FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 14. FAIR VALUE MEASUREMENTS

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the year ended December 31, 2023 and 2022 . The carrying amounts of cash equivalents, accounts receivable, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of December 31, 2023 and 2022, due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and estimates for the equity volatility and traded volume volatility of our common stock, the time to maturity of the convertible preferred stock, the risk-free interest rate for a period that approximates the time to maturity, dividend rate, a penalty dividend rate, and our probability of default. The fair value of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions, as noted above: dividend yield, expected term in years, equity volatility, and risk-free interest rate.

Fair Value on a Recurring Basis

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of marketable securities and money market accounts represents a Level 1 measurement. The estimated fair value of the warrant liability and bifurcated embedded derivatives represent Level 3 measurements. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at December 31, 2023 and 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

The following table sets forth a summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis:

			December 31,
Description	Level		2023		2022
Assets:		1
Marketable securities		1	$	—	$	9,848,804
Money market accounts		1	$	1,805,597	$	20,312,844
Liabilities:
Warrant liability (see Note 3)		3	$	13,319,800	$	—
Derivative liability (see Note 3)		3	$	9,400,000	$	—

AYRO, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth a summary of the change in the fair value of the warrant liability that is measured at fair value on a recurring basis:

	December 31, 2023
Balance on December 31, 2022	$	—
Issuance of warrants		9,969,480
Change in fair value of warrant liability		3,350,320
Balance on December 31, 2023	$	13,319,800

The following table sets forth a summary of the change in the fair value of the derivative liability that is measured at fair value on a recurring basis:

	December 31, 2023
Balance on December 31, 2022	$	—
Issuance of convertible preferred stock with bifurcated embedded derivative		5,147,000
Change in fair value of bifurcated embedded derivative		4,253,000
Balance on December 31, 2023	$	9,400,000