit Design UK LTD (“ECD UK”), a private limited company incorporated on July 16, 2021 in England and Wales. ECD UK was formed for the purpose of procuring parts overseas for the Company. ECD UK is a consolidated variable interest entity (“VIE”) for which the company is the primary beneficiary. The Company is the primary beneficiary of ECD UK as it has both the power to direct the most significant activities impacting its economic performance and the obligation to absorb losses or receive benefits significant to them.
F-8
NOTE 2. LIQUIDITY AND GOING CONCERN
As of December 31, 2024, the Company had cash
and cash equivalents of approximately $
The Company’s primary source of operating
funds since inception has been from cash receipts from sales and proceeds from loan payable. Immediately prior to the closing of the Business
Combination on December 12, 2023, the Company executed and delivered to the Lender a senior secured convertible note (the “December
Convertible Note”), in exchange for a loan in the principal amount of $
On April 4, 2025, the Company entered into a new
business 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 Imports
Inc., 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 to
pay off the Agile Loan in the discounted amount of $
Management’s assessment of the Company’s ability to continue as a going concern involves making a judgement, at a particular point in time, about inherently uncertain future outcomes of events or conditions. Any judgment about the future is based on information available at the time at which the judgment is made. 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 requirements will depend on many factors, including the Company’s revenue growth rate. The Company will need to raise additional financing through loans or through equity raises. The Company cannot provide any assurance that the new financing will be available to it on commercially acceptable terms, if at all. If the Company is unable to raise additional capital, the Company’s business, results of operations and financial condition would be materially and adversely affected.
As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, Management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through twelve months from the date these consolidated financial statements are available to be issued. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
F-9
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of ECD and ECD Auto Design UK Ltd. The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), expressed in U.S. dollars. The accompanying consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the years presented. References to GAAP issued by the Financial Accounting Standard Boards (“FASB”) in these accompanying notes to the consolidated financial statements are to the FASB Accounting Standards Codification (“ASC”). All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Certain amounts from prior period financial statements have been reclassified to align with the presentation used in the current consolidated financial statements for comparative purposes. These reclassifications had no material effect on the Company’s previously issued financial statements.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates include assumptions used in revenue recognition, useful life of assets, and allowance for doubtful accounts.
Segment Information
Operating segments are defined as components of
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 assess
performance. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating
financial performance. Accordingly, the Company operates and manages its business as
Cash and Cash Equivalents
The Company considers all highly liquid investments acquired with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at cost, which approximates market value, because of the short maturity of these instruments.
Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Deposit Insurance Corporation Coverage limit of $
F-10
Revenue Recognition
Revenue is recognized when the Company transfers promised goods or services to the customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the agreement, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are 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 Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the 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 the years ended December 31, 2024 and 2023.
Product Revenue – Parts and Builds
The Company generates revenue through the sale of Land Rover vehicles directly to customers. The Company considers the build/sales contracts to be the contracts with the customer. There is a single performance obligation in all the Company’s contracts, which is to build a vehicle based on customer specifications, transfer title and shipping terms in the arrangement. Product revenue is recognized when the product build is completed, and title has been transferred. The Company concluded that this was the appropriate time to record revenue based on 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 the truck is shipped back to the customer.
Upon execution of the contract, the Company bills
its customers the total consideration of the contract. The Company receives approximately
Service Revenue
The Company generates revenue through providing repair or upgrade services to its customers. The Company agrees with the customer on a budget and specific deliverable. This is typically evidenced by a quote which represents the customer arrangement. There is a single performance obligation, which is the Company’s promise to perform the repair or upgrade work on the vehicle. The entire transaction price is allocated to this single performance obligation. Service revenue is recognized when the repair or upgrade work is completed, and the customer receives the vehicle.
Warranty Revenue
The Company generates revenue through the sale
of extended warranty to customers. The customers agree to the terms and conditions at the time of purchase, which represents the customer
arrangements. The period covered by the extended warranty is usually
Product Limited Warranty
Consistent with industry practice, the Company generally offers customers a limited warranty for work performed on the vehicle under the builds/sales contract. The customers do not have 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 discount the 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 of product warranties at the time revenue is recognized. While the Company engages in product quality programs and processes, including quality control test driving vehicles, the warranty obligation is affected by historical warranty costs per vehicle. Should actual costs differ from the Company’s estimates, revisions to increase or decrease the estimated warranty liability may be required.
F-11
Other Revenue Policies
Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.
Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised products to the customer will be one year or less, which is the case with substantially all customers.
Applying the practical expedient in ASC 606-10-25-18B, the Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. The Company records the related costs as part of the cost of goods good.
Disaggregation of Revenue
The following table summarizes the Company’s net revenues disaggregated by product category:
| Year Ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| As Restated | ||||||||
| Builds | $ | $ | ||||||
| Warranty and other | ||||||||
| Total revenues, net | $ | $ | ||||||
Contract Liability and remaining performance obligations
| 2024 | 2023 | |||||||
| As Restated | ||||||||
| Beginning balance, January 1 | $ | $ | ||||||
| Additional deposits received | ||||||||
| Revenue Recognized during the year at a point-in-time | ( | ) | ( | ) | ||||
| Ending balance, December 31 | $ | $ | ||||||
As of December 31, 2024 and 2023, the Company
had customer deposits in the amount of $
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the original
invoice amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existing
balances. Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivable
balances are written off against the allowance upon management’s determination that such accounts are uncollectible. Recoveries
of accounts receivable previously written off are recorded when received. Management believes that credit risks on accounts receivable
will not be material to the financial position of the Company or results of operations. The Company had trade accounts receivable of $
As of December 31, 2024, amounts due from one
customer exceeded
F-12
Inventories
Work in progress, work in progress – shipping and consumables, and work in progress – labor costs reported in inventories are carried at the lower of cost or net realizable value. 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 comprised of vehicles for which the build is completed but title has not been legally transferred, or in some cases, the vehicle has not been delivered. The measurement of finished goods inventories is the total cost of the materials, shipping and consumables, and labor attributed to the build of each specific completed vehicle. Overhead costs are allocated to inventory based on the rate of inventory turned for the period.
