Cenntro Inc
For the period ended Jun 30, 2024. Filed Aug 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 13, 2024
CENN$0.16+9.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001140361-24-026231
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001140361-24-036925
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 148 current paragraphs.
72 unchanged; 41 reworded; 35 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 23 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Accounts receivable andallowance for credit losses
Current report
Net revenues for the six months ended June 30, 2024 were approximately $11.7 million, an increase of approximately $4.0 million or 52.0% from approximately $7.7 million for the six months ended June 30, 2023. The increase in net revenues in 2024 was primarily attributed to an increase in vehicle sales by approximately $2.4 million due to the improvement of sales volume and average selling price from approximately $19,797 to $22,882 and an increase in spare-part sales by approximately $1.6 million due to the increase of sales of iChassis. The net revenues in US market for the six months ended June 30, 2024 were approximately $5.1 million, an increase of approximately $5.1 million from approximately zero for the six months ended June 30, 2023. The increase in net revenues in US market in 2024 was primarily attributed to an increase in vehicle sales by approximately $5.1 million.
Current report
Net revenues for the three months ended June 30, 2024 were approximately $8.3 million, an increase of approximately $4.1 million or 96.4% from approximately $4.2 million for the three months ended June 30, 2023. The increase in net revenues in 2024 was primarily attributed to an increase in vehicle sales by approximately $2.7 million due to the improvement of sales volume and average selling price from approximately $18,581 to $ 27,827 and an increase in spare-part sales by approximately $1.4 million due to the increase of sales of iChassis. The net revenues in US market for the three months ended June 30, 2024 were approximately $4.9 million, an increase of approximately $4.9 million from approximately zero for the three months ended June 30, 2023. The increase in net revenues in US market in 2024 was primarily attributed to an increase in vehicle sales by approximately $4.9 million.
Current report
For the six months ended June 30, 2024, we sold 420 ECVs, including 53 fully assembled Metro® units, 43 fully assembled Logistar™ 200 units, 59 fully assembled Logistar™ 100 units, 19 fully assembled Teemak™ units, 54 fully assembled Logistar™ 260 units, 37 fully assembled Logistar™ 400 units, 2 fully assembled Logistar™ 210 units, 82 fully assembled Avantier™ units, 14 Antric® units, 39 Clubcar units, 15 Neibor® 150 units and 3 Neibor® 200 units, compared with 364 ECVs for the six months ended June 30, 2023, including 156 fully assembled Metro® units, 102 fully assembled Logistar™ 200, 49 fully assembled Logistar™ 100, 2 fully assembled Teemak™, 47 fully assembled Logistar™ 260 and 8 Neibor® 150 units. In U.S. market, we sold 65 ECVs, including 10 fully assembled Metro® units, 14 fully assembled Teemak™ units, 37 fully assembled Logistar™ 400 units and 4 fully assembled Avantier™ units, compared with nil for the six months ended June 30, 2023.
Current report
Geographically, the vast majority of our net revenues were generated from vehicle sales in the North America and European Union during the six months ended June 30, 2024 and 2023. For the six months ended June 30, 2024, net revenues from Europe, North America, and Asia (including China) as a percentage of total revenues was 31.2%, 49.2%, and 19.6%, respectively, compared to 71.8%, 1.3%, and 27.0%, respectively for the corresponding period in 2023.
Current report
For the six months ended June 30, 2024, net revenues from vehicle sales in Europe, North America, and Asia (including China) as a percentage of total vehicle net revenues was 35.4%, 59.9%, and 4.7%, respectively, compared to 74.8%, 0.8%, and 24.4%, respectively, for the corresponding period in 2023.
Current report
Cost of goods sold for the six months ended June 30, 2024 was approximately $10.5 million, an increase of approximately $4.1 million or approximately 64.5% from approximately $6.4 million for the six months ended June 30, 2023. The increase of cost of vehicle sales was mainly caused by the increase in the inventory write-down of approximately $1.7 million compared to nil in the corresponding period in 2023 and the increased cost of vehicle sales and spare-parts sales of approximately $0.7 million and $1.7 million, respectively.
Current report
Gross Profit/(Loss)
Current report
Gross Profit for the six months ended June 30, 2024 was approximately $1.2 million, a decrease of approximately $0.1 million from approximately $1.3 million of gross profit for the six months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, our overall gross margin was approximately 10.6% and 17.4%, respectively. Our gross margin of vehicle sales for the six months ended June 30, 2024 and 2023 was 12.1% and 16.7%, respectively. The decrease of our overall gross profit was caused by the increase in inventory write-down of approximately $1.7 million and the decrease in the gross profit of our spare-part sales and other sales of approximately $0.1 million, offset by the increase in the gross profit of our vehicle sales of approximately $1.7 million including approximately $1.0 million increase in the US market sale in the six months ended June 30, 2024 compared with the same period in 2023.
Current report
Selling and Marketing Expenses
Current report
Selling and marketing expenses for the six months ended June 30, 2024 were approximately $2.6 million, a decrease of approximately $2.0 million or approximately 43. 1% from approximately $4.6 million for the six months ended June 30, 2023. The decrease in selling and marketing expenses in 2024 was primarily attributed to the decrease in salary expenses, share-based compensation and marketing expense of approximately $1.1 million, $0.3 million and $0.6 million, respectively.
