NWTN ANNOUNCES FINANCIAL RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2023
- None.
- None.
Insights
The significant increase in net loss reported by NWTN Inc. reflects a challenging period for the company. A 655% rise in net loss is a substantial deviation from the norm, which typically warrants concern from investors and stakeholders. The company's transition from development to production phase, as evidenced by its first recorded revenues, marks an important milestone. However, the sharp rise in operating expenses, particularly general and administrative expenses, is alarming. A comprehensive analysis of the company's financial discipline and operational efficiency is crucial, especially considering the 801% increase in general and administrative expenses year-over-year, which includes significant increments in share-based compensation and insurance costs.
From a liquidity perspective, the current cash reserves seem adequate for the short-term operational needs. However, the high cash burn rate indicated by the net cash flow used in operating activities, which stands at US$129.7 million, raises concerns about the company's long-term financial sustainability. The dependency on private investment in public equity (PIPE) investors for liquidity is not uncommon for companies in growth phases, but it does highlight the importance of achieving operational cash flows to ensure future financial independence and stability.
The mobility technology sector is highly competitive and capital-intensive, with significant investments in research and development (R&D) being a critical component for success. NWTN Inc.'s 199% increase in R&D expenses demonstrates a strong commitment to innovation, particularly in the development of its premium flagship Smart Passenger Vehicle, the MUSE. While this positions the company to potentially capture a niche in the green premium mobility market, the low revenue figures relative to the R&D spend suggest that the company is still in the early stages of commercializing its technology.
The company's strategic investments in production facilities and certifications, such as ISO and Gulf Standardization Organization certifications, are positive indicators of its commitment to quality and regional compliance. However, the market will be looking for evidence that these investments translate into increased sales and market share. The delivery of only ten vehicles in the reported period raises questions about the current production capacity and market demand.
The termination of the Share Subscription Agreement with China Evergrande New Energy Vehicle Group Limited due to unmet conditions is a significant event that could have repercussions on investor confidence and potential future partnerships. It is essential to analyze the legal implications of such a termination, especially considering the potential for litigation or financial penalties that could further strain NWTN's financial resources.
Additionally, the loss on contingency of US$23.0 million related to an ongoing lawsuit represents a considerable financial risk. This not only affects the company's bottom line but also indicates potential vulnerabilities in its corporate governance or operational practices. Stakeholders should closely monitor the outcomes of legal disputes and their impact on the company's financial position and reputation.
Financial Highlights (all results compared to the same period of prior year period unless otherwise noted)
- Revenue was
$0.6 million - Gross margin was
10.8% , which was nil for the six months ended June 30, 2022. - Net loss was
$69.8 million $9.2 million - Inventories amounted to
$51.7 million $2.1 million
Management Commentary
The Company completed the construction of its electric vehicle assembly facility in Khalifa Economic Zones Abu Dhabi ("KEZAD") at the end of 2022 and obtained production and sales licenses from Abu Dhabi Emirate in early 2023. Subsequently, the KEZAD plant received certifications of ISO 9001, ISO 14001, and ISO 45001. During the six months ended June 30, 2023, the Company delivered ten vehicles to one customer.
The Company has continued to systematically upgrade its production facility to expand its capacity and to train its production employees to ensure quality control. The Company has passed the Gulf Standardization Organization certification, accomplished Production License Certification of Ministry of Industry and Advanced Technology of the
The construction of the Company's parts and supply chain facility in Jinhua,
As previously disclosed, NWTN entered a share subscription agreement (the "Share Subscription Agreement") with China Evergrande New Energy Vehicle Group Limited ("CENEV"), a company listed on the Hong Kong Stock Exchange (HKEX: 0708). On September 28, 2023, CENEV announced that trading of its ordinary shares on the Hong Kong Stock Exchange was suspended. On September 29, 2023, NWTN delivered a letter to CENEV notifying thin NWTN has suspended the performance of its obligations due to significant uncertainties on the likelihood of CENEV's being able to meet various closing conditions under the Share Subscription Agreement. On December 31, 2023, the Company delivered notice to CENEV that that the Company was exercising its right to terminate the Share Subscription Agreement because the conditions to closing had not been satisfied or waived by December 31, 2023.
Results of Operations
The following tables set forth a summary of the Company's unaudited condensed consolidated results of operations for the periods presented. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
For the Six Months Ended | ||||||||
June 30, | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
(In USD in thousands) | ||||||||
Net revenue | $ | 583 | $ | - | ||||
Cost of revenues | (520) | - | ||||||
Gross profit | 63 | - | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (34,325) | (3,809) | ||||||
Selling expenses | (1,224) | - | ||||||
Research and development expenses | (12,818) | (4,282) | ||||||
Total operating expenses | (48,367) | (8,091) | ||||||
Loss from operations | (48,304) | (8,091) | ||||||
Other loss, net: | ||||||||
Other income (expenses), net | 1,148 | (333) | ||||||
Loss on contingency | (23,011) | - | ||||||
Interest income (expenses), net | 631 | (814) | ||||||
Changes in fair value of derivative warrant liabilities | (2) | - | ||||||
Investment loss | (217) | - | ||||||
Total other loss | (21,451) | (1,147) | ||||||
Loss before income tax provision | (69,755) | (9,238) | ||||||
Income tax provision | - | - | ||||||
Net loss | $ | (69,755) | $ | (9,238) | ||||
Net Revenue
Net revenue for the six months ended June 30, 2023 was
Cost of Revenues
The Company recognized cost of revenue of
General and Administrative Expenses
The Company's general and administrative expenses increased by approximately
Selling Expenses
Selling expenses incurred for the six months ended June 30, 2023 were approximately
Research and Development Expenses
The Company's research and development expenses significantly increased by approximately
Loss from Operations
As a result of the foregoing, the Company's loss from operations increased by approximately
Other Income (Expenses), Net
The Company incurred other income, net of
Loss on Contingency
The Company incurred loss on contingency of
Interest Income (Expenses), Net
Interest income, net was
Net Loss
As a result of the foregoing, the Company incurred a net loss of
Liquidity
As of June 30, 2023, the Company had cash and cash equivalents and restricted cash of a total of
The Company's net cash flow used in operating activities for the six months ended June 30, 2023 was
If the Company fails to achieve the anticipated cash flows from operation, the Company may need additional financing to execute its business plan or execute certain policies to controlling expenditures and optimizing operational efficiency to improve the Company's cash flow from operations.
About NWTN
NWTN is a pioneering green energy company dedicated to providing passenger-focused, premium electric vehicle products and green energy solutions to customers worldwide. Headquartered in
Exchange Rate
This press release contains translations of certain Chinese Renminbi ("RMB") and United Arab Emirates Dirham ("AED") amounts into
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are characterized by future or conditional verbs such as "may," "will," "expect," "intend," "anticipate," believe," "estimate" and "continue" or similar words. You should read statements that contain these words carefully because they may discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information.
Forward-looking statements are predictions, projections and other statements about future events (including, without limitation, the Company's goals and strategies and its future business development) that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Actual results may differ significantly from those set forth or implied in the forward-looking statements. Many factors could cause actual future events to differ materially from the forward-looking statements in this press release, including but not limited to the risk factors contained in NWTN's filings with the Securities and Exchange Commission, which are available for review at www.sec.gov. Forward-looking statements speak only as of the date they are made. New risks and uncertainties arise over time, and it is not possible for NWTN to predict those events or how they may affect NWTN. If a change to the events and circumstances reflected in NWTN's forward-looking statements occurs, NWTN's business, financial condition and operating results may vary materially from those expressed in NWTN's forward-looking statements.