Property and Equipment
Property and equipment are stated at cost, less
accumulated 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 for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable 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-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. impairments were recognized for the years ended December 31, 2024 and 2023.
Advertising and Marketing
The Company follows the policy of charging the
costs of advertising and marketing to expense as incurred. The Company charged to operations $
Income Taxes
Prior to the Business Combination on December 13, 2023, the Company was an S corporation. As an S corporation, the Company was not directly liable for federal income taxes. As of the date of the Business Combination, the operations of the Company ceased to be taxed as a S corporation resulting in a change in tax status for federal and state income tax purposes.
F-13
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company records deferred tax assets to the extent management believes that it is more likely than not that these assets will be realized in the future. Future realization of deferred income tax assets (meaning, items that may provide tax deductions in future periods) requires evidence that there will be sufficient taxable income in those future periods, or within any carryback periods available under tax law. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. The majority of the Company’s deferred tax assets are comprised of income tax carryforwards, including federal and state net operating loss carryforwards (“NOLs”) and non-deductible interest expense carryforwards. Some of these carryforwards are subject to annual usage limitations and expiration, while other state NOLs and a portion of federal NOLs do not have expirations.
While the Company remains in a financial reporting loss position based on a cumulative pre-tax loss for the year ended December 31, 2024, the determination of the valuation allowance is based on its evaluation of the periods over which future taxable items are expected to be utilized to offset tax loss and deduction carryforward items in those future periods. That is, future forecasts of our taxable income are not considered in the evaluation of realizability of its deferred tax assets. Therefore, changes in its deferred tax asset valuation allowances will primarily be affected by changes in the estimates of the time periods over which those future taxable items will occur.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Management has evaluated
the Company’s tax positions, including its previous status as a pass-through entity for federal and state tax purposes, and has
determined that the Company has taken no uncertain tax positions that require adjustment to the 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 in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares. Diluted net loss per share is calculated by including any potentially dilutive share issuances in the denominator. For the year ended December 31, 2024 and 2023, all potentially dilutive securities were not included in the calculation of diluted net income (loss) per share as their effect would be anti-dilutive.
F-14
Leases
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use asset (“ROU asset”) and short-term and long-term lease liability are included on the face of the consolidated balance sheets.
ROU asset represents the right to use an underlying asset 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 lease term. As the Company’s lease does not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date over the respective lease term in determining the present value of lease payments. The Company’s lease 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 than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term.
Fair Value of Financial Instruments
The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to the 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 their carrying amounts due to the relatively short maturity of these instruments. The carrying value of lease liability also approximates fair value since the instrument bears market rates of interest. None of these instruments are held for trading purposes.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, 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 measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
F-15
Warrants
The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. The Company accounts for the Common Share Warrants and the Preferred Share Warrants (as defined in Note 13) (collectively, with the Common Share Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815-40 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Liability classified warrants require fair value accounting at issuance 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.
Redeemable Preferred Stock
Accounting for convertible or redeemable equity instruments in the Company’s own equity requires an evaluation of the hybrid security to determine if liability classification is required under ASC 480-10. Liability classification is required for freestanding financial instruments that are not debt in legal form and are: (1) subject to an unconditional obligation requiring the issuer to redeem the instrument by transferring assets (i.e. mandatorily redeemable), (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 scoping criteria to be classified as a liability under ASC 480 are subject to redeemable equity guidance, which prescribes securities that may be subject to redemption upon an event not solely within the control of the issuer to be classified outside permanent equity (i.e., classified in temporary equity). Securities classified in temporary equity are initially measured at the proceeds received, net of issuance costs and excluding the fair value of bifurcated embedded derivatives (if any). Subsequent measurement of the carrying value is not required unless the instrument is probable of becoming redeemable or is currently redeemable. When the instruments are currently redeemable or probable of becoming redeemable, the Company will recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the then current maximum redemption value at the end of each reporting period.
Stock-based compensation
The Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (“ASC”) Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the statements of operations based on their grant date fair values.
The Company periodically issues common stock and common stock options to consultants for various services.
Convertible Note
The Company determined the fair value option of the Convertible Note, as described in Note 12, was not appropriate. As such, the Company accounted for the Convertible Note, analyzing the conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments.
The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
F-16
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.
Recent Accounting Pronouncements
In September 2022, the FASB issued ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll forward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The Company adopted the guidance when it became effective on January 1, 2023, except for the roll forward information, which is effective for fiscal years beginning after December 15, 2023. The Company does not have any supplier finance programs and accordingly, the adoption did not have a material impact on the Company’s consolidated financial statements, and the Company does not believe the impact of adopting the roll-forward requirement in this accounting standard update will be material to the consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. For the Company, the new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Adoption of the ASU should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. Adoption of the ASU did not impact the Company’s consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies that contractual sale restrictions are not considered in measuring fair value of equity securities and requires additional disclosures for equity securities subject to contractual sale restrictions. The standard is effective for public companies for fiscal years beginning after December 15, 2023. Adoption of the ASU did not impact the Company’s consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which will add required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the CODM evaluates segment expenses and operating results. The new standard will also allow disclosure of multiple measures of segment profitability, if those measures are used to allocate resources and assess performance. The amendments will be effective for public companies for fiscal years beginning after December 15, 2023. Adoption of the ASU did not have a material impact the Company’s financial position, results of operations or cash flows.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The standard will be effective for public companies for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). The standard requires additional disclosure of certain costs and expenses within the notes to the financial statements. The provisions of the standard are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. This accounting standards update may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
F-17
NOTE 4. RECAPITALIZATION
As discussed in Note 1, “Nature of Operations”, On December 12, 2023, ECD completed the business combination (the “Business Combination”) contemplated by the merger agreement, dated as of March 3, 2023 (the “Merger Agreement”) by and among EFHT, Humble Imports Inc., d/b/a ECD Auto Design, a Florida corporation (“Humble” or “ECD”), ECD Auto Design UK, Ltd., an England and Wales corporation (the “ECD UK”), EFHAC Merger Sub, Inc., a Florida corporation (“Merger Sub”) and wholly-owned subsidiary of EFHT, and Scott Wallace, as the Securityholder Representative. The Merger Agreement was previously reported on the Current Report on Form 8-K filed by EFHT with the SEC on March 6, 2023.