Current report
General and administrative expenses for the three months ended June 30, 2024 were approximately $7.7 million, a decrease of approximately $1.6 million or approximately 17.6% from approximately $9.3 million for the three months ended June 30, 2023. The decrease in general and administrative expenses in 2024 was primarily attributed to a decrease in office expenses, legal and professional fee, share-based compensation and others of approximately $1.2 million, $0.9 million, $0.2 million and $0.4 million, respectively, offset by the increase in salary and social insurance of approximately $1.1 million. The decrease in the others category of approximately $0.4 million mainly including the decrease of compensation insurance expense and tax expense on deposit interest income paid of $0.4 million in the same period of 2023.
Current report
Research and development expenses for the six months ended June 30, 2024 were approximately $2.8 million, a decrease of approximately $0.9 million or approximately 24.2% from approximately $3.7 million for the six months ended June 30, 2023. The decrease in research and development expenses in 2024 was primarily attributed to the decrease in design and development expenditures of approximately $1.3 million, offset by the increase in salary expense of approximately $0.4 million.
Current report
Interest expense, net, mainly consists of interest on convertible bonds. Net interest expense was approximately $0.1 million for the three months ended June 30, 2024, a change of approximately $0.1 million compared to the approximately one thousand U.S dollar in interest income for the three months ended June 30, 2023.
Current report
Other income (expense), net
Current report
Other expense, net for the six months ended June 30, 2024 was approximately $0.6 million, representing a decrease of approximately $0.2 million compared to approximately $0.8 million of other expense, net for the six months ended June 30, 2023. The decrease of other expense in 2024 compared to 2023 was primarily attributable to an increase in loss on foreign currency exchange and investment gain of approximately $0.6 million, offset by an increase of approximately $0.3 million investment gain and an increase of approximately $0.2 million in income on disposal of PPE from CAC during the second quarter of 2024.
Current report
A gain in the change in fair value of convertible promissory notes and derivative liability for the six months ended June 30, 2024 was approximately $0.01 million, representing a decrease of approximately $0.06 million compared to approximately $0.07 million for six months ended June 30, 2023.
Current report
A gain in the change in fair value ofequity securities for the six months ended June 30, 2024 was approximately $0.5 million, representing a decrease of approximately $0.2 million compared to approximately $0.7 million of a gain in the change in fair value ofequity securities for the six months ended June 30, 2023.
Current report
1 NTD: Company to provide any additional business plans requiring material capital over the next twelve months.
Current report
Fair value measurement
Current report
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. These tiers include:
Current report
Level 1—defined as observable inputs such as quoted prices in active markets;
Current report
Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
Current report
Level 3—defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Current report
The Company’s financial instruments not reported at fair value primarily consist of cash and cash equivalents, restricted cash, accounts receivable, prepayments and other current assets, amount due from and due to related parties, accounts payable and accrued expenses and other current liabilities.
Current report
The carrying value of cash and cash equivalents, restricted cash, accounts receivable, prepayment, goodwill and other current assets, accounts payable, accrued expenses and other current liabilities and amount due from and due to related party, current were approximate fair value because of the short-term nature of these items. The estimated fair values of loan from third party, and amount due from related party, non-current were not materially different from their carrying value as presented due to the brief maturities and because the interest rates on these borrowings approximate those that would have been available for loans of similar remaining maturities and risk profiles.
Current report
Available-for-sale investments and currency-cross swap were classified within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets. Our debt security investments are classified within Level 3 of the fair value hierarchy. As the Issuer is not yet listed and there are no similar companies in the market at the same stage of development for comparison, the Issuer is difficult to value, and the valuation is not considered reliable. Therefore, the Company develop own assumption by future cash flow forecast, which contains principle paid and interests accrued.
Current report
The fair value option provides an election that allows a company to irrevocably elect to record certain financial assets and liabilities at fair value on an instrument-by-instrument basis at initial recognition. The Company has elected to apply the fair value option to: i) convertible promissory notes payable due to the complexity of the various conversion and settlement options available to notes holders; ii) convertible loan receivable, which was recognized as debt security in long-term investments, and iii) currency-cross swap, which was recognized as derivative financial instruments in short-term investments.
Current report
The convertible promissory notes payable accounted for under the fair value option election are each a debt host financial instrument containing embedded features that would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements in accordance with GAAP. Notwithstanding, when the fair value option election is applied to financial liabilities, bifurcation of an embedded derivative is not required, and the financial liability is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis as of each reporting period date.
Current report
The portion of the change in fair value attributed to a change in the instrument-specific credit risk is recognized as a component of other comprehensive income and the remaining amount of the fair value adjustment is recognized as changes in fair value of convertible promissory notes and derivative liabilities in the Company’s consolidated statement of operations. The estimated fair value adjustment is presented in a respective single line item within other expense in the consolidated statement of operations because the change in fair value of the convertible notes was not attributable to instrument-specific credit risk.
Current report
In connection with the issuances of convertible promissory notes, the Company issued investor warrants and placement agent warrants to purchase ordinary shares of the Company. The Company utilizes a Binomial model to estimate the fair value of the warrants and are considered a Level 3 fair value measurement. The warrants are measured at each reporting period, with changes in fair value recognized in the statement of operations.
