Fabric.AI, Inc. Q2 FY2023 earnings call

• Vanish Development : Made progress in homologation, drive testing, track tuning, and calibration of braking and motor control. Close to finishing the build of the 12th Vanish first article unit. Anticipate moving to low rate initial production (LRIP) in the coming quarter and full - scale production in early 2024, expecting cost savings per vehicle with production tooling, volume leverage, and learning curve improvements.
• Financials : Sales in the second quarter were in line with expectations with the sunsetting of legacy Club Car Current vehicle and slightly higher than the first quarter. Inventory of remaining Club Car Current vehicle is minimal.
• Sales and Marketing : Built a growing network of dealers, potential fleet customers, and large multi - vehicle customers in various fields. Signed growing number of dealers, formed relationships with vehicle upfitters, and finalizing e - commerce site and first onsite location in Florida for direct - to - consumer sales, expecting to launch within a week.
• Intellectual Property : Strengthening IP portfolio consisting of design patents and utility patents.

In the second quarter, sales were $139,544, a decrease of 86% year-over-year. This was due to the sunsetting of the legacy Club Car Current vehicle. Revenue contribution was mainly from the runoff of Club Car Current inventory as the company transitioned to the Ayro Vanish. Total operating expenses in the second quarter of 2023 were approximately $6.1 million, compared to approximately $4.1 million in the second quarter of 2022. Adjusted EBITDA for the second quarter of 2023 was a loss of approximately $5.5 million versus a loss of approximately $3.6 million in the second quarter of 2022. Net loss for the quarter was $6 million versus a net loss of approximately $6 million in the year - ago quarter. Cash and marketable securities at June 30, 2023 were approximately $33 million, and total debt was zero.

• Plan to continue into full - fledged LRIP in the coming quarter with the intention of beginning the ramp to production quantities of the Vanish, planning to build approximately 60 Vanish units during LRIP.
• Anticipate moving to full - scale production in early 2024, expecting cost savings per vehicle from production tooling, volume leverage, and learning curve improvements, which will allow improving gross margins in 2024.

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