Readers are cautioned not to put undue reliance on forward-looking statements, and NWTN assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
NWTN INC.
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS | PAGE(S) | |
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022 | F-2 | |
F-3 | ||
F-4 | ||
F-5 | ||
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | F-6 |
F-1
NWTN INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In U.S. dollars in thousands, except for share and per share data, or otherwise noted) | ||||||||
As of | ||||||||
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 73,292 | $ | 211,864 | ||||
Restricted cash | 165 | 146 | ||||||
Advance to suppliers | 10,423 | 1,440 | ||||||
Inventories | 51,729 | 2,107 | ||||||
Prepaid expenses and other current assets | 54,743 | 24,722 | ||||||
Amounts due from related parties | 320 | - | ||||||
Total current assets | 190,672 | 240,279 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 3,073 | 1,705 | ||||||
Intangible assets, net | 43 | 7 | ||||||
Operating lease right-of-use asset | 4,936 | 5,329 | ||||||
PIPE escrow account | 100,000 | 100,000 | ||||||
Long-term investments | 2,539 | 2,887 | ||||||
Total non-current assets | 110,591 | 109,928 | ||||||
TOTAL ASSETS | $ | 301,263 | $ | 350,207 | ||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | 6,896 | 4,955 | ||||||
Advance from customers | 306 | - | ||||||
Loans from a third party | 15,997 | 16,818 | ||||||
Warrant liabilities | 502 | 500 | ||||||
Amounts due to related parties | 648 | 5,799 | ||||||
Accrued expenses and other current liabilities | 47,104 | 33,511 | ||||||
Lease liabilities, current | 1,445 | 1,550 | ||||||
Total current liabilities | 72,898 | 63,133 | ||||||
Non-current liabilities: | ||||||||
Amounts due to a related party, non-current | 4,682 | 4,922 | ||||||
Lease liabilities, non-current | 3,589 | 3,921 | ||||||
Total non-current liabilities | 8,271 | 8,843 | ||||||
TOTAL LIABILITIES | 81,169 | 71,976 | ||||||
Shareholders' equity | ||||||||
Class A Ordinary shares (par value of | 3 | 3 | ||||||
Class B Ordinary Shares (par value of | 25 | 25 | ||||||
Subscription receivables | - | (576) | ||||||
Additional paid-in capital | 587,952 | 576,271 | ||||||
Accumulated deficit | (360,791) | (292,235) | ||||||
Accumulated other comprehensive loss | (3,598) | (2,685) | ||||||
NWTN Shareholders' equity | 223,591 | 280,803 | ||||||
Non-controlling interests | (3,497) | (2,572) | ||||||
Total Shareholders' equity | 220,094 | 278,231 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 301,263 | $ | 350,207 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
NWTN INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||
(In U.S. dollars in thousands, except for share and per share data, or otherwise noted) | ||||||||
For the six months ended | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Net revenue | $ | 583 | $ | - | ||||
Cost of revenues | (520) | - | ||||||
Gross profit | 63 | - | ||||||
Operating expenses: | ||||||||
General and administrative expenses | (34,325) | (3,809) | ||||||
Selling expenses | (1,224) | - | ||||||
Research and development expenses | (12,818) | (4,282) | ||||||
Total operating expenses | (48,367) | (8,091) | ||||||
Loss from operations | (48,304) | (8,091) | ||||||
Other loss, net: | ||||||||
Other income/(expenses), net | 1,148 | (333) | ||||||
Loss on contingency | (23,011) | - | ||||||
Interest income (expenses), net | 631 | (814) | ||||||
Changes in fair value of derivative warrant liabilities | (2) | - | ||||||
Investment loss | (217) | - | ||||||
Total other loss | (21,451) | (1,147) | ||||||
Loss before income tax provision | (69,755) | (9,238) | ||||||
Income tax provision | - | - | ||||||
Net loss | $ | (69,755) | $ | (9,238) | ||||
Less: Net loss contributed to noncontrolling interests from continuing operations | (1,199) | (268) | ||||||
Net loss attributable to shareholders | (68,556) | (8,970) | ||||||
Other comprehensive loss | ||||||||
Foreign currency translation (loss) gain | (639) | 2,972 | ||||||
Total comprehensive loss | $ | (70,394) | $ | (6,266) | ||||
Loss per ordinary share attributable to shareholders | ||||||||
Basic and Diluted | (0.24) | (0.04) | ||||||
Weighted average number of ordinary shares outstanding | ||||||||
Basic and Diluted | 286,186,007 | 240,029,717 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
NWTN INC. | ||||||||||||||||||||||||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/(DEFICIT) | ||||||||||||||||||||||||||||||||||||||||||||
(In U.S. dollars in thousands, except for share and per share data, or otherwise noted) | ||||||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Subscription | Additional | Accumulated | Accumulated | Total | Non- | Total | ||||||||||||||||||||||||||||||||||||
Share | Amount | Share | Amount | receivables | capital | deficit | income | (deficit)/equity | interests | (deficit)/equity | ||||||||||||||||||||||||||||||||||
USD | USD | USD | USD | USD | USD | USD | USD | USD | ||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 32,715,010 | $ | 3 | 207,314,707 | $ | 21 | $ | (3) | $ | 208,989 | $ | (251,515) | $ | (10,036) | $ | (52,541) | $ | (2,947) | $ | (55,488) | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (8,970) | - | (8,970) | (268) | (9,238) | |||||||||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | - | 2,871 | 2,871 | 101 | 2,972 | |||||||||||||||||||||||||||||||||
Shareholder contribution | - | - | - | - | 3 | - | - | - | 3 | - | 3 | |||||||||||||||||||||||||||||||||
Acquisition of an NCI | - | - | (10) | - | - | (10) | 10 | - | ||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | 32,715,010 | $ | 3 | 207,314,707 | $ | 21 | $ | -- | $ | 208,979 | $ | (260,485) | $ | (7,165) | $ | (58,647) | $ | (3,104) | $ | (61,751) | ||||||||||||||||||||||||
Balance as of December 31, 2022 | 32,715,010 | $ | 3 | 253,470,511 | $ | 25 | $ | (576) | $ | 576,271 | $ | (292,235) | $ | (2,685) | $ | 280,803 | $ | (2,572) | $ | 278,231 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (68,556) | - | (68,556) | (1,199) | (69,755) | |||||||||||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | - | (913) | (913) | 274 | (639) | |||||||||||||||||||||||||||||||||
Exercise of warrants to ordinary shares | - | - | 1,000 | - | 576 | 12 | - | - | 588 | - | 588 | |||||||||||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | 11,669 | - | - | 11,669 | - | 11,669 | |||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | 32,715,010 | $ | 3 | 253,471,511 | $ | 25 | $ | - | $ | 587,952 | $ | (360,791) | $ | (3,598) | $ | 223,591 | $ | (3,497) | $ | 220,094 | ||||||||||||||||||||||||
* | Shares are related to the reverse recapitalization for the business combination and reorganization for the founding shareholders are presented on a retroactive basis to reflect both the reverse recapitalization and the reorganization. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
NWTN INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In U.S. dollars in thousands, except for share and per share data, or otherwise noted) | ||||||||
For the six months ended | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Net cash (used in)/provided by operating activities | $ | (129,732) | $ | 1,764 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (1,949) | - | ||||||
Purchases of intangible asset | (40) | - | ||||||
Loan to a related party | (2,371) | - | ||||||
Net cash used in investing activities | (4,360) | - | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercise of warrants | 588 | - | ||||||
Repayments loan to a related party | (3,037) | (3,174) | ||||||
Convertible bond received from a third party | - | 2,315 | ||||||
Payments of a promissory note | - | (568) | ||||||
Proceeds from issuance of ordinary shares | - | 3 | ||||||