At the Closing, pursuant to the terms of the Merger Agreement and after giving effect to the redemptions of shares of EFHT Common Stock:
| ● | the total consideration paid at the Closing (the “Merger Consideration”) by EFHT to Humble security holders was |
| ● | each share of Merger Sub common stock, par value $ |
Following the filing of a Certificate of Merger with the Florida Department of State, Merger Sub merged with and into Humble with Humble as the surviving corporation, effective December 12, 2023. Thus, Humble became a wholly-owned subsidiary of the Company. In connection with the Merger, the Company changed its name to “ECD Automotive Design, Inc.”
Although EFHAC was the legal acquirer of ECD in the merger, ECD is deemed to be the accounting acquirer, and the historical financial statements of ECD became the basis for the historical financial statements of the Company upon the closing of the merger. ECD was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| ● | ECD’s existing stockholders have the greatest voting interest in the combined company; | |
| ● | ECD’s existing stockholders have the ability to control decisions regarding election and removal of directors and officers of the combined company; | |
| ● | ECD is the larger entity in terms of substantive operations and employee base; | |
| ● | ECD comprises the ongoing operations of the combined company; and | |
| ● | ECD’s existing senior management is the senior management of the combined company. |
In accordance with guidance applicable to these
circumstances, the equity structure has been restated in all comparable periods up to December 12, 2023, to reflect the number of shares
of the Company’s common stock, $
F-18
The following table reconciles the elements of the Business Combination to the consolidated statement of changes in stockholders’ deficit for the period ended December 31, 2023:
| Cash-trust and cash, net of redemptions | $ | |||
| Less: transaction expenses paid | ( | ) | ||
| Net proceeds from the Business Combination | ||||
| Less: recognition of SPAC closing balance sheet | ( | ) | ||
| Reverse recapitalization, net | $ | ( | ) |
The number of shares of Common Stock issued immediately following the consummation of the Business Combination were:
| EFHAC Class A common stock, outstanding prior to the Business Combination | ||||
| Less: Redemption of EFHAC Class A common stock | ( | ) | ||
| Class A common stock of EFHAC | ||||
| EFHAC public rights shares outstanding | ||||
| EFHAC founder shares outstanding | ||||
| EFHAC private shares outstanding | ||||
| EFHAC private rights shares outstanding | ||||
| EFHAC shares issued to EF Hutton (underwriter) (1) | ||||
| Business Combination shares | ||||
| ECD Shares | ||||
| Common Stock immediately after the Business Combination |
| (1) |
The number of ECD shares was determined as follows:
| ECD Shares | ECD Shares after conversion ratio | |||||||
| Class A Common Stock (before Defender SPV shares) | ||||||||
Public and private placement warrants
The
Redemption
Prior to the closing of the Business Combination,
certain EFHAC public shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption
of
F-19
NOTE 5. BNMC CONTINUATION CARS LLC BUSINESS COMBINATION
On April 3, 2024, the Company entered into an
Asset Purchase Agreement (the “Original Asset Purchase Agreement”) with BNMC Continuation Cars LLC, an Oklahoma limited liability
company and David W. Miller II (collectively “Sellers”), that was subsequently amended on April 24, 2024 Amended and Restated
Asset Purchase Agreement (the A&R Asset Purchase Agreement”).The Company agreed to purchase certain assets relating to vehicle
builds, including the trademark “Brand New Muscle Car” (the “Purchased Assets”) from Sellers in exchange for up
to $
On April 24, 2024, ECD entered into an Amended
and Restated Asset Purchase Agreement (the A&R Asset Purchase Agreement”) with Sellers, pursuant to which the Company agreed
to purchase certain assets relating to vehicle builds, including the trademark “Brand New Muscle Car” (the “Purchased
Assets”) from Sellers in exchange for up to $
On April 24, 2024, following the satisfaction
or waiver of closing conditions, the Company and Sellers closed the transactions contemplated by the A&R Asset Purchase Agreement.
In connection with the closing of the A&R Asset Purchase Agreement, the Company and the Sellers executed and delivered the following
agreements: (1) the IP Assignment Agreement, dated April 24, 2024, by and between Sellers, as assignors, and ECD, as assignee (the “IP
Assignment Agreement”), (2) the Trademark License Agreement, dated April 24, 2024, by and between ECD, as licensor and Sellers,
as licensees (the “Trademark License Agreement”), and (3) Consulting Agreement, dated April 24, 2024, by and between ECD,
as the company and BNMC Films LLC, a wholly owned subsidiary of David W. Miller II, as the contractor (the “Consulting Agreement”).