Current report
As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. The Company’s investments valued at NAV as a practical expedient are: i) private equity funds, which represent the investment in equity securities on the consolidated balance sheet; ii) wealth management products purchased from banks, which represents the available-for-sale investments in short-term investments on the consolidated balance sheet.
Current report
The following table disaggregates the Company’s revenues by product line for the six months ended June 30, 2024 and 2023:
Current report
The Company’s revenues are derived from Europe, Asia and America. The following table sets forth disaggregation of revenue by customer location.
Current report
The following table provides information about receivables and contractual liabilities from contracts with customers:
Removed paragraphs (5)
Previous report
Selling and Marketing Expense
Previous report
Accounts receivable and provision for doubtful accounts
Previous report
Net revenues for the three months ended March 31, 2024 were approximately $3.4 million, a decrease of approximately $0.1 million or 2.3% from approximately $3.5 million for the three months ended March 31, 2023. The decrease in net revenues in 2024 was primarily attributed to a decrease in vehicle sales by approximately $0.3 million due to the decrease of average selling price from approximately $22,000 to $15,000, offset by an increase in spare-part sales by approximately $0.2 million.
Previous report
Gross Profit
Previous report
Other expense (income), net
Reworded paragraphs (41)
Previous wording
Up until the three months ended March 31, 2024, we generate revenue primarily through the sale of ECVs to our channel partners. Starting in 2022, especially after the acquisition of CAE and the termination of the channel partners in North America, we have started to transform our go-to-market model to Cenntro Branded EV Centers globally.
Current wording
Up until December 31, 2021, we generate revenue primarily through the sale of ECVs to our channel partners. Starting in 2022, especially after the acquisition of CAE and the termination of the channel partners in North America, we have started to transform our go-to-market model to a more blended approach. Historically (i.e. up until end of 2021), these revenues were generated solely by the sale of the Metro®. Starting from the last quarter of 2021, we began generating revenue from the sales of the Logistar™ 200, Logistar™ 100, Logistar™ 260, Teemak™ and Neibor® 150 in Europe.
Previous wording
Net revenues during the three months ended 2024 and 2023 were generated from (a) vehicles sales, which primarily represent net revenues from sales of Metro® vehicles (including vehicle kits), Logistar™ 200, Logistar™ 260, Logistar™ 400, Avantier™, Logistar™ 100 and Clubcar, (b) sales of ECV spare-parts related to our Metro® vehicles, and (c) other sales, which primarily were: (i) the sales of inventory of outsourced ECV batteries and (ii) charges on services provided to channel partners for technical developments and assistance with vehicle homologation or certification.
Current wording
Net revenues ended June 30, 2024 and 2023 were generated from (a) vehicles sales, which primarily represent net revenues from sales of Metro® vehicles (including vehicle kits), Logistar™ 200, Logistar™ 260, Logistar™ 400, Antric®, Avantier™, Logistar™ 100 and Clubcar, (b) sales of ECV spare-parts related to our Metro® vehicles, and (c) other sales, which primarily were: (i) the sales of inventory of outsourced ECV batteries and (ii) charges on services provided to channel partners for technical developments and assistance with vehicle homologation or certification.
Previous wording
Cost of goods sold also includes inventory write-downs. Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the basis of weighted average and is comprised of direct materials, direct labor cost and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices fewer selling expenses and any further costs of completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances. Write-downs are recorded in the cost of goods sold in our statements of operations and comprehensive loss.
Current wording
Cost of goods sold also includes inventory write-downs. Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the basis of weighted average and is comprised of direct materials, direct labor cost and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less selling expenses and any further costs of completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances. Write-downs are recorded in the cost of goods sold in our statements of operations and comprehensive loss.
Previous wording
Our operating expenses consist of general and administrative, selling and marketing expenses, and research and development expenses. General and administrative expenses are the most significant components of our operating expenses. Operating expenses also include provision for doubtful accounts and impairment loss for long-lived assets.
Current wording
Our operating expenses consist of general and administrative, selling and marketing expenses, and research and development expenses. General and administrative expenses are the most significant components of our operating expenses. Operating expenses also include provision for doubtful accounts.
Previous wording
Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, costs associated with assets acquired for research and development, product development costs, production inspection and testing expenses, product strategic advisory fees, third-party engineering and contractor support costs and allocated overhead. We expect our research and development expenses to increase as we continue to invest in new ECV models, new materials and techniques, vehicle management and control systems, digital control capabilities and other technologies.
Current wording
Research and development expenses consist primarily of employee compensation and related expenses, prototype expenses, costs associated with assets acquired for research and development, product development costs, production inspection and testing expenses, product strategic advisory fees, third-party engineering and contractor support costs and allocated overhead. We will continue committing our resource in our research and development functions as we continue to invest in new ECV models, new materials and techniques, vehicle management and control systems, digital control capabilities and other related technologies.
Previous wording
We prepare and analyze operating and financial data to assess the performance of our business and allocate our resources. The following table sets forth our key performance indicators for the three months ended March 31, 2024 and 2023.