Net cash used in financing activities | (2,449) | (1,424) | ||||||
Effect of exchange rate changes | (2,012) | (59) | ||||||
Net (decrease)/increase in cash and cash equivalents | (138,553) | 281 | ||||||
Cash and cash equivalents and restricted cash, at beginning of the period | 212,010 | 60 | ||||||
Cash and cash equivalents and restricted cash, at end of the period | $ | 73,457 | $ | 341 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW INFORMATION: | ||||||||
Repayments of Magic loan by Mr. Alan Nan Wu | $ | - | $ | 3,467 | ||||
The Group's claim on Tianjin Tuoda transferred to Mr. Alan Nan Wu | $ | (1,628) | $ | - | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | - | $ | 87 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
ICONIQ HOLDING LIMITED ("ICONIQ") was incorporated under the laws of the
On April 15, 2022, ICONIQ entered into a business combination agreement, as amended on September 28, 2022 (the "Business Combination Agreement"), with (i) East Stone Acquisition Corporation, a
Pursuant to the Business Combination Agreement, subject to the terms and conditions set forth therein, at the closing of the transactions contemplated by the Business Combination Agreement (the "Closing"), (a) the First Merger Sub will merge with and into the Company (the "First Merger"), with the Company surviving the First Merger as a wholly-owned subsidiary of Pubco and the outstanding shares of the Company being converted into the right to receive shares of Pubco; and (b) the Second Merger Sub will merge with and into East Stone (the "Second Merger", and together with the First Merger, the "Mergers"), with East Stone surviving the Second Merger as a wholly-owned subsidiary of the Pubco and the outstanding securities of East Stone being converted into the right to receive substantially equivalent securities of the Pubco (the Mergers together with the other transactions contemplated by the Business Combination Agreement and other ancillary documents, the "Transactions").
The Company and its subsidiaries primarily engage in smart electric vehicles design and development through its direct or indirectly owned subsidiaries (collectively, the "Group") in
Reverse recapitalization
On November 11, 2022 (the "Closing Date"), East Stone and NWTN consummated the closing of the Transactions, following the approval at a special meeting of the shareholders of East Stone on November 10, 2022. Following the consummation of the Transactions, ICONIQ became a wholly-owned subsidiary of NWTN and the outstanding shares of ICONIQ were converted into the right to receive shares of NWTN, ICONIQ was determined to be the accounting acquirer given ICONIQ effectively controlled the combined entity after the Transactions. The Transactions are not a business combination because East Stone was not a business. The Transactions are accounted for as a reverse recapitalization, which is equivalent to the issuance of shares by ICONIQ for the net monetary assets of the Company, accompanied by a recapitalization. ICONIQ is determined as the accounting acquirer and the historical financial statements of ICONIQ became the Company's historical financial statements, with retrospective adjustments to give effect of the reverse recapitalization. All of the Class A ordinary shares of ICONIQ that were issued and outstanding immediately prior to the First Merger were cancelled and converted into an aggregate of 32,715,010 Pubco Class A ordinary shares (the "Pubco Class A Ordinary Shares"). All of the Class B ordinary shares of ICONIQ that were issued and outstanding immediately prior to the First Merger were cancelled and converted into an aggregate of 207,314,707 Pubco Class B ordinary shares (the "Pubco Class B Ordinary Shares"), which has been restated retrospectively to reflect the equity structure of the Company. Loss per share is retrospectively restated using the historical weighted-average number of ordinary shares outstanding multiplied by the exchange ratio.
The par value of ordinary shares remained
F-6
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (cont.)
History of the Group and Reorganization
The Company commenced its operations through Tianjin Tianqi Group Co., Ltd ("Tianqi Group") in 2017.
The Group completed a reorganization (the "Reorganization") on January 19, 2022, which involved the following steps:
- Formation of ICONIQ, ICONIQ Motors Limited, ICONIQ Global Limited, ICONIQ (
Tianjin ) Investment Co. Ltd ("WFOE"), ICONIQ Green Technology FZCO ("FZCO"), ICONIQ (Tianjin ) Motors Ltd. and - WFOE obtaining
94.66% of the equity interests of Tianqi Group by increasing in the registered capital of Tianqi Group (the "Capital Increase").
The shareholders and their respective equity interests in the entities remain similar immediately before and after the capital injection in Tianqi Group. Accordingly, the Reorganization has been treated as a corporate restructuring (reorganization) of entities under common control and thus the current capital structure has been retroactively presented in prior periods as if such structure existed at that time, the entities under common control are presented on a combined basis for all periods to which such entities were under common control.
As of June 30, 2023, the details of the Company's subsidiaries are as follows.
Name | Date of | Place of | Percentage of | Principal | ||||
ICONIQ | March 11, 2021 | 100 % | Investment holding | |||||
NWTN Global Energy Co. LTD | April 18, 2023 | 100 % | Business management | |||||
NWTN Green Energy Co. for Managing | May 31, 2023 | 100 % | Business management | |||||
NWTN General Trading Sole Proprietary LLC | February 23, 2023 | 100 % | General trading | |||||
FZCO | March 22, 2022 | 100 % | Business management, operations, commercialization | |||||
NWTN Technology | October 20, 2022 | 100 % | Investment holding | |||||
NWTN Automobile Cars Trading Sole Proprietary LLC ("Cars Trading") | February 23, 2023 | 100 % | Vehicle wholesale and retail | |||||
NWTN Technologies Industries Solo Proprietorship L.L.C. | November 22, 2022 | 100 % | Business management, operations, commercialization | |||||
ICONIQ Motors Limited | March 24, 2021 | 100 % | Investment holding | |||||
ICONIQ Global Limited | April 28, 2021 | 100 % | Investment holding | |||||
Suez Top Ventures Limited | November 25, 2021 | 100 % | Investment holding | |||||
ICONIQ ( | July 15, 2021 | PRC | 100 % | Investment holding | ||||
ICONIQ ( | August 11, 2021 | PRC | 100 % | Investment holding | ||||
NWTN ( | June 14, 2022 | PRC | 100 % | Business management, operations, commercialization | ||||
NWTN Smart Motors ( | December 30, 2022 | PRC | 100 % | Technology development | ||||
Tianjin Automotive Group Co. Ltd | September 5, 2016 | PRC | 95.87 % | Design and technology development | ||||
Shanghai Zunyu Automobile Sales Co., Ltd. ("Shanghai Zunyu") | December 27, 2014 | PRC | 95.87 % | Vehicle wholesale and retail | ||||
Shanghai ICONIQ New Energy Development Co., Ltd. ("Shanghai ICONIQ") | April 25, 2014 | PRC | 95.87 % | Technology development | ||||
Tianjin Tianqi Automobile New Energy Co., Ltd. ("Tianjin Tianqi") | December 7, 2018 | PRC | 95.87 % | Technology development | ||||
East Stone | August 9, 2018 | BVI | 100 % | Investment holding |
F-7
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
2. LIQUIDITY
As of June 30, 2023, the Group had cash and cash equivalents and restricted cash of a total of
The Group's net cash flow used in operating activities for the six months ended June 30, 2023 was
If the Group fails to achieve the anticipated cash flows from operation, the Group may need additional financing to execute its business plan or execute certain policies to controlling expenditures and optimizing operational efficiency to improve the Group's cash flow from operations.