The additional $
On August 11, 2024, the Company and the Sellers
entered into an Amendment (the “Amendment”) to the A&R Asset Purchase Agreement, pursuant to which the parties acknowledged
that the Sellers have satisfied all conditions to the A&R Asset Purchase Agreement to fix the aggregate purchase price at $
The assets acquired under the A&R Asset Purchase
agreement were accounted for as a business combination under FASB ASC Topic 805 Business Combinations. The Company utilized acquisition
method under ASC 805-10-05-4 to account for the business combination
| Consideration shares (1) | $ | |||
| Transaction costs | ||||
| Total purchase consideration | ||||
| Less: Cash deposits | ( | ) | ||
| Inventory | ( | ) | ||
| Deferred revenue | ||||
| Total purchase consideration to be allocated | ||||
| Less: fair value of intangible asset | ||||
| Goodwill | $ |
| (1) |
| Fair value | Useful life | |||||||
| Brand name | $ | |||||||
| Less: accumulated amortization | ( | ) | ||||||
| Barnd name, net | ||||||||
F-20
NOTE 6. INVENTORIES
Inventories consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| As Restated | As Restated | |||||||
| Inventory – work in progress | $ | $ | ||||||
| Inventory – work in progress shipping and consumables | ||||||||
| Inventory – work in progress labor | ||||||||
| Resale inventory | ||||||||
| Overhead allocated to inventory | ||||||||
| Finished goods | ||||||||
| Total inventory | $ | $ | ||||||
NOTE 7. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Prepaid expenses | $ | $ | ||||||
| Advances to employees | $ | |||||||
| Other | $ | |||||||
| $ | $ | |||||||
NOTE 8. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| As Restated | ||||||||
| Computer equipment | $ | $ | ||||||
| Office furniture | ||||||||
| Manufacturing equipment | ||||||||
| Vehicles | ||||||||
| Building improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense related to the Company’s
property and equipment was $
F-21
NOTE 9. LEASES
Prior to 2022, the Company entered into several
lease renewal agreements with landlord whereby the Company agreed to lease office space in Kissimmee, Florida. All of these lease renewal
agreements expired during the year ended December 31, 2022. The leases had rental payments from $
On August 11, 2021, the Company entered into a
lease agreement, whereby the Company agreed to lease office space in Kissimmee, Florida for a term of
The Company also has a five-year lease in the
UK for office space expiring December 16, 2026. The Company will owe monthly rental payments ranging from $
On March 23, 2023, the Company entered into a
lease agreement, whereby the Company agreed to lease warehouse space I Kissimmee, Florida for a term of
The Company’s commercial properties are subject to Common Are Maintenance (“CAM”) charges, which represent the tenant’s pro-rata share of the operating expenses incurred by the landlord in the operation of the buildings. These expenses include, but are not limited to, property taxes, insurance premiums, utilities for common areas, maintenance and service agreements and supplies and materials used in the operation and maintenance of the property, cost of repairs and enhancements to common areas, owner’s association fees, and cost of capital improvements or modifications only if the capital improvements reduce operating costs. The Company’s share of the CAM is paid by the Company as additional rent based on the landlord’s written estimate of the CAM for the following year. Within 150 days following the end of each calendar year the landlord provides a statement to the Company reconciling the estimated CAM expenses for the year to the actual costs incurred.
Maturity analysis under the lease agreements are as follows:
| Total | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 and beyond | ||||
| Less: present value discount | ( | ) | ||
| Lease liability | $ | |||
Lease expense for the years ended December 31,
2024 and 2023 was $
F-22
Qualitative information regarding the Company’s leases is as follows:
| The Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Lease expenses | ||||||||
| Operating lease expenses | $ | $ | ||||||
| Variable and other lease costs | ||||||||
| Total lease cost | $ | $ | ||||||
| Other information | ||||||||
| Cash paid for the amounts included in the measurement of lease liabilities for operating leases: | ||||||||
| Operating cash flows | $ | $ | ||||||
| Weighted-average remaining lease term (in years): | ||||||||
| Operating leases | ||||||||
| Weighted-average discount rate: | ||||||||
| Operating leases | % | % | ||||||
NOTE 10. ACCRUED EXPENSES
Accrued expenses consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Accrued commission | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued bonuses | ||||||||
| Accrued expenses, other | ||||||||
| Warranty reserve | ||||||||
| Accrued payroll | ||||||||
| $ | $ | |||||||
NOTE 11. OTHER PAYABLE
Other payable consisted of the following:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| PPG payable (as defined below) | $ | $ | ||||||
| Income tax payable | ||||||||
| Share issuance liability | ||||||||
| Other | ||||||||
| $ | $ | |||||||
On February 1, 2022, the Company entered into
an Exclusive Supplier Agreement with a third party, pursuant to which the third party issues a pre-bate in the amount of $
F-23
NOTE 12. LOAN PAYABLE
On December 15, 2021, the Company entered into
a Letter of Credit Agreement with a third party, pursuant to which the Company borrowed $
The loan balance outstanding as of December 31,
2022, was $
Loan and Security Agreement
In connection with ECD’s PIPE Financing,
on September 28, 2023, ECD entered into a loan and security agreement (the “Loan and Security Agreement”) with Context Credit
Holdings, LP (“Edge”) for a $
The Edge Facility is secured by a blanket lien on all corporate assets, including a perfected first-priority lien on and security interest in all ECD’s assets, including accounts receivables, inventory, equipment, real estate, contracts, general intangibles, and proceeds thereof. Also, each of the ECD Initial Securityholders has entered into a personal guaranty with Edge with respect to the Edge Facility.
In September 2023, October 2023, November 2023, and December 2023, the Company drew an aggregate of $ on the Loan and Security Agreement. On December 12, 2023, in connection with the closing of the Business Combination, the outstanding balance on the Loan and Security Agreement was paid in full.