Current wording
We prepare and analyze operating and financial data to assess the performance of our business and allocate our resources. The following table sets forth our key performance indicators for the six months ended June 30, 2024 and 2023.
Previous wording
Comparison of the Three months ended March 31, 2024 and 2023
Current wording
Comparison of the Three and Six months ended June 30, 2024 and 2023
Previous wording
Additional units were sold during the three months ended March 31, 2024; we sold 165 ECVs, including 29 fully assembled Metro® units, 8 fully assembled Logistar™ 200, 26 fully assembled Logistar™ 100, 4 fully assembled Teemak™ , 42 fully assembled Logistar™ 260, 4 fully assembled Logistar™ 400 units, 29 fully assembled Avantier™ units, 20 Clubcar units and 3 Antric® V5 units compared with 129 ECVs for the three months ended March 31, 2023, including 17 fully assembled Metro® units, 48 fully assembled Logistar™ 200, 39 fully assembled Logistar™ 100, 1 fully assembled Teemak™ and 24 fully assembled Logistar™ 260.
Current wording
For the three months ended June 30, 2024, we sold 255 ECVs, including 24 fully assembled Metro® units, 35 fully assembled Logistar™ 200 units, 33 fully assembled Logistar™ 100 units, 15 fully assembled Teemak™ units, 12 fully assembled Logistar™ 260 units, 33 fully assembled Logistar™ 400 units, 2 fully assembled Logistar™ 210 units, 53 fully assembled Avantier™ units, 11 Antric® units, 19 Clubcar units, 15 Neibor® 150 units and 3 Neibor® 200 units, compared with 235 ECVs for the three months ended June 30, 2023, including 139 fully assembled Metro® units, 54 fully assembled Logistar™ 200, 10 fully assembled Logistar™ 100, one fully assembled Teemak™, 23 fully assembled Logistar™ 260 and 8 Neibor® 150 units. In U.S. market, we sold 55 ECVs, including 2 fully assembled Metro® units, 12 fully assembled Teemak™ units, 37 fully assembled Logistar™ 400 units and 4 fully assembled Avantier™ units, compared with nil for the three months ended June 30, 2023.
Previous wording
Geographically, the vast majority of our net revenues were generated from vehicle sales in the Europe during the three months ended March 31, 2024 and 2023. For the three months ended March 31, 2024, net revenues from Europe, North America, and Asia as a percentage of total revenues was 49.0%, 18.5%, and 32.5%, respectively, compared to 88.2%, 0.9%, and 10.9%, respectively for the corresponding period in 2023.
Current wording
The vast majority of our net revenues were generated from vehicle sales in the North America during the three months ended June 30, 2024 and 2023. For the three months ended June 30, 2024, net revenues from Europe, North America, and Asia (including China) as a percentage of total revenues was 24.0%, 61.7%, and 14.3%, respectively, compared to 58.3%, 1.5%, and 40.2%, respectively for the corresponding period in 2023.
Previous wording
For the three months ended March 31, 2024, net revenues from vehicle sales in Europe, North America, and Asia as a percentage of total vehicle net revenues was 61.8%, 24.9%, and 13.3%, respectively, compared to 93.8%, 1.1%, and 5.1%, respectively, for the corresponding period in 2023.
Current wording
For the three months ended June 30, 2024, net revenues from vehicle sales in Europe, North America, and Asia (including China) as a percentage of total vehicle net revenues was 26.0%, 72.4%, and 1.6%, respectively, compared to 62.5%, 0.6%, and 36.9%, respectively, for the corresponding period in 2023.
Previous wording
The following table presents our cost of goods sold by amount and as a percentage of the total cost of goods sold for the periods presented.
Current wording
The following table presents our cost of goods sold by amount andas a percentage of the total cost of goods sold for the periods presented.
Previous wording
Cost of goods sold for the three months ended March 31, 2024 was approximately $3.4 million, an increase of approximately $0.1 million or approximately 3.1% from approximately $3.3 million for the three months ended March 31, 2023. The increase of cost of vehicle sales was mainly caused by the increased cost of spare-parts sales and other sales of approximately $0.5 million and $0.09 million, respectively, offset by the decreased cost of vehicle sales of approximately $0.4 million.
Current wording
Cost of goods sold for the three months ended June 30, 2024 was approximately $7.1 million, an increase of approximately $4.0 million or approximately 129.6% from approximately $3.1 million for the three months ended June 30, 2023. The increase of cost of vehicle sales was mainly caused by the increase in the inventory write-down of approximately $1.7 million compared to nil in the corresponding period in 2023 and the increased cost of vehicle sales and spare-parts sales of approximately $1.1 million and $1.2 million, respectively.
Previous wording
Gross profit for the three months ended March 31, 2024 was approximately $0.01 million, a decrease of approximately $0.18 million from approximately $0.19 million of gross profit for the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, our overall gross margin was approximately 0.4% and 5.6%, respectively. Our gross margin of vehicle sales for the three months ended March 31, 2024 and 2023 was 6.34% and 1.63%, respectively. The decrease of our gross profit was caused by a decrease in the gross profit of spare-part sales and other sales of approximately $0.2 million and $0.07 million, respectively, offset by the increase in the gross profit of vehicle sales of approximately $0.1 million.
