LIQUIDITY

6 Months Ended

Jun. 30, 2022

Liquidity

LIQUIDITY

2. LIQUIDITY

The Company has a history of net losses. For the six months ended June 30, 2022 and 2021, the Company had net losses of $5.1 million (which includes $0.7 million of non-cash expenses) and $2.9 million (which included $0.5 million of non-cash expenses), respectively, and net cash used in operating activities of $7.4 million and $3.8 million, respectively. During the first six months of 2022, the $7.4 million of operating cash usage included $3.6 million to purchase inventory and to prepay vendors for inventory to reduce the risk of potential shortages of cells required for battery manufacturing, and an increase of work in process inventory of EV ARC™ units. The increases in prepayments and inventory are not expected to be ongoing quarterly cash requirements, but rather should reduce to lower levels over the next 12 months.

At June 30, 2022, we had a cash balance of $13.8 million and working capital of $19.4 million. Based on the Company’s current operating plan, the Company believes that it has sufficient cash to fund its operations and meet contractual obligations for at least twelve months from June 30, 2022. The Company can also manage prepayment and inventory levels as well as spending levels for sales and marketing resources to help manage our cash over time. The Company believes that our business will become profitable in the next few years as our revenues continue to grow, we improve our gross margins and we leverage our overhead costs, but we expect to continue to incur losses for a period of time. That may require the Company to raise additional capital to finance its future operations. We have shown success in raising capital in public and private markets in the past. In addition, we have an S-3 Shelf registration that will become available on May 23, 2023 or we could pursue debt financings. In addition, the Company’s outstanding warrants have generated $0.3 million and $2.6 million of proceeds during the six months ended June 30, 2022 and 2021, respectively. There is no guarantee that profitable operations will be achieved, the warrants will be exercised or that additional capital or debt financing will be available.