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 senior secured convertible note (the “December 2023 Convertible Note”) in exchange for a loan in the
principal amount of $
F-24
The December 2023 Convertible Note has a maturity date of December 12, 2026 and will rank senior to all outstanding and future indebtedness of the Company and its subsidiaries. The December 2023 Convertible Notes are secured by a first priority perfected security interest in all the existing and future assets of the Company and its direct and indirect subsidiaries, including a pledge of all of the capital stock of each of the subsidiaries. The December 2023 Convertible Note also provides that the Company and its subsidiaries execute a guaranty (the “Guaranty”) to guaranty the obligations under the December 2023 Convertible Note and the Security Agreement, that all insider stockholders of the common stock shall execute a lock-up agreement (the “Lock-Up Agreement”) restricting their sale of the common stock until six months after the registration statement registering 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 a
SPA with the Lender pursuant to which the Company issued to the Lender a senior secured convertible note (the “August 2024 Convertible
Note”) in exchange for a loan in the principal amount of $
Certain events of default under the December 2023
Convertible Note and the Series A Convertible Preferred Stock have occurred based on the following: the Company’s failure to have
its resale registration statement on Form S-1 declared effective by the SEC within sixty (60) days of December 12, 2023, the financial
statements of the Company’s subsidiary for the years ended December 31, 2022 and 2021 and the quarterly periods ended March 31,
2023, June 30, 2023, and September 30, 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 December 31, 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 file its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 (the “Form
10-Q”) within two (2) trading days of the filing due date of the Form 10-Q. The Convertible Note and the Series A Convertible Preferred
Stock each provide for certain remedies based upon the occurrence of an event of default. As a result of the default the lender under
the Convertible Note who is also the holder of the Series A Convertible Preferred Stock calculated default interest on the Convertible
Note of an additional
The December 2023 Convertible Note includes an
original issue discount of $
F-25
The table below summarizes the outstanding Convertible Note as of December 31, 2024 and 2023:
| December 31, 2024 | December 31, 2023 | |||||||
| As Restated | ||||||||
| Principal value of Convertible Note (1) | $ | $ | ||||||
| Debt discount, net of amortization (2) | ( | ) | ( | ) | ||||
| Convertible Note payable | $ | $ | ||||||
| (1) |
| (2) |
Floor Plan Payable
On May 15, 2024, the Company entered into a loan
agreement for up to $
The table below presents the disaggregation of interest expense for the years ended December 31, 2024 and 2023:
| Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||
| Contractual interest expense | $ | $ | ||||||
| Debt discount amortization | ||||||||
| Debt issuance cost amortization | ||||||||
| Finance costs and other | ||||||||
| Total | $ | $ | ||||||
NOTE 13. WARRANT LIABILITIES
As part of the Senior Secured Convertible Note,
entered on December 12, 2023, the Company issued warrants to Defender SPV, LLC where each whole warrant entitles the holder to purchase
one share of the Company’s common stock at an exercise price of $
F-26
The Common Share warrants expire on the seventh
anniversary of the issuance date provided that (x) if the Holder fails to acquire at least $
Once the Common Share Warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | upon written notice of redemption given after the warrants become exercisable to each warrant holder; and |
| ● | At any time on or after the initial date on which either (i) the shares of Common Stock of the Company are registered after the 1934 Act or (ii) any publicly traded common equity (or equivalent security) of any Successor Entity (or Parent Entity, as applicable) are issued in exchange for the Common Stock in the applicable Business Combination or other similar transaction (such applicable entity, the “Successor Public Company”), in either case, whether as a result of a public offering, Business Combination, recapitalization reorganization or otherwise (the “Public Company Date”) but not after 11;59 p.m., New York time, on the Expiration Date. |
The Preferred Share Warrants expire on the eighteen (18) month anniversary of the date of the Business Combination (or such later date as extended by written consent of the Company and the Holder.
Once the Preferred Share Warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | upon written notice of redemption given after the warrants become exercisable to each warrant holder; and |
| ● | At any time on or after the later of (x) the Issuance Date and (y) the date all of the Initial Preferred Shares have been converted in full, but not after 11:59 p.m., New York Time, on the Expiration Date. |
The Common Share Warrants and the Preferred Share Warrants are recognized as derivative liabilities in accordance with ASC 805. Accordingly, the Company recognized the warrant instruments as liabilities at fair value as of the issuance date with the offsetting entry to debt discount. The carrying value of the instruments will be adjusted to fair value through other income (expense) on the consolidated statement of operations at each reporting period until they are exercised. As of December 31, 2024 and 2023, the fair value of the Common Share Warrants and the Preferred Share Warrants liabilities are presented within warrant liabilities on the consolidated balance sheet.
F-27
NOTE 14. FAIR VALUE MEASUREMENTS
The Company accounts for certain assets and liabilities at 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 measurements are as follows:
| 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 | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2023, As Restated | ||||||||||||||||
| 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 Share Warrants 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 information regarding Level 3 fair value measurements for Common Share Warrants and Preferred Share Warrants as of December 31, 2024.
| Preferred Share Warrant December 31, 2024 | Common Share Warrant December 31, 2024 | |||||||
| Exercise price | $ | $ | ||||||
| Share price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Expected life | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | ||||||||
F-28
The following table provides quantitative information regarding Level 3 fair value measurements for Common Share Warrants and Preferred Share Warrants as of December 31, 2023.
| Preferred Share Warrant December 31, 2023 | Common Share Warrant December 31, 2023 | |||||||
| Exercise price | $ | $ | ||||||
| Share price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Expected life | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | ||||||||
The following table presents a summary of the changes in the fair value of 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, 2022 | $ | $ | $ | |||||||||
| Initial measurement, December 31, 2023 | ||||||||||||
| Fair value as of December 31, 2023, as restated | ||||||||||||
| Initial measurement, August 9, 2024 | ||||||||||||
| Change in fair value | ||||||||||||
| Fair value as of December 31, 2024 | $ | $ | $ | |||||||||
The conversion upon the event of default derivative liability of the Convertible Promissory Note was valued using a Black Scholes option pricing model terms related to the terms of the Convertible Promissory Note (see Note 12), estimated volatility of the price of the Common Stock and current interest rates.