The Group's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation and principles of consolidation
The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and accounting principles generally accepted in
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company's consolidated financial statements for the year ended December 31, 2022. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results for the full year.
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
All intercompany transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
A non-controlling interest is recognized to reflect the portion of the subsidiaries' equity which is not attributable, directly or indirectly, to the Group. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheet and net income and other comprehensive income are attributed to controlling and non-controlling interests respectively.
(b) Use of estimates
The preparation of the unaudited condensed consolidated financial statements in accordance with
(c) Inventories
Inventories, consisting of smart electric vehicles and auto parts purchased by the company, are stated at the lower of cost or net realizable value, with net realized value represented by estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving merchandise and damaged products, which is dependent upon factors such as historical and forecasted consumer demand. No inventory write-down was recorded for the six months ended June 30, 2022 and 2023.
F-8
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(d) Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its intended use. Estimated useful lives are as follows:
Category | Estimated | |
Electronic equipment | 5 years | |
Vehicles | 5 years | |
Production facilities | 10 years | |
Battery and charging swap infrastructure | 5 years | |
Furniture | 5 years | |
Leasehold improvement | 20 years |
Repair and maintenance costs are charged to expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the consolidated statements of income.
(e) Impairment of long-lived assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows.
(f) Fair value measurement
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs are:
- Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
- Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.
- Level 3 — Unobservable inputs which are supported by little or no market activity.
Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach, (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.
The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
F-9
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, amounts due from related parties, advance to suppliers, other receivables included in prepaid expenses and other current assets, long-term investment, accounts payable, loan from a third party, warrant liabilities, amounts due to related parties, other payables included in accrued expenses and other current liabilities. Warrant liabilities and equity investments were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy.
The Group's non-financial assets, such as property and equipment as well as intangible assets, would be remeasured at fair value only if they were determined to be impaired.
The following table details the fair value measurements of liabilities that were measured at fair value on a recurring basis based on the following three-tiered fair value hierarchy per ASC 820, Fair Value Measurement, as of June 30, 2023 and December 31, 2022.
Fair Value Measurement using | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total fair | |||||||||||||
Warrant liabilities: | ||||||||||||||||
As of June 30, 2023 | $ | - | $ | - | $ | 502 | $ | 502 | ||||||||
As of December 31, 2022 | $ | - | $ | - | $ | 500 | $ | 500 | ||||||||
The fair value of the Private Warrants (defined below) and the Representative Warrants (defined below) is considered a Level 3 valuation and is determined using the Black-Scholes valuation model. As of June 30, 2023, the fair value of the Private Warrants and the Representative Warrants were
Private | Representative | |||||||
Fair value as of December 31, 2022 | 101 | 399 | ||||||
Change in fair value | 1 | 1 | ||||||
Fair value as of June 30, 2023 | 102 | 400 | ||||||
The changes for Level 3 items measured at fair value on a recurring basis using significant unobservable inputs are as follows:
Representative | Private | |||||||
Expected term (in years) | 1.55 | 4.37 | ||||||
Volatility | 0.00 | % | 0.00 | % | ||||
Risk-free interest rate | 4.87 | % | 4.16 | % | ||||
Dividend yield | 0.00 | % | 0.00 | % | ||||
F-10
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(g) Warrants
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
Management evaluates all of its financial instruments, including issued warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. In accordance with ASC 825-10 "Financial Instruments", offering costs attributable to the issuance of the warrant liabilities are recognized in the consolidate statement of operations as incurred.
The Group issued 350,000 private warrants ("Private Warrants"), 690,000 representative warrants ("Representative Warrant") and 13,800,000 public warrants ("Public Warrants") in connection with its Transactions. The Public Warrants met the criteria for equity classification and are recorded as additional paid-in capital on the Consolidated Balance Sheet at the completion of the Business Combination. The Private Warrants contain exercise and settlement features that may change with a change in the holder, which precludes the Private Warrants from being indexed to the Company's own stock. For Representative Warrants, net cash settlement is assumed under ASC 815-40 as the Company is required to deliver registered shares to the purchasers of Representative Warrants. Therefore, both the Private Warrants and the Representative Warrants are recognized as derivative liabilities on the Consolidated Balance Sheet at fair value, with subsequent changes in fair value recognized in the Consolidated Statement of Operations and Comprehensive Loss at each reporting date until exercised.
(h) Commitments and contingencies
In the normal course of business, the Group is subject to commitments and contingencies, including operating lease commitments, legal proceedings and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The Group recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Group may consider many factors in making these assessments on liability for contingencies, including historical and the specific facts and circumstances of each matter.
(i) Revenue recognition
The Group's revenues are generated from sales of smart electric vehicles.
The Group recognizes revenues pursuant to ASC 606, Revenue from Contracts with Customers ("ASC 606"). In accordance with ASC 606, revenues from contracts with customers are recognized when control of the promised smart electric vehicles is transferred to the Group's customers, in an amount that reflects the consideration the Group expects to be entitled to in exchange for those products net of business tax and value added tax. Revenue recognition policy for the revenue stream is as follows:
Sales of smart electric vehicles
The Group generates revenue from sales of smart electric vehicles through purchase orders. The Group identified only one performance obligation to provide customers with vehicles, at a fixed price stated in the purchase orders. Full prepayment is required before or upon the Group's delivery of the vehicles. Revenue is recognized at a point of time upon the customer's acceptance of the smart electric vehicles. The Group is deemed as the principal, recognizing revenue on a gross basis as the Group the Group is primary responsible for fulfilling the contract, bears the inventory risk, and has the discretion in establishing the sales price.
In the normal course of business, the Group's warranties are required by the law and related to the risk of purchasing defective products. In addition, the Group would not sell a warranty separately. Accordingly, warranty costs are treated as a cost of fulfillment subject to accrual, rather than a performance obligation. The Group recognize the warranty when actual repair or replacement incur as the amount of loss cannot be reasonably estimated due to the very short experience in sales of vehicles.
F-11
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(j) Share-based compensation
Share-based compensation expense arises from the contingent payment of issuing Class A ordinary shares as contemplated by the Business Combination Agreement. Share-based compensation expense is recognized using the straight-line method over the vested period. All the Group's grants of share-based awards were classified as equity awards and are recognized in the financial statements based on their grant date fair values using quoted market price.