Current wording
Gross Profit for the three months ended June 30, 2024 was approximately $1.2 million, an increase of approximately $0.1 million from approximately $1.1 million of gross profit for the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, our overall gross margin was approximately 14.7% and 27.1%, respectively. Our gross margin of vehicle sales for the three months ended June 30, 2024 and 2023 was 14.2% and 26.4%, respectively. The increase of our overall gross profit was mainly caused by an increase in the gross profit of our vehicle sales and spare-part sales of approximately $1.6 million and $0.2 million, respectively, offset by the increase in the inventory write-down of approximately $1.7 million.
Previous wording
Selling and marketing expenses for the three months ended March 31, 2024 were approximately $1.3 million, a decrease of approximately $0.6 million or approximately 29.6% from approximately $1.9 million for the three months ended March 31, 2023. The decrease in selling and marketing expenses in 2024 was primarily attributed to the decrease in marketing expenses, others, freight and selling employees’ share-based compensations of approximately $0.3 million, $0.1 million, $0.2 million and $0.1 million, respectively, offset by the increase in service fees related to European market and distribution channel research of approximately $0.2 million.
Current wording
Selling and marketing expenses for the three months ended June 30, 2024 were approximately $1.3 million, a decrease of approximately $1.4 million or approximately 52.4% from approximately $2.7 million for the three months ended June 30, 2023. The decrease in selling and marketing expenses in 2024 was primarily attributed to the decrease in salary expenses, share-based compensations and marketing expense of approximately $1.0 million, $0.1 million and $0.3 million, respectively.
Previous wording
General and administrative expenses for the three months ended March 31, 2024 were approximately $6.4 million, a decrease of approximately $1.0 million or approximately 13.3% from approximately $7.3 million for the three months ended March 31, 2023. The decrease in general and administrative expenses in 2024 was primarily attributed to a decrease in legal and professional fee, salary and social insurance and office expenses of approximately $0.5 million, $0.2 million and $0.7 million, respectively, offset by the increase in ROU amortization of approximately $0.4 million.
Current wording
General and administrative expenses for the six months ended June 30, 2024 were approximately $14.0 million, a decrease of approximately $2.6 million or approximately 15.8% from approximately $16.6 million for the six months ended June 30, 2023. The decrease in general and administrative expenses in 2023 was primarily attributed to a decrease in legal and professional fee, office expenses and share-based compensation of approximately $1.4 million, $1.8 million and $0.4 million, respectively, offset by the increase in salary expense of approximately $0.9 million.
Previous wording
Research and development expenses for the three months ended March 31, 2024 were approximately $1.7 million, an increase of approximately $0.2 million or approximately 10.1% from approximately $1.6 million for the three months ended March 31, 2023. The increase in research and development expenses in 2024 was primarily attributed to the increase salary expense of approximately $0.3 million, offset by the decrease in design and development expenses of approximately $0.1 million.
Current wording
Research and development expenses for the three months ended June 30, 2024 were approximately $1.1 million, a decrease of approximately $1.1 million or approximately 49.2% from approximately $2.1 million for the three months ended June 30, 2023. The decrease in research and development expenses in 2024 was primarily attributed the decrease in design and development expenditures of approximately $1.2 million, offset by the increase in salary expense of approximately $0.1 million.
Previous wording
Interest income (expense), net, mainly consists of interest income from deposit. Net interest income was approximately $0.07 million for the three months ended March 31, 2024, a change of approximately $0.12 million compared to the approximately $0.05 million in interest expense for the three months ended March 31, 2023. The increase was primarily attributable to (i) a decrease in interest expense to convertible bonds of approximately $0.2 million, (ii) offset by the decrease in interest income of approximately $0.09 million from HWE.
Current wording
Interest expense, net, mainly consists of interest on convertible bonds. Net interest expense was approximately $0.02 million for the six months ended June 30, 2024, representing a decrease of approximately $0.03 million or approximately 53.8% compared to the approximately $0.05 million in interest expense for the six months ended June 30, 2023.
Previous wording
Other expense, net for the three months ended March 31, 2024 was approximately $0.17 million, representing a change of approximately $0.53 million compared to approximately $0.36 million of other income, net for the three months ended March 31, 2023. The change of other income in 2024 compared to 2023 was primarily attributable to (i) a decrease of approximately $0.2 million in investment income from the wealth management products purchased from banks during the first quarter in 2024 (ii) an increase of approximately $0.4 million in loss on foreign currency exchange.
Current wording
Other expense, net for the three months ended June 30, 2024 was approximately $0.4 million, representing a decrease of approximately $0.7 million compared to approximately $1.1 million of other expense, net for the three months ended June 30, 2023. The change of other expense in 2024 compared to 2023 was primarily attributable to an increase in loss on foreign currency exchange of approximately $1.0 million, offset by an increase of approximately $0.1 million investment gain and an increase of approximately $0.2 million in income on disposal of PPE from CAC during the second quarter of 2024.
Previous wording
A loss in the change in fair value of convertible promissory notes and derivative liability for the three months ended March 31, 2024 was approximately nil, representing a decrease of approximately $0.1 million compared to approximately $0.1 million of a loss in the change in fair value of convertible promissory notes and derivative liability for the three months ended March 31, 2023.