The following table provides quantitative information regarding Level 3 fair value measurements for the conversion upon the event of default derivative liability as of December 31, 2024.
| December 2023 Note December 31, 2024 | August 2024 Note December 31, 2024 | |||||||
| Exercise price | $ | $ | ||||||
| Share price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Expected life | ||||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | ||||||||
F-29
The following table provides quantitative information regarding Level 3 fair value measurements for the conversion upon the event of default derivative liability as of December 31, 2023.
| December 31, 2023 | ||||
| Exercise price | $ | |||
| Share price | $ | |||
| Volatility | % | |||
| Expected life | ||||
| Risk-free rate | % | |||
| Dividend yield | ||||
The following table presents a summary of the changes in the fair value of the conversion upon the event of default derivative liability, a Level 3 liability, measured on a recurring basis.
| Derivative liability | ||||
| Fair value as of December 31, 2022 | $ | |||
| Initial measurement, December 31, 2023 | ||||
| Fair value as of December 31, 2023, as restated | ||||
| Initial measurement, August 9, 2024 | ||||
| Change in fair value | ||||
| Fair value as of December 31, 2024 | $ | |||
There was no derivative liability as of December 31, 2022.
NOTE 15. INCOME TAXES
Historically, ECD was an S Corporation and as such, the Company was not directly liable for income taxes for federal purposes. As of the date of the Business Combination (December 2023), the operations of the Company ceased to be taxed as an S Corporation resulting in a change in tax status for federal and state income tax purposes. This change in tax status requires immediate recognition of any deferred tax assets or liabilities as of the transaction date as the Company will now be directly liable for income taxes. The recognition of these initial deferred balances, if any, would be recorded as an additional tax expense in the period of the transaction. In addition, the Company will accrue current and deferred tax expense based on ongoing activity from that date.
The components of the provision (benefit) for income taxes were as follows (in thousands):
| For the year ended December 31, 2024 |
For the year ended December 31, 2023 |
|||||||
| As Restated | ||||||||
| Deferred: | ||||||||
| Federal | $ | $ | ( |
) | ||||
| State and local | ( |
) | ||||||
| Foreign | - | ( |
) | |||||
| Total deferred provision (benefit) | ( |
) | ||||||
| Change in valuation allowance | - | |||||||
| Total provision (benefit) for income taxes | $ | $ | ( |
) | ||||
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The effective tax rate differs from the statutory tax rates as follows (in thousands):
| For the year ended December 31, 2024 |
For the year ended December 31, 2023 |
|||||||
| Tax at statutory federal rate | % | % | ||||||
| Change in fair value of warrant liabilities | ( |
)% | % | |||||
| Change in fair value of conversion option | ( |
)% | % | |||||
| Other permanent items | ( |
)% | % | |||||
| State income tax | % | % | ||||||
| Change in tax status | % | % | ||||||
| Foreign tax rate differential | % | % | ||||||
| Valuation allowance | ( |
)% | ( |
)% | ||||
| Other | % | ( |
)% | |||||
| Provision (benefit) for income taxes | ( |
)% | % | |||||
Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss carryforwards.
The components of the deferred income tax assets and liabilities were as follows (in thousands):
| December 31, 2024 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Net operating losses and tax credit carry-forward | $ | $ | ||||||
| Lease liabilities | ||||||||
| Organizational start-up costs | ||||||||
| Allowance for doubtful accounts | ||||||||
| Bonus accrual | ||||||||
| Inventory reserve | ||||||||
| Warranty reserve | ||||||||
| Charitable contribution | ||||||||
| OID on convertible notes | ||||||||
| Intangibles | ||||||||
| Gross deferred tax asset | $ | $ | ||||||
| Less valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Depreciation expense | $ | $ | ||||||
| Right of use assets | ||||||||
| Goodwill | ||||||||
| Total deferred tax liability | $ | $ | ||||||
| Net deferred tax asset (liability) | $ | $ | ||||||
As of December 31, 2024 and 2023, the Company
had federal net operating losses of approximately $
ASC 740, Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all of the evidence, the Company has recorded a valuation allowance against all its Federal, state and foreign deferred tax assets at December 31, 202, because management has determined it is more likely than not that the Company will be unable to recognize the benefits of its net deferred tax assets. At December 31, 2023, the Company only recorded a valuation allowance against its foreign deferred tax assets because management has determined that it is more likely than not that the Company will recognize the benefits of its federal and state deferred tax assets, but not for its foreign deferred tax assets, primarily due to its lack of revenue generating operations since inception.
The Company recognizes interest accrued to unrecognized
tax benefits and penalties as income tax expense. The Company accrued total penalties and interest of $
F-31
As of December 31, 2024 and 2023, the Company has not recorded an amount of gross unrecognized tax benefits for uncertain tax positions for the current or prior year planned tax filing positions. No unrecognized tax benefits are applicable for prior periods.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2024, the open tax years are December 31, 2023, 2022, and 2021.
The Company has no open tax audits with any taxing authority as of December 31, 2024.
The Company actively monitors domestic and global tax law changes to account for the effects in the period the legislation is enacted, as applicable.
NOTE 16. REDEEMABLE PREFERRED STOCK
The Company is authorized to issue
Dividend Rights
From and after the first date of issuance of any initial shares of Series A Convertible Preferred Stock (the “Initial Issuance Date”) and prior to the date of the initial exercise of the Preferred Warrants (the “Initial Preferred Warrant Exercise Date”), unless a triggering event has occurred and is continuing, holders of Series A Convertible Preferred Stock shall not be entitled to dividends. From and after the Initial Preferred Warrant Exercise Date, dividends on the Series A Convertible Preferred Stock shall commence accruing and shall be computed on the basis of 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 Preferred Stock on the applicable Dividend Date, in shares of Common Stock (“Dividend Shares”) so long as there has been no Equity Conditions Failure; 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.