(k) Income taxes
The Group accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The provisions of ASC 740-10-25, "Accounting for Uncertainty in Income Taxes," prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Group's operating subsidiaries in PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than
The Group did not accrue income tax payable for the six months ended June 30, 2023 and 2022. The Group did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line of its unaudited condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2023 and 2022, respectively. The Group does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
(l) Foreign currency transactions and translations
The functional and reporting currency of the Company is the United States Dollar ("US$"). The Company's operating subsidiaries in
The results of operations and the unaudited condensed consolidated statements of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the unaudited condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive loss included in unaudited condensed consolidated statements of changes in shareholders' equity/(deficit). Gains and losses from foreign currency transactions are included in the results of operations.
The following table outlines the currency exchange rates that were used in creating the consolidated financial statements:
As of | As of | |||||||
Balance sheet items, except for equity accounts | 2023 | 2022 | ||||||
US$ against RMB | 7.2513 | 6.8972 | ||||||
US$ against AED | 3.6731 | 3.6722 | ||||||
F-12
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
For the six months ended | ||||||||
Items in the statements of operations and comprehensive loss, and statements of cash flows | 2023 | 2022 | ||||||
US$ against RMB | 6.9283 | 6.4791 | ||||||
US$ against AED | 3.6733 | Not applicable | ||||||
No representation is made that the RMB and AED amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
(m) Loss per share
Basic loss per share is computed by dividing net loss attributable to ordinary shareholders, taking into consideration the deemed dividends to preferred shareholders (if any), by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included in the computation of basic loss per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses.
Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent shares consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such share would be anti-dilutive.
(n) Segment reporting
The Group uses the management approach in determining its operating segments. The Group's chief operating decision maker ("CODM") identified as the Group's Chief Executive Officer, relies upon the consolidated results of operations as a whole when making decisions about allocating resources and assessing the performance of the Group. As a result of the assessment made by CODM, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting.
Geographic information
The majority of the Group's long-lived assets other than financial instruments, including Property and equipment, net, Intangible assets, net, Operating lease right-of-use asset, net, PIPE escrow account and Long-term investments as of June 30, 2023 and December 31, 2022, were located in the Mainland China,
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
$ | 100,258 | $ | 100,293 | |||||
The | 5,850 | 5,484 | ||||||
Mainland | 4,483 | 4,151 | ||||||
Total | $ | 110,591 | $ | 109,928 | ||||
F-13
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(o) Recent accounting pronouncements
The Group is an "emerging growth company" ("EGC") as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments — Credit Losses", which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Further, the FASB issued ASU No. 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2020-02 to provide additional guidance on the credit losses standard. For all other entities, the amendments for ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. The Group have adopted ASU 2016-13 from January 1, 2023. The Company evaluated that the impact of the adoption of this ASU on the Company's unaudited condensed consolidated financial statements was immaterial.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Group does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
4. INVENTORIES
Inventories consisted of the following:
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
Smart electric vehicles | $ | 50,118 | $ | 2,107 | ||||
Auto parts and other materials | 1,611 | - | ||||||
Total | $ | 51,729 | $ | 2,107 | ||||
No inventory write-down was recorded for the six months ended June 30, 2023 and 2022.
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets, consisted of the following:
As of | ||||||||
June 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Prepaid expenses (i) | $ | 22,634 | $ | 9,062 | ||||
Amounts due from an export agent (ii) | 18,425 | - | ||||||
Loan to third parties (ii) | 7,000 | 7,000 | ||||||
Deposit | 1,797 | 1,495 | ||||||
Deductible input VAT | 2,620 | 1,186 | ||||||
Advance to a third-party individual (iii) | 1,732 | 2,000 | ||||||
Advance to staff for business operations and travels | 487 | 165 | ||||||
Receivable from a third party (iv) | - | 3,800 | ||||||
Others | 48 | 14 | ||||||
Total | $ | 54,743 | $ | 24,722 | ||||
(i) | Prepaid expenses primarily consisted of directors' and officers' insurance expenses to be amortized within a year and prepaid commission expenses for financing and marketing services, advance payment for the potential investment or acquisition as of June 30, 2023 and December 31, 2022. |
F-14
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS (cont.)
(ii) | In April 2023, NWTN Zhejiang entered into a vehicle sales agreement with Jizhida'an (Jinhua) Technology Co., Ltd (the "Jizhida'an"), pursuant to which the vehicles being sold would be transferred to China National Vehicles IMP. & EXP. Co., Ltd, a third party export agent (the "Vehicles IMP. & EXP"), and be purchased by FZCO through another vehicle sales agreement. These sales agreements were procedural in nature, in order to facilitate the process of vehicles exportation from Mainland China to the Group's factory in the |
(ii) | In November and December 2022, the Group provided an interest-free loan of |
(iii) | In November 2022, the Group engaged a shareholder, who held a |
(iv) | In December 2022, the Group engaged a third party for marketing services with a total consideration of |
The Group did not record bad debt expense for the six months ended June 30, 2023 and 2022.
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
Vehicles | $ | 834 | $ | 515 | ||||
Electronic equipment | 486 | 178 | ||||||
Production facilities | 1,201 | 377 | ||||||
Battery and charging swap infrastructure | 106 | 67 | ||||||
Furniture | 384 | 46 | ||||||
Leasehold improvement | 248 | - | ||||||
Construction in process | 64 | 602 | ||||||
Less: accumulated depreciation | (250) | (80) | ||||||
Property and equipment, net | $ | 3,073 | $ | 1,705 | ||||
Depreciation expenses were
F-15
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
7. PIPE ESCROW ACCOUNT
In September 2022, NWTN and Al Ataa Investment LLC ("PIPE Investor" or the "Pledgee"), a company incorporated in Abu Dhabi Global Market entered into a PIPE Subscription Agreement for PIPE Investor investing
(a) | To cover Pledgee's PIPE investment in NWTN by reimbursing the Pledgee the difference between the sales price of Pledgee's NWTN stocks in open market and the | |
(b) | To award Pledgee's PIPE investment in NWTN by guaranteeing the Pledgee a minimum |
In addition, NWTN, FIRST ABU DHABI BANK PJSC (the "Escrow Agent"), and an affiliate entity of PIPE Investor entered into an Escrow Agreement. Pursuant to the Escrow Agreement, NWTN should open an account (the "Escrow Account") and credit the sum of
Key terms of Escrow Agreement were as follows:
(a) | Escrow Account is a non-interest-bearing account. | |
(b) | Escrow Amount would be transferred a minimum | |
(c) | NWTN's market share price (VWAP of 10 days,1 month, 3 months) and PIPE Investor's share selling plan for the following 6 months, if any, is to be evaluated on a quarterly basis. At times of market price of NWTN's shares drop below | |
(d) | 3 months after (b) above is executed, the escrow account will be reviewed. If the market value of NWTN's shares has recovered, funds over the needed | |
(e) | Escrow Agent shall release the Escrow Amount and transfer such amount less any amounts which Escrow Agent is entitled to retain to NWTN in 3 business days after November 9, 2024. |
As of December 31, 2023, NWTN's market share price was lower than
F-16
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
8. LOANS FROM A THIRD PARTY
As of June 30, 2023 and December 31, 2022, loans from a third party consisted of the principal and legal fees for the loans from Tianjin Yizhong Jinshajiang Equity Investment Fund Partnership ("Yizhong"). In 2016 and 2017, Tianqi Group entered into two convertible debt agreements with Yizhong. According to the agreements, Yizhong provided loans of
In 2022, Yizhong and the Group reached an instalment plan which allowed the Group to repay the outstanding obligations totalling
Tianqi Group executed the instalment plan and repaid the accrued interests and part of the legal fees in the amount of
9. WARRANTS
In connection with the Business Combination, the Company assumed 14,840,000 warrants from East Stone (the "Warrants"), which consisted of 13,800,000 Public Warrants, 350,000 Private Warrants and 690,000 Representative Warrants. The Public Warrants met the criteria for equity classification and the Private Warrants and Representative Warrants are classified as liability.