Current wording
A gain in the change in fair value of convertible promissory notes and derivative liability for the three months ended June 30, 2024 was approximately $0.01 million, representing a decrease of approximately $0.19 million compared to approximately $0.2 million for the three months ended June 30, 2023.
Previous wording
A gain in the change in fair value of equity securities for the three months ended March 31, 2024 was approximately $0.2 million. The gain was attributed to a downward adjustment of approximately $0.02 million due to the fair value change of our investment on participating shares in Micro Money Fund SPC with an original investment value of $5 million, offset by an upward adjustment of approximately $0.3 million from our investment on partnership shares in MineOne Fix Income Investment I L.P with an original investment value of $25 million.
Current wording
A gain in the change in fair value of equity securities for the three months ended June 30, 2024 was approximately $0.3 million, representing an increase of approximately $0.2 million compared to approximately $0.1 million of a gain in the change in fair value of equity securities for the three months ended June 30, 2023.
Previous wording
Adjusted EBITDA for the three months ended March 31, 2024 and 2023
Current wording
Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023
Previous wording
Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We define Adjusted EBITDA as net income (or net loss) before net interest expense, income tax expense, depreciation and amortization as further adjusted to exclude the impact of stock-based compensation expense and other non-recurring expenses including expenses related to loss on redemption of convertible promissory notes, loss on exercise of warrants, and change in fair value of convertible promissory notes and derivative liability.
Current wording
Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We define Adjusted EBITDA as net income (or net loss) before net interest expense, income tax expense, depreciation and amortization as further adjusted to exclude the impact of stock-based compensation expense and other non-recurring expenses including expenses related to TME Acquisition, expenses related to one-off payment inherited from the original Naked Brand Group, impairment of goodwill, convertible bond issuance fee, loss on redemption of convertible promissory notes, loss on exercise of warrants, and change in fair value of convertible promissory notes and derivative liability.
Previous wording
We have historically funded working capital and other capital requirements primarily through bank loans, equity financings and short-term loans. Also, the reverse recapitalization we have completed at the end of December 2021 provided significant funding for the Company’s operations. Cash is required primarily to purchase raw materials, repay debts and pay salaries, office expenses and other operating expenses.
Current wording
We have historically funded working capital and other capital requirements primarily through bank loans, equity financings and short-term loans. Also, the reverse recapitalization we have completed at the end of December 2021 provided significant funding for the Company’s operations. Our Cash is required primarily to purchase raw materials, and pay salaries, office expenses and other operating expenses.
Previous wording
As of March 31, 2024 we had approximately $20.3 million in cash and cash equivalents and approximately $4.6 million of accounts receivables as compared to approximately $91.8 million in cash and cash equivalents and $2.7 million in accounts receivable as of March 31, 2022. For the three months ended March 31, 2024 and 2023, net cash used in operating activities was approximately $8.9 million and $17.4 million, respectively.
Current wording
As of June 30, 2024, we had approximately $16.2 million in cash and cash equivalents, approximately $7.9 million of accounts receivables, and approximately $41.3 million of inventory as compared to approximately $29.4 million in cash and cash equivalents, $6.5 million in accounts receivable, and $43.9 million in inventory as of December 31, 2023. For the six months ended June 30, 2024 and 2023, net cash used in operating activities was approximately $12.7 million and $35.5 million, respectively.
Previous wording
We believe our cash and cash equivalents will be sufficient for us to continue to execute our business strategy over the twelve months period following the date of issuance of our annual report. Our current business strategy for the next twelve months includes (i) the continued rollout of our new ECV models and green energy related products in North America and Europe, as applicable and (ii) the establishment and development of local distribution channels in the United States and the European Union. Actual results could vary materially as a result of a number of factors, including:
Current wording
We are looking at measures to generate operating efficiency as well as increasing the inventory turns in containing the growth of working capital for reducing negative net cash used in operating activities. With the cash improvement initiatives, we believe our cash and cash equivalents will be sufficient for us to continue to execute our business strategy over the twelve months period following the date ofissuance of this 10Q. Our current business strategy for the next twelve months includes (i) the continued rollout of our new ECV models in North America and Europe, as applicable, (ii) the establishment of local assembly facilities in the United States and the European Union and (iii) additional plants and equipment for the expansion of our Changxing factory 1. Actual results could vary materially as a result of a number of factors, including:
Previous wording
In the long-term, we plan to regionalize the manufacturing and supply chain relating to certain components of our ECVs in the geographic markets in which our ECVs are sold. In the long-term, through our supply chain development know-how, we intend to establish supply chain relationships in North America and the European Union to support anticipated manufacturing and assembly needs in these markets, thereby reducing the time in transit and potentially other landed costs elements associated with importing our components and spare parts from China. Currently, the majority of our revenues is derived from the sale of ECVs by private label channel partners that assemble our vehicle kits in their own facilities. As part of our growth strategy, we plan to expand our channel partner network, and local assembly facilities to regionalize our manufacturing and supply chains to better serve our global customers especially to expand our after-sales-market services offerings.