Liquidation Preference
In the event of a liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, the stockholders of Series A Convertible Preferred Stock shall be entitled
to 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 passu
with any parity stock then outstanding, an amount per share of Series A Convertible Preferred Stock equal to the sum of (i) the Black
Scholes Value (as defined in the Common Warrants) with respect to the outstanding portion of all Common Warrants held by such holder (without
regard 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, each
stockholder shall be entitled to convert any portion of the outstanding Series A Convertible Preferred Stock held by such stockholder
into validly issued, fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock issuable upon conversion
of any Series A Convertible Preferred Stock shall be determined by dividing (i) the Conversion Amount (as defined in the Certificate of
Designation) of such Series A Convertible Preferred Stock by (y) $
F-32
The stockholders of Series A Convertible Preferred Stock have redemption rights upon the occurrence of a Triggering Event (as defined in the Certificate of Designation). The Company has the 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 Stock shall have no voting rights, except as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designations.
NOTE 17. STOCKHOLDERS’ DEFICIT
Common stock — The Company
is authorized to issue
On October 11, 2023, ECD closed the transaction
memorialized in the Securities Purchase Agreement, dated October 6, 2023 (the “Humble SPA”) by and between ECD and Defender
SPV LLC (the “Investor”) pursuant to which ECD agreed to issue to the Investor (i)
In advance of the Business Combination Closing,
Common Stock Issuances
On August 8, 2024, the Company entered into a
subscription agreement with Theodore Duncan (the “Second Investor”) pursuant to which the Company agreed to issue to the Second
Investor
On August 11, pursuant to the satisfaction of
the terms in the Original Asset Purchase Agreement the Company issued
On August 30, 2024, the holders of
On December 27, 2024, the Company issued
F-33
Warrants — As part of EFHAC’s
initial public offering (“IPO”), EFHAC issued warrants to third-party investors where each whole warrant entitles the holder
to purchase
The Public Warrants and the Private Warrants expire on the fifth anniversary of the Business Combination or earlier upon redemption or liquidation and are exercisable commencing 30 days after the Business Combination, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder.
Once the Public Warrants become exercisable, the Company 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 reported last reported sale price of the Class A ordinary shares for any |
The Company accounts for the
On August 8, 2024, the Company entered into a
subscription 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 and the 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 the Board with appropriate incentives and rewards to encourage them to enter into and continue in the employ and service of the Company and to acquire a proprietary interest in the long-term success of the Company, as well as to reward the performance of these individuals in fulfilling their personal responsibilities for long-range and annual achievements. Eligible individuals under the Plan may receive awards of Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Awards and Other Stock-Based Awards.
The maximum number of shares reserved for the
grant of awards under the Plan shall be
The authority to manage the operation of and administer the Plan shall be vested in a committee (the “Committee”), which shall have all the powers vested in it by the terms of the Plan, including exclusive authority to select the participants to the Plan; to make awards; to determine the type, size, terms and timing of the awards (which need not be uniform); to accelerate the vesting of awards granted pursuant to the Plan, including upon the occurrence of a change of control of the Company; to prescribe the form of the award agreement; to modify, amend or adjust the terms and conditions of any award; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued pursuant to the Plan. The Committee shall be selected by the Board of Directors and shall consist solely of non-employee directors within the meaning of Rule 16b-3 that are outside directors within the meaning of Code Section 162(m).
Grants may be made under the Plan through the tenth (10th) anniversary of the date it is adopted by the Board and approved by the Committee. Awards outstanding as of the date of termination of the Plan shall not be affected or impaired by the termination of the Plan.
F-34
As of December 31, 2024, no awards were granted
under the Equity Incentive Plan. Each of its four non-employee directors were expected to receive a one-time grant of stock options to
purchase up to
In February 2024, the Company entered into a one-year
consulting agreement (the “Agreement”) with an investor relations firm for the purposes of developing, implementing and maintaining
an ongoing stock market support system for the Company with the general objective of expanding awareness in the Company. In connection
with 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 $ |
For the year ended December 31, 2024, the Company
recognized $
| Valuation as of February 13, 2024 | ||||||||||||
| Initial shares | Tranche 1 | Tranche 2 | ||||||||||
| Stock price | $ | $ | $ | |||||||||
| Volatility | % | % | % | |||||||||
| Remaining term | ||||||||||||
| Risk-free rate | % | % | % | |||||||||
On June 11, 2024, the Company entered into a marketing
service agreement (the “Marketing Service Agreement”) with an advisory firm. In connection with the Marketing Service Agreement,
the Company agreed to pay the advisory firm $
F-35
NOTE 18. RELATED PARTY TRANSACTIONS
Related Party Policy
EFHT’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 guidelines
approved by the Board (or the audit committee). The Code of Ethics defines related party transactions as transactions in which (i) the
aggregate amount involved will or may be expected to exceed $
EFHT’s audit committee, pursuant to its written charter, is responsible for reviewing and approving related party transactions to the extent that EFHT enters into such transactions. All ongoing and future transactions between EFHT and any of EFHT’s officers and directors or their respective affiliates will be on terms believed by EFHT to be no less favorable to EFHT than are available from unaffiliated third parties. Such transactions will require prior approval by EFHT’s audit committee and a majority of EFHT’s uninterested “independent” directors, or the members of the Board who do not have an interest in the transaction, in either case who had access, at EFHT’s expense, to EFHT’s attorneys or independent legal counsel. We will not enter into any such transaction unless EFHT’s audit committee and a majority of EFHT’s disinterested “independent” directors determine that the terms of such transaction are no less favorable to EFHT than those that would be available to EFHT with respect to such a transaction from unaffiliated third parties. Additionally, EFHT requires each of EFHT’s directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any 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 entered into
a verbal agreement with Overland Auto Transport Inc d/b/a Luxury Automotive Transport (“TransportCo”), a company which is
The following table shows the Company’s expenses incurred with related parties and the relationship:
| Year Ended December 31 | ||||||||||
| Relationship | 2024 | 2023 | ||||||||
| Luxury Automotive Transport, Inc. | $ | $ | ||||||||
| British Food Stop | ||||||||||
| Total expenses, net | $ | $ | ||||||||
F-36
NOTE 19. COMMITMENTS AND CONTINGENCIES
We record a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.