The Warrants became exercisable on the later of (a) the completion of the Business Combination or (b) 12 months from the closing of the initial public offering of East Stone ("IPO") (February 24, 2020). The Warrants will expire on dates ranging from January 16, 2025 to November 11, 2027.
Public Warrants
As of June 30, 2023 and December 31, 2022, the Company had 12,524,392 and 12,526,392 Public Warrants outstanding, respectively. Each whole Public Warrant entitles the registered holder to purchase one-half share of the Company's Class B ordinary share at a price of
The Company may redeem the Public Warrants in whole and not in part, at a price of
- at any time while the Warrants are exercisable,
- upon not less than 30 days' prior written notice of redemption to each Warrant holder,
F-17
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
9. WARRANTS (cont.)
- if, and only if, the reported last sale price of the ordinary shares equals or exceeds
US per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading days period ending on the third trading business day prior to the notice of redemption to Warrant holders, and,$18.00 - if, and only if, there is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such Warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
If the Company calls the Warrants for redemption as described above, management will have the option to require all holders that wish to exercise the Warrants to do so on a "cashless basis," as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants.
Detail related to Public Warrant activity for the six months ended June 30, 2023, was as follows:
Public Warrants | Number of | Weighted | ||||||
Balances as of December 31, 2022 | 12,526,392 | $ | 11.50 | |||||
Exercised | (2,000) | 11.50 | ||||||
Balances as of June 30, 2023 | 12,524,392 | $ | 11.50 | |||||
For the six months ended June 30, 2023, 2,000 Public Warrants were exercised and were paid in full with the gross proceeds of
Warrant liabilities
As of June 30, 2023 and December 31, 2022, the Company had 350,000 and 350,000 Private Warrants, and 690,000 and 690,000 Representative Warrants outstanding, respectively. Each whole Private Warrants entitles the registered holder to purchase one-half share of the Company's Class B ordinary share at a price of
The Private Warrants are identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Warrants and the ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Representative Warrants are different from Public and Private Warrants. The exercise price of Representative Warrants is
As of June 30, 2023, the remaining contractual term for the outstanding Private Warrants and Representative Warrants to purchase our ordinary shares were 4.4 years and 1.6 years, respectively.
F-18
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
10. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following:
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
Amounts due to an export agent (i) | $ | 17,089 | $ | - | ||||
Accrued expense (ii) | 3,893 | 18,639 | ||||||
Payroll payable | 3,632 | 9,185 | ||||||
Individual income tax payable (iii) | 114 | 5,115 | ||||||
Contingent liabilities of Jinghong Dispute (iv) | 21,986 | - | ||||||
Borrowing from a third party | 272 | 490 | ||||||
Others | 118 | 82 | ||||||
Total | $ | 47,104 | $ | 33,511 | ||||
(i) | Amounts due to an export agent represent payables to Vehicles IMP. & EXP with respect to vehicle exportation from Mainland China to the |
(ii) | As of June 30, 2023 and December 31, 2022, accrued expenses mainly consisted of unpaid offering cost of |
(iii) | As of December 31, 2022, the Group settled the payroll payable accumulated from 2019 to 2022 which resulted in an increase in individual income tax payable. For the six months ended June 30, 2023, the Group settled most of the individual income tax payable. |
(iv) | On May 18, 2022, Tianjin Jinghong Investment Development Group Co., Ltd. ("Jinghong") filed proceedings with the Group. And the verdict was issued on July 20, 2023 that the Group was ordered to bear a total amount of approximately |
Employee Lawsuits
As of December 31, 2022, the balances of payroll associated with employee lawsuits were
11. LEASES
The balances for the operating leases where the Company is the lessee are presented as follows:
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
Operating lease right-of-use assets | $ | 4,936 | $ | 5,329 | ||||
Lease liabilities – current | $ | (1,445) | $ | (1,550) | ||||
Lease liabilities – non-current | (3,589) | (3,921) | ||||||
Total operating lease liabilities | $ | (5,034) | $ | (5,471) | ||||
F-19
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
11. LEASES (cont.)
The components of operating lease expense are as follows:
For the six months ended | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Operating lease expense | $ | 726 | $ | 230 | ||||
Short-term lease expense | 1,465 | 206 | ||||||
Total lease expense | $ | 2,191 | $ | 436 | ||||
Short-term leases included lease of
Both operating lease expense and short-term lease expense are recognized as general and administrative expenses.
Other information related to operating leases where the Company is the lessee is as follows:
As of | ||||
Weighted-average remaining lease term (in years) | 3.76 | |||
Weighted-average discount rate | 4.26 | % | ||
Because most of the leases do not provide an implicit rate of return, the Company used the incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
The following is a schedule of future minimum payments under the Company's operating leases as of June 30, 2023:
For the years ended December 31, | Amount | |||
Remainder of 2023 | $ | 622 | ||
2024 | 1,503 | |||
2025 | 1,329 | |||
2026 | 1,909 | |||
Total lease payments | 5,363 | |||
Less: imputed interest | (329) | |||
Total operating lease liabilities, net of interest | $ | 5,034 | ||
F-20
NWTN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
12. SHARE-BASED COMPENSATION
Earnout shares
In connection with the Business Combination, each Class A ordinary share of ICONIQ that was issued and outstanding before the Transactions was cancelled and converted into the right to receive
The Earnout Shares will be issued to Muse Limited (the company held by Mr. Alan Nan Wu, Chief Executive Officer and Chairman of the Company) when the Company delivers 12 vehicles on an aggregate basis or would be adjusted if the Company has delivered less than 12 vehicles by the end of 2023.
The Earnout Shares are determined as compensation, which is a transaction separate from the reverse recapitalization. In addition, the issuance of Earnout Shares does not meet any condition to be classified as a liability under ASC 718, thus it should be classified as an equity financial instrument, and measured at fair value using the quoted market price on grant date, November 11, 2022, which is
As of June 30, 2023 and December 31, 2022, the performance condition was not met. The Company evaluated and considered that the performance condition of delivering 12 vehicles would probably be achieved by the end of 2023. Thus, the Company should recognize compensation cost for awards with performance conditions. The requisite service period should be the shortest of the explicit, implicit or derived service periods, which is determined as the period from November 11, 2022, the grant date, to December 31, 2023.
Share-based expenses recognized in general and administrative expenses were
Subsequently in October 2023, the performance condition of delivering 12 vehicles is achieved and the Earnout Shares was issued to Muse Limited accordingly.