Current wording
In the long-term, we plan to regionalize the manufacturing and supply chain relating to certain components of our ECVs in several geographic markets. Through our supply chain development know-how, we intend to establish supply chain relationships especially in the North America to support anticipated manufacturing and assembly needs in these markets, thereby reducing the time in transit and potentially other landed costs elements associated with importing our components and spare parts from China. As part of our growth strategy, we plan to expand our channel partner network, and local assembly facilities to regionalize our manufacturing and supply chains to better serve our global customers, especially to expand our after-sales-market services offerings.
Previous wording
We intend to further expand our technology through continued investment in research and development. Since inception in 2013 through March 31, 2024 we have spent over approximately $91.7 million in research and development activities related to our operations. We plan to increase our research and development expenditure over the long term as we build on our technologies in vehicle development, driving control, cloud-based platforms, and innovations for promoting sustainable energy.
Current wording
We intend to further expand our technology through continued investment in research and development. Since inception in 2013 through June 30, 2024, we have spent over approximately $92.8 million in research and development activities related to our operations. We plan to increase our research and development expenditure over the long term as we build on our technologies in vehicle development, driving control, cloud-based platforms, and innovations for promoting sustainable energy.
Previous wording
As of March 31, 2024, our working capital was approximately $67.5 million, as compared to a working capital of approximately $75.6 million as of December 31, 2023. The approximately $8.1 million decrease in working capital during 2024 was primarily due to (i) the decrease of cash and cash equivalents of approximately $9.1 million, offset by the increase in prepayment and other current assets of approximately $0.9 million.
Current wording
As of June 30, 2024, our working capital was approximately $60.6 million, as compared to a working capital of approximately $75.6 million as of December 31, 2023. The approximately $15.0 million decrease in working capital during 2024 was primarily due to the decrease of cash and cash equivalents and inventories of approximately $13.1 million and $2.6 million, respectively, offset by the increase in accounts receivable, accounts and notes payable and accrued expense and other current liabilities of approximately $1.3 million, $0.2 million and $0.2 million, respectively.
Previous wording
Our net cash used in operating activities was approximately $8.9 million, $17.4 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Our net cash used in operating activities was approximately $12.7 million, $35.6 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Net cash used in operating activities for the three months ended March 31, 2024 was primarily attributable to (i) our net loss of approximately $9.2 million and adjusted for non-cash items of approximately $3.0 million, which primarily consisted of net foreign currency exchange loss, share based compensation expense, depreciation and amortization and amortization of operating lease right-of-use asset of approximately $0.6 million, $0.9 million, $0.5 million and $1.2 million, respectively, (ii) the increase in inventories, accrued expense and other current liabilities, deferred revenue and operating lease liabilities and of approximately $0.7 million, $0.6million, $0.7 million and $1.3 million, respectively, (iii) decrease in accounts receivable of approximately $1.8 million.
Current wording
Net cash used in operating activities for the six months ended June 30, 2024 was primarily attributable to (i) our net loss of approximately $18.4 million and adjusted for non-cash items of approximately $7.1 million, which primarily consisted of share based compensation expense, net foreign currency exchange loss, depreciation and amortization, impairment of slow-moving inventories and amortization of operating lease right-of-use asset of approximately $1.8 million, $0.6 million, $1.0 million, $1.7 million and $2.4 million, respectively, (ii) the increase in accounts receivable, prepayment and other current assets and operating lease liabilities and of approximately $1.5 million, $1.5 million and $1.9 million, respectively, (iii) increase in deferred revenue, accrued expense and other current liabilities, and accounts payable of approximately $1.8 million, $0.2 million and $0.1 million, respectively, (iv) decrease in inventories and other non-current assets of approximately $0.7 million and $0.8 million, respectively.
Previous wording
Net cash provided by investing activities was approximately $0.3 million for the three months ended March 31, 2024. Net cash provided by investing activities for the three months ended March 31, 2024 was primarily attributable to proceeds from equity securities of approximately $0.6 million, offset by the cash in purchase of property, plant and equipment of approximately $0.3 million.
Current wording
Net cash used in investing activities was approximately $0.4 million for the six months ended June 30, 2024. Net cash used in investing activities for the six months ended June 30, 2024 was primarily attributable to cash paid in acquisition of 80% of Hezhe’s shares of approximately $0.4 million, approximately $0.7 million in purchase of plant and equipment, offset by the cash from redemption of equity securities investment of approximately $0.6 million.
Previous wording
Net cash provided by financing activities was nil for the three months ended March 31, 2024.
Current wording
Net cash provided by financing activities was approximately $0.5 million for the six months ended June 30, 2024. Net cash provided by financing activities for the six months ended June 30, 2024 was primarily attributable to approximately $0.5 million due to proceeds from bank loans.
Previous wording
In February 2021, we signed a non-cancellable operating lease agreement for warehouse and trial production use in Freehold, New Jersey (Willowbrook Road) of approximately 9,750 square feet. The lease period began in February 2021 and ends in January 2025. The annual base rent for this facility is $175,500 starting from February 2023. The lease rent fee will be adjusted upward by 3% annually afterwards. We signed the first addendum to lease on December 7, 2022 and the renewal period is two years commencing on Feb. 1, 2023 and terminating on Jan. 31, 2025, the annual base rent for the first twelve months the period is $17,500 and the annual base rent for the second twelve months the period is $180,765.
