This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our audited Consolidated Financial Statements and the accompanying notes included in this 2022 Form 10-K. Unless differences among reportable segments are material to an understanding of our business taken as a whole, we present the discussion in this MD&A on a consolidated basis. Terms not defined in this MD&A have the meanings ascribed to them in the Consolidated Financial Statements. All dollars are reported in thousands, except per share and per unit amounts.
Organization
The Company was incorporated under the laws of the
Overview
The Company considers itself as a lifestyle company. The Company develops new open points, buys and operates BMW Motorcycle, Triumph Motorcycle and Ducati Motorcycle dealerships. It is the belief of the Company that these brands are not sold as practical transportation; instead, they are luxury items that buyers consume as part of a more extensive and exclusive lifestyle choice. The Company has acquired four dealerships and plans to acquire more existing dealerships and develop new "open point" dealerships.
The Company's business office is located at 3131 W 2210 So, Suite C
Motos's powersports business primarily offers motorcycles comprised of 3 main brands: BMW motorcycles, Triumph Motorcycles and Ducati motorcycles. To a much lesser extent a few other brands of motorcycles, motor scooters, and other vehicles are offered at select locations.
Key Operating Metrics
We regularly review several Key Operating Metrics as pertains to our business across our dealership network. We budget for and benchmark to the revenue profiles and gross profit margins of each segment of our business. In aggregate, these business segments can be thought of in two broad categories: Sales and After Sales. Sales is typically considered to be inclusive of the sales of new and used motorcycles in addition to the Finance and Insurance (F&I) products sold along with them. After Sales is typically considered to be inclusive of all Service and Parts.
Revenue
The Revenue of our business is synonymous with the sales generated.
Within the Sales and After Sales categories, we have the four income streams discussed above. The Sales segment is typically viewed in the context of unit volume, while After Sales is viewed as being more independent of that volume. Each of these categories has more granular components which we monitor regularly. We discuss more in depth in the Gross Profit segment below.
Gross Profit
The Gross Profit of our business is the sales generated for a given segment less the cost for those sales.
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The Gross Profit profile for our dealerships can be thought of in two broad categories: Sales and After Sales. In turn, each of these categories has their own sub-components that we budget for and track independently. For sales, the components are new front-end gross, used front-end gross, and F&I gross. The front-end gross on a motorcycle is the difference between the retail price to the customer and the invoice cost to the dealership. All of these sales components are viewed in conjunction with new and used unit volume. For After Sales, the components are labor gross, and PAA gross. Both of these metrics are considered to be somewhat independent of the sales process and are therefore tracked separately.
Unit Count
As mentioned, the Sales category is highly correlated with unit volume. We view many metrics as a ratio of unit count as detailed below. Additionally it is often useful to view unit count in conjunction with other metrics such as OEM unit count, new and used unit count, etc.
Gross Profit per Unit
As mentioned, we believe the sales category is best suited to tracking in conjunction with unit volume since the two are inherently tied. This Sales Gross Profit per unit encompasses both the front-end gross profit of selling a unit along with the finance and insurance gross along with that unit. Both are part of the Sales category. After Sales is viewed and tracked somewhat independently and not on a per unit basis. Although we do monitor our PAA Gross Profit per new unit retailed as a key metric, it is a subcomponent of the overall PAA Gross Profit profile.
Results of Operations
For the year ended
Our results for operations for the year endedJuly 31, 2022 and 2021 are summarized below: Motos Total Company Metrics Year Ended July 31, 2022 2021 Revenues: Vehicle sales-new$ 11,428,282 $ - Vehicle sales -used 3,444,212 - Parts, service and accessories 4,387,262 - Finance and insurance 918,477 - Total revenues 20,178,233 - Gross Profit : Vehicle sales-new 1,211,996 - Vehicle sales-used 563,848 - Parts, service and accessories 1,775,635 - Finance and insurance 835,503 - Total Gross Profit 4,386,982 - Operating expenses 6,540,985 - Operating loss 2,154,003 - Other income 42,485 - Net loss$ 2,111,518 $ - 14 Year Ended July 31, 2022 2021 Vehicles Sold: New 576 - Used 282 - Total vehicles sold 858 - Revenue per Unit Sold: Vehicles -new$ 19,841 $ - Vehicles -used$ 12,214 $ - Gross Profit per Unit: Vehicles -new$ 2,104 $ - Vehicles -used$ 1,999 $ - Revenue
During the year ended
Gross Profit
During the year ended
Other Income
For the year ended
Operating Expenses
For the year ended
Selling and General Administrative Expense
Selling and general administrative expenses include costs and expenses for
advertising and marketing, development and operating our product procurement and
distribution system managing and logistics system and other overhead expenses.
Selling and general administrative expenses will continue to increase in future
periods as we execute and aggressively expand our business through increased
marketing spending and the addition of management and support personnel to
ensure we adequately develop and maintain operational, financial and management
controls as well as our reporting systems and procedures, but we anticipate they
will decline as a percentage of sales revenue. Selling and general
administrative expenses consisted of
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Depreciation expenses of
Professional Fees
For the year ended
Payroll Expenses
For the year ended
Liquidity and Capital Resources
Our primary sources of liquidity are available cash, amounts available under our
floor plan lines of credit, and monetization of our retail loan portfolio.
During the year ended
Our consolidated financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company's assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management's experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company's assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as conditions evolve as a result of the COVID-19 pandemic and the resulting Demand/Supply Imbalances.
The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Management believes that current working capital, results of operations, and existing financing arrangements are sufficient to fund operations for at least one year from the financial statement date.
We had the following liquidity resources available as of
Working capital (deficiency)
July 31, 2022 July 31, 2021 Current Assets$ 5,583,337 $ 542 Current Liabilities$ 7,394,747 $ 2,322,414 Working Capital Deficiency$ (1,811,410 ) $ (2,321,872 ) 16
Committed liquidity resources available
Year EndedJuly 31, 2022 Cash$ 1,088,837
Committed liquidity resources available $ -
As of
Year EndedJuly 31, 2022 Asset-Based Financing: Vehicle floor plan notes payable$ 2,686,379 Total asset-based financing 2,686,379 Convertible notes payable, net of discount 3,223,309 Working capital loan 337,146 Total debt$ 6,144,273
The following table sets forth a summary of our cash flows:
Year EndedJuly 31, 2022 2021
Cash Flows provide by (used in) Operating Activities
(2,937,320 ) - Cash Flows provided by Financing Activities 5,793,112 - Effects on changes in foreign exchange rate - (19,451 ) Net Change in Cash During Period$ 1,088,295 $ (2 ) Operating Activities
Our primary sources of operating cash flows result from the sales of new and
used vehicles and ancillary products. Our primary uses of cash from operating
activities are purchases of inventory, parts and merchandise, cash used to
acquire customers, technology development, and personnel-related expenses. For
the year ended
For the year ended
17 Investing Activities
Our primary use of cash for investing activities was for purchase of property
and equipment and acquisitions to expand our operations. Cash used in investing
activities for the year ended
For the year ended
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term
debt activity and proceeds from equity issuances which have been used to provide
working capital and for general corporate purposes, including paying down our
short-term revolving facilities. Cash provided by financing activities for the
year ended
For the year ended
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with
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