13. TAXATION
The Company was incorporated in the
The Company's subsidiaries incorporated in the
The Company's subsidiaries incorporated in
Hong Kong
The Company's subsidiaries incorporated in Hong Kong are subjected to Hong Kong profits tax. With effect from April 1, 2018, a two-tiered profits tax rate regime applies. The profits tax rate for the first
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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13. TAXATION (cont.)
Mainland
Generally, the Company's WFOE and subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of
The Company's subsidiary, which incorporated in
For the six months ended June 30, 2023 and 2022, the Group recognized nil and nil income tax benefit, respectively.
The Group does not file combined or consolidated tax returns, therefore, losses from individual subsidiaries of the Group may not be used to offset other subsidiaries' earnings within the Group. Valuation allowance is considered on each individual subsidiary basis. Full valuation allowance of
14. ORDINARY SHARES
The Company is authorized to issue a total of 100,000,000 Class A ordinary shares of a par value of
In April 2023, the Company issued 1,000 Class B ordinary shares for exercise of warrants for the exercise price of
As of June 30, 2023, 32,715,010 Class A ordinary shares were issued and outstanding, 253,471,511 Class B ordinary shares were issued and outstanding.
15. NON-CONTROLLING INTERESTS
As a result of the Reorganization of the Company that was completed on January 19, 2022 (see Note 1), Tianqi Group and its subsidiaries' financial statements have been prepared on a consolidated basis by applying the pooling of interests method as if the Reorganization had been completed at the beginning of the earliest reporting period, and the equity interests held by the original shareholders are recognized as non-controlling interests as if the Capital Increase were occurred on January 1, 2020.
As of June 30, 2023 and December 31, 2022, the non-controlling interests were
As of June 30, 2023 and December 31, 2022, non-controlling interests in the consolidated balance sheet was
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16. RELATED PARTY TRANSACTIONS
(a) The table below sets forth the related parties and their relationships with the Group, with which the Group has transactions:
No. | Name of Related Parties | Relationship | ||
1 | ICONIQ ( | Controlled by the Company's Chief Executive Officer and Chairman, Mr. Alan Nan Wu ( | ||
2 | Magic Minerals Limited ("Magic") | Shareholder of the Company | ||
3 | My Car ( | A company which Mr. Alan Nan Wu held | ||
4 | Shenzhen Yinghehuicheng Investment Center (Limited Partnership) ("Shenzhen Yinghehuicheng") | A company controlled by a shareholder of the Company, and also a non-controlling shareholder of Tianqi Group | ||
5 | Tianjin Tuoda Enterprise Management Service Co., Ltd. ("Tianjin Tuoda") | A company controlled by a group of shareholders of the Company, and also a non-controlling shareholder of Tianqi Group | ||
6 | Mr. Alan Nan Wu | Shareholder and Chief Executive Officer and Chairman of the Company | ||
7 | Vision Path Holdings Limited ("Vision Path") | Shareholder of the Company | ||
8 | Shanghai OBS Culture and Technology Co., Ltd. ("Shanghai OBS") | A company in which the Group holds a |
(b) The Group had the following significant related party transactions for the six months ended June 30, 2023 and 2022:
For the six months ended | ||||||||
2023 | 2022 | |||||||
Nature | (Unaudited) | |||||||
Expense paid by the related parties on behalf of the Group | ||||||||
– My Car (i) | $ | - | $ | (5,087) | ||||
– Mr. Alan Nan Wu (ii) | - | (3,744) | ||||||
– ICONIQ Institute | - | (38) | ||||||
Repayments to related parties | ||||||||
– Magic (iii) | - | 6,641 | ||||||
– Mr. Alan Nan Wu (ii) | 3,037 | - | ||||||
– Shanghai OBS | 70 | |||||||
Loan to related parties | ||||||||
– Mr. Alan Nan Wu (ii) | 740 | |||||||
– Tianjin Tuoda (iv) | 1,631 | |||||||
Loan from related parties | ||||||||
– Mr. Alan Nan Wu (ii) | (11) | |||||||
Magic loan repaid by related parties on behalf of the Group | ||||||||
– Mr. Alan Nan Wu (iii) | - | (3,467) | ||||||
Collection of loan to a related party | ||||||||
– Tianjin Tuoda (iv) | - | 5,985 | ||||||
– ICONIQ Institute | - | 93 | ||||||
Interest expenses of loan from a related party | ||||||||
– Magic | - | 87 | ||||||
Advance petty cash to a related party | ||||||||
– My Car (i) | - | 9,023 | ||||||
The Group's claim on Tianjin Tuoda transferred to Mr. Alan Nan Wu | ||||||||
– Tianjin Tuoda (iv) | (1,628) | |||||||
Promotion service provided by a related party | ||||||||
– Shanghai OBS | $ | (70) | $ | - | ||||
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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16. RELATED PARTY TRANSACTIONS (cont.)
(c) The Group had the following related party balances with the related parties mentioned above:
As of | ||||||||
June 30, | December 31, | |||||||
(Unaudited) | ||||||||
Amounts due from related parties: | ||||||||
– Mr. Alan Nan Wu(iv) | $ | 320 | $ | - | ||||
Total | $ | 320 | $ | - | ||||
Amounts due to related parties, current: | ||||||||
– Mr. Alan Nan Wu | $ | - | $ | 5,114 | ||||
– Shenzhen Yinghehuicheng | 648 | 681 | ||||||
– Tianjin Tuoda | - | 4 | ||||||
Amounts due to related parties, non-current: | ||||||||
– Vision Path Holdings Limited (v) | 4,682 | 4,922 | ||||||
Total | $ | 5,330 | $ | 10,721 | ||||
(i) | In the first half of 2022, My Car paid expenses on behalf of the Group totaled |
(ii) | In the first half of 2022, Mr. Alan Nan Wu paid loan and expenses on behalf of the Group totaled |
(iii) | In 2021, Magic provided short-term loans totaled |
(iv) | Previously, the Group provided several short-term interest-free loans to Tianjin Tuoda to support its normal operations, which was repaid in full in 2021 and May 2022. During the six months ended June 30, 2023, the Group provided interest-free loans totaled |
(v) | In August 2022, Vision Path, the Group and Hainan Union Management Co., Ltd ("Hainan Union") entered into a share transfer agreement. Under the agreement, Vision Path would sell its shares of the Group to Hainan Union with an amount of |
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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17. COMMITMENTS AND CONTINGENCIES
Contingencies
The Group is, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of the management, while the outcome of any such claims and disputes cannot be predicted with certainty, its ultimate liability in connection with these matters is not expected to have a material adverse effect on the Group's results of operations.
Through the issuance date of this report, except for below the Jinghong Dispute and Loop Capital Petition, the Company is not aware of any pending or threatened claims and litigation as of June 30, 2023 and through the issuance date of these unaudited condensed consolidated financial statements.