Current wording
In February 2021, we signed a non-cancellable operating lease agreement for warehouse and trial production use in Freehold, New Jersey (Willowbrook Road) of approximately 9,750 square feet. The lease period began in February 2021 and ends in January 2025. The annual base rent for this facility is $175,500 starting from February 2023. The lease rent fee will be adjusted upward by 3% annually afterwards. We signed the first addendum to lease on December 7, 2022 and the renewal period is two years commencing on Feb. 1, 2023 and terminating on Jan. 31, 2025, the annual base rent for the first twelve months the period is $17,500 and the annual base rent for the second twelve months the period is $180,765.The lease terminated on May 31, 2024.
Previous wording
On May 19, 2023, we completed the acquisition with Cenntro Elecautomotiv, S.L., our EVC in Spain. On April 3, 2023, Cenntro Elecautomotiv, S.L. signed a non-cancellable operating lease agreement for approximately 1,765 square feet as a local office in Barcelona, Spain, the lease period began on April 3, 2023 and the lease term is five years. The monthly rent is €1,776 (or approximately $1,919.9) plus value-added tax with a two-month rent abatement period. In addition, Cenntro Elecautomotiv, S.L. signed a non-cancellable operating lease agreement for approximately 3,471 square feet as a service center in Barcelona, Spain on August 9, 2022, the lease period began on August 1, 2022 and the lease term is ten years. The annual rent is €36,000 (or approximately $38,916) and shall be readjusted depending on the changes of the consumer price index (CPl) determined by the National Bureau of Statistics and its substitute institutions. Legal defense is €6,000 (or approximately $6,486).
Current wording
On May 19, 2023, we completed the acquisition with Cenntro Elecautomotiv, S.L., our EVC in Spain. On April 3, 2023, Cenntro Elecautomotiv, S.L. signed a non-cancellable operating lease agreement for approximately 1,765 square feet as a local office in Barcelona, Spain, the lease period began on April 3, 2023 and the lease term is five years. The monthly rent is €1,776 (or approximately $1,919.9) plus value-added tax with a two-month rent abatement period. In addition, Cenntro Elecautomotiv, S.L. signed a non-cancellable operating lease agreement for approximately 3,471 square feet as a service center in Barcelona, Spain on August 9, 2022, the lease period began on August 1, 2022 and the lease term is ten years. The annual rent is €36,000 (or approximately $38,916) and shall be readjusted depending on the changes of the consumer price index (CPl) determined by the National Bureau of Statistics and its substitute institutions. Legal defense is €6,000 (or approximately $6,486). The lease of local office terminated on April 10, 2024.
Previous wording
On April 4, 2023, we signed a non-cancellable operating lease agreement for approximately 2,500 square feet in Freehold, New Jersey. The lease period commenced on July 17, 2023 and ends on July 31, 2025. The annual base rent for the first twelve months of the period is $33,525 and the annual base rent for the second twelve months of the period is $35,201.
Current wording
On April 4, 2023, we signed a non-cancellable operating lease agreement for approximately 2,500 square feet in Freehold, New Jersey. The lease period commenced on July 17, 2023 and ends on July 31, 2025. The annual base rent for the first twelve months of the period is $33,525 and the annual base rent for the second twelve months of the period is $35,201. The lease terminated on June 30, 2024.
Previous wording
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our Audited Financial Statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Current wording
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our Unaudited Financial Statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Previous wording
The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, the reported amounts of revenue and expenses during the reporting period and the related disclosures in the consolidated and combined financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2—Summary of Significant Accounting Policies” of our consolidated and combined financial statements for the three months ended March 31, 2024, included elsewhere in this Quarter Report, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.
Current wording
The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, the reported amounts of revenue and expenses during the reporting period and the related disclosures in the consolidated and combined financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2—Summary of Significant Accounting Policies” of our consolidated and combined financial statements for the six months ended June 30, 2024, included elsewhere in this Semi-annual Report, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.
Previous wording
The accompanying consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Current wording
The accompanying consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited condensed consolidated financial statements as of June 30, 2024 and for the six months ended June 30, 2024 and 2023 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Previous wording
Certain information and disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. Management believes that the disclosures made are adequate to provide a fair presentation. The interim financial information should be read in conjunction with the financial statements and the notes for the fiscal year ended December 31, 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year or any future periods.
Current wording
Certain information and disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been condensed or omitted pursuant to such rules and regulations. Management believes that the disclosures made are adequate to provide a fair presentation. The interim financial information should be read in conjunction with the financial statements and the notes for the fiscal year ended December 31, 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results for the full year or any future periods..
Previous wording
Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration. The consideration received remains a contractual liability until goods or services have been provided to the customer. For the three months ended March 31, 2024 and 2023, the Company recognized $890,646 and $98,818 revenue that was included in contractual liabilities as of December 31, 2023 and 2022, respectively.
Current wording
Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration. The consideration received remains a contract liability until goods or services have been provided to the customer. For the six months ended June 30, 2024 and 2023, the Company recognized $923,815 and $479,499 revenue that was included in contract liabilities as of December 31, 2023 and 2022, respectively.
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