From time to time in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. At December 31, 2024 and 2023, the Company did not have any pending claims, charges or litigation that were expected to have a material adverse impact on its financial position, results of operations or cash flows.
Agreement with One Drivers Club
As previously disclosed in ECD’s Current
Report on Form 8-K filed on December 6, 2024, on December 3, 2024, ECD announced that it entered into agreements One Drivers Club in furtherance
of the ECD’s retail strategy. Specifically, on November 14, 2024, ECD entered into a Strategic Partnership Agreement (the “ODC
Agreement”) 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 enthusiasts
who view their vehicles as not just machines, but drivers of their lifestyles. With facilities located in Bedford, NY, Chicago, IL, West
Palm Beach, FL, and Seattle WA, One Drivers Club redefines luxury car care through unparalleled concierge storage and full-service collection
management. Beyond exceptional car care, One Drivers Club is a community-a place where like-minded drivers connect over shared passions
and Members celebrate the art and prestige of driving, collecting, and owning remarkable vehicles. The ODC Agreement, entitles ECD to
use a portion of One Drivers Club’s facility in West Palm Beach, Florida (the “ODC Premises”) for the operation of an
ECD showroom for ECD vehicles and sale of ECD vehicles, subject to the terms of the Usage Agreement. Pursuant to the ODC Agreement, One
Drivers Club grants to ECD a non-exclusive, royalty-free, fully paid up, non-transferable and terminable right and license to use the
marks designated by One Drivers Club, and ECD grants to One Drivers Club, a non-exclusive, royalty-free, fully paid up, non-transferable
and terminable right and license to use the marks designated by ECD, for the limited purpose of the operation of the ECD showroom and
for 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 $
Relationship with Ten Easy Street
On December 12, 2024, ECD signed with Ten Easy Street of Nantucket (“TES”), a concept showroom, showhouse and gathering space, to expand ECD’s retail presence and showcase its one-of-one vehicles as part of their curated creative lifestyle brands, furnishings and social opportunities.
TES has agreed to showcase the Company’s
custom 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 $
F-37
NOTE 20. SEGMENT
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer who reviews the assets, liabilities, operating results, and financial metrics for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that there is only one reportable segment.
The CODM assesses performance for the single segment
and decides how to allocate resources based on net income or loss that also is reported on the statement of operations as net income or
loss. The measure of segment assets and liabilites is reported on the balance sheet as total assets and total liabilities.
| December 31, | December 31, | |||||||
| 2024 | 2023, | |||||||
| As Restated | ||||||||
| Inventory | $ | $ | ||||||
| Deferred revenue | $ | $ | ||||||
| Year Ended December 31, | ||||||||
| 2024 | 2023, | |||||||
| As Restated | ||||||||
| Revenue, net | $ | $ | ||||||
| Less: Cost of goods sold | ||||||||
| Gross Profit | ||||||||
NOTE 21. SUBSEQUENT EVENTS
Subsequent events have been evaluated through April 15, 2025, which represents the date the financial statements were available to be issued, and no events, other than disclosed below have occurred through that date that would impact the financial statements.
Additional Financings from Defender SPV LLC
As previously disclosed in ECD’s Current
Report on Form 8-K filed on January 14, 2025, on January 8, 2025, the Company entered into a securities purchase agreement (the “January
2025 SPA”) with the Lender pursuant to which the Lender agreed to waive the pre-existing events of default that occurred under the
August Note and the Company Preferred Stock and the Company agreed to execute and deliver to the Lender a senior secured convertible note
(the “January 2025 Note”), in exchange for a loan in the principal amount of $
The January 2025 SPA also provides that in connection
with the January 2025 Note, the Company will also issue to the Lender at no additional cost
F-38
Reversal of Series A Convertible Preferred Stock Conversion
In January 2025 the conversion of the
Business Loan and Security Agreement
On February 20, 2025, the Company entered into
a Business Loan and Security Agreement with Agile Lending, LLC (the “Lending Lender”) pursuant to which the Company received
a term loan from the Lending Lender in the principal amount of $
Consulting Agreement
On February 20, 2025 (the “Effective Date”),
the Company entered into a 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 the consulting
agreement the Company will issue
Loan Agreement
On April 4, 2025, the Company entered into a new
business 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 Imports
Inc., 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 to
pay off the Agile Loan in the discounted amount of $
F-39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: July 15, 2025 | ||
| ECD Automotive Design, Inc. | ||
| /s/ Scott Wallace | ||
| Name: | Scott Wallace | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| /s/ Benjamin Piggott | ||
| Name: | Benjamin Piggott | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURE | TITLE | DATE | ||
| /s/ Scott Wallace | Chief Executive Officer and Director | July 15, 2025 | ||
| Scott Wallace | (principal executive officer) | |||
| /s/ Benjamin Piggott | Chief Financial Officer | July 15, 2025 | ||
| Benjamin Piggott | (principal financial and accounting officer) | |||
| /s/ Emily Humble | Chief Product Officer and Director | July 15, 2025 | ||
| Emily Humble | ||||
| /s/ Patrick Lavelle | Director | July 15, 2025 | ||
| Patrick Lavelle | ||||
| /s/ Robert Machinist | Director | July 15, 2025 | ||
| Robert Machinist | ||||
| /s/ Thomas Wood | Director | July 15, 2025 | ||
| Thomas Wood |
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