Jinghong Dispute
On December 3, 2018, Tianjin Jinghong Investment Development Group Co., Ltd. ("Jinghong") and Tianqi Group entered into a cooperation agreement (the "2018 Cooperation Agreement"), under which Jinghong agreed to acquire the
On May 21, 2019, Jinghong and Tianqi Group entered into an updated cooperation agreement (the "2019 Cooperation Agreement"), the purpose of which was partly to amend and restate some of the material terms of the 2018 Cooperation Agreement, under which Tianqi Group agreed to cooperate with Jinghong in the field of new energy vehicles through a newly-established joint venture after Jinghong acquires the equity interest of Meiya Automobile. Under the same agreement, Tianqi Group agreed that after Jinghong signed an equity transfer agreement with Tianjin Benefo to acquire the
Jinghong demanded Tianqi Group to pay for the RMB 97 million equity transfer price on August 21, 2019, but Tianqi Group did not comply. On April 14, 2021, Jinghong issued a notice to Tianqi Group to terminate the 2018 Cooperation Agreement and the 2019 Cooperation Agreement. On May 18, 2022, Jinghong filed a lawsuit to the People's Court of Jinghai District,
There was a verdict on July 20, 2023 that the Group was ordered to bear the following obligation: (a) equity transfer consideration of
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
17. COMMITMENTS AND CONTINGENCIES (cont.)
Loop Capital Dispute
On May 3, 2023, a winding up petition was brought by Loop Capital Markets LLC ("Loop Capital") against ICONIQ before Cayman Grand Court, claiming a total amount of
Shareholder Guarantee
On August 18, 2022, ICONIQ, Vision Path and Hainan Union entered into a share transfer agreement (the "Share Transfer Agreement"). Under the Share Transfer Agreement, Vision Path transferred 1,000,000 NWTN Class B ordinary shares to Hainan Union with consideration of
The Redemption Event was defined in the Share Transfer Agreement as (i) 12 months from the effective date, which referred to November 14, 2022, the average closing market price of the Company is lower than
Vision Path has pledged 2.6 million Class B ordinary shares ("Pledged Shares") to Hainan Union. The Pledged Shares could be transferred to Hainan Union as disbursement when the Redemption Event occurs.
Vision Path applied the Purchase Price as a two-year interest-free loan to ICONIQ to support the Group's normal operations. In connection therewith, ICONIQ has provided a guarantee with joint liability of Vision Path's contingent repayment for the shortfall of
As of the issuance date of the unaudited condensed consolidated financial statements, as market value of the Pledged Shares could cover the shortfall of
Puluo Debt
During 2018, Tianqi Group entered into a series of agreements with Taizhou Puluo New Energy Automobile Equity Investment Enterprise (Limited Partnership) ("Puluo") and had received several loans from Puluo totaled
In December 2021, to settle the Puluo Debts, Tianqi Group entered into a series of supplemental agreements (the "New Agreements") with Puluo, Guozhong Tianhong Asset Management (
According to the New Agreements, in the event that the Group fails to obtain approval from the SEC and complete a business combination before December 31, 2022, Guozhong Tianhong is obligated to transfer both the Puluo Debts and its equity interest of Tianqi Group to Tianjin Tuoda. Subsequently, on January 1, 2023, Tianjin Tuoda would assume responsibility for repaying the Puluo Debts to Puluo while also acquiring the equity interests of Tianqi Group. However, the consummation of a business combination before December 31, 2022 would require Guozhong Tianhong to pay back Puluo Debts in two installments within a period of two years from the date of the business combination. Additionally, within this same timeframe following completion of the business combination, Tianjin Tuoda will make two installment payments towards indemnifying Puluo (referred to as "Indemnification"). On November 11, 2022, the Company consummated the business combination with East Stone.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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17. COMMITMENTS AND CONTINGENCIES (cont.)
According to the New Agreements, the Group assumes joint and several liability (the "Joint and Several Liability") for both the repayment of the Puluo Debts and the Indemnification from Guozhong Tianhong or Tianjin Tuoda (the "Co-obligator") to Puluo. Additionaly, Mr. Alan Nan Wu assumes joint and several liability for the repayment of the Indemnification from Tianjin Tuoda to Puluo.
In 2022, eight shareholders of the Group signed letters of support to demonstrate their commitment to providing financial support to Tianjin Tuoda for its indebtedness in the event that the Group fails to complete a business combination, as well as assuming joint and several liability of the Group for the repayment of both the Puluo Debts and the Indemnification. In 2023, (i) two shareholders of the Group signed letters of support to commit their financial support to Tianjin Tuoda and Guozhong Tianhong for the indebtedness, as well as assuming the joint and several liability for the repayment of both the Puluo Debts and the Indemnification, and (ii) Guozhong Tianhong signed a letter to commit its repayment of the debt to Puluo based on its holdings of NWTN ordinary shares (collectively, the "Shareholders' Support").
As of December 31, 2021 and 2022 and June 30, 2023, the Puluo Debts payable by Guozhong Tianhong were
The management assessed the Joint and Several Liability in accordance with ASC 405-40. As of December 31, 2021, December 31, 2022 and June 30, 2023, considering that the arrangement did not specify the Company's payment obligations, no additional payments are anticipated on behalf of the co-obligator with the Shareholders' Support. Consequently, no liability was recognized as of December 31, 2021 and 2022 and June 30, 2023.
Investment Commitment
The Group is obligated to invest into Hainan Union an amount of
18. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through January 4, 2024, the date of issuance of the unaudited condensed consolidated financial statements. Except for the events mentioned below, the Company did not identify any subsequent events with material financial impact on the Company's unaudited condensed consolidated financial statements.
Share Subscription Agreement with China Evergrande Group
On August 14, 2023, the Company entered into a share subscription agreement (the "Share Subscription Agreement") with China Evergrande Group, China Evergrande New Energy Vehicle Group Limited (the "Target"), together with its subsidiaries. Under the Share Subscription Agreement, the Company agreed to subscribe for 6,177,106,404 of newly issued ordinary shares of the Target (the "Subscription Shares") for an aggregate subscription price of
On August 14, 2023, NWTN (
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In
18. SUBSEQUENT EVENTS (cont.)
Loan with Related Party
In August 2023, the Company entered into a loan agreement of
Loan and Pledge
On September 7, 2023, the Group together with Mr. Alan Nan Wu entered into a loan agreement with ICONIC Investment One SPV RSC Ltd (the "Lender"), a shareholder of the Company, for an amount of
Purchase of Vehicles
From July 1, 2023 to December 31, 2023, the Group entered into several vehicle purchase agreements with vehicle manufacturers to purchase a total number of 122 vehicles with approximately
Sales of Vehicles
From July 1, 2023 to December 31, 2023, the Group entered into several vehicle sales agreements with customers with an aggregate order quantity of 758 units with approximately
Additionally, on September 19, 2023, the Group entered into a framework vehicle sales agreement with a customer, who placed minimum order quantity of 50,000 units within 3 years from the date of contract signing, and each order not to be less than 100 units of vehicles. The unit price of the vehicle was not set in the framework agreement but would be determined for each order by the Group after taking the market supply situation, actual purchase volume and the Group's stock level into consideration. The parties may mutually agree and sign a written agreement to terminate this framework agreement in advance.
W Motors Transaction
On December 28, 2023, NWTN entered into a binding term sheet (the "Term Sheet") with W Motors Automotive Group Holding Limited ("W Motors"). Pursuant to the Term Sheet, NWTN has agreed to issue (i) 308,171 restricted Class B ordinary shares to W Motors in settlement of certain outstanding invoices from W Motors and (ii) 2,070,000 restricted Class B ordinary shares to W Motors in exchange for 107,646 ordinary shares of W Motors, which is equivalent to
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SOURCE NWTN
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