Zapp(ZAPP) - 2024 Q2 - Quarterly Report

Unaudited Condensed Consolidated Interim Financial Statements Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended March 31, 2024, Zapp EV reported a net loss of $5.03 million, an improvement from an $8.63 million loss in the prior year period, with basic and diluted loss per share also improving to $(1.61) from $(3.61) Profit or Loss Summary | Metric | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Revenue | — | — | | Gross profit | — | — | | Operating loss | (3,134,110) | (3,863,505) | | Loss before tax | (5,033,129) | (8,630,224) | | Loss for the period | (5,033,129) | (8,630,224) | | Basic and diluted EPS | (1.61) | (3.61) | | Total comprehensive loss | (5,291,977) | (8,646,159) | Unaudited Condensed Consolidated Statement of Financial Position As of March 31, 2024, total assets decreased to $3.83 million from $7.34 million at September 30, 2023, primarily due to a significant reduction in non-current assets, particularly derivative assets, while total liabilities increased slightly to $26.84 million, and total equity remained negative at $(23.01) million Financial Position Summary | Metric | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------- | :------------------- | :--------------------- | | Total current assets | 1,954,813 | 2,651,149 | | Total non-current assets | 1,873,682 | 4,690,674 | | Total assets | 3,828,495 | 7,341,823 | | Total current liabilities | 24,883,689 | 23,698,195 | | Total non-current liabilities | 1,955,110 | 2,081,245 | | Total liabilities | 26,838,799 | 25,779,440 | | Total equity | (23,010,304) | (18,437,617) | - Derivative assets - non-current decreased from $2,660,568 at September 30, 2023, to $0 at March 31, 2024, significantly impacting total non-current assets[4] Unaudited Condensed Consolidated Statement of Changes in Equity The company's total equity decreased from $(18.44) million at October 1, 2023, to $(23.01) million at March 31, 2024, primarily due to the loss for the period and foreign currency translation differences, while share capital and share premium increased due to new share issuances Equity Changes (October 1, 2023 to March 31, 2024) | Metric | At Oct 1, 2023 (USD) | Loss for the period (USD) | Other comprehensive loss (USD) | Shares issued (USD) | Share-based payments (USD) | At Mar 31, 2024 (USD) | | :-------------------------- | :------------------- | :------------------------ | :----------------------- | :------------------ | :---------------------- | :-------------------- | | Share capital | 5,790 | — | — | 463 | — | 6,260 | | Share premium | 120,966,057 | — | — | 1,713,521 | — | 122,679,578 | | Accumulated deficit | (229,646,272) | (5,033,129) | — | — | — | (234,679,401) | | Foreign currency translation reserve | (263,227) | — | (258,848) | — | — | (522,075) | | Total Equity | (18,437,617) | (5,033,129) | (258,848) | 1,713,984 | 43,246 | (23,010,304) | - Shares issued for cash, net of issuance costs, amounted to $626,000[5] - Shares issued in relation to the SEPA commitment fee amounted to $50,000[5] Unaudited Condensed Consolidated Statement of Cash Flows For the six months ended March 31, 2024, the company reported net cash used in operating activities of $(1.52) million, a significant improvement from $(3.55) million in the prior year, with net cash from financing activities at $1.20 million, leading to a net decrease in cash and cash equivalents of $(0.34) million Cash Flow Summary | Metric | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Net cash used in operating activities | (1,524,744) | (3,554,604) | | Net cash used in investing activities | (9,624) | (91,791) | | Net cash from financing activities | 1,199,300 | 4,929,743 | | Net (decrease) / increase in cash | (335,068) | 1,283,348 | | Cash and cash equivalents at period end | 484,972 | 3,390,274 | - Drawdown of loans, net of issuance costs, was $284,151 in 2024, significantly lower than $6,008,981 in 2023[9] - Proceeds from the issuance of convertible loan notes, net of issuance costs, was $421,500 in 2024[9] - Proceeds from the issuance of shares was $626,000 in 2024[9] Notes to the Condensed Consolidated Interim Financial Statements 1. Reporting Entity and Business Combination Zapp Electric Vehicles Group Ltd. (Zapp EV), incorporated in the Cayman Islands, is engaged in the design, development, and delivery of electric vehicles, having consummated a business combination on April 28, 2023, involving Zapp UK and CIIG Capital Partners II, Inc., which was accounted for as a reverse acquisition under IFRS 2 - Zapp EV's principal activity is the design, development, and delivery of electric vehicles[10] - The Business Combination with CIIG II was consummated on April 28, 2023, and was classified as a reverse acquisition under IFRS 2[12][17] - Zapp EV Ordinary Shares and Public Warrants commenced trading on Nasdaq under "ZAPP" and "ZAPPW" post-Business Combination[15] 2. Basis of Preparation The unaudited condensed consolidated interim financial statements are prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the annual report on Form 20-F for the year ended September 30, 2023, with significant accounting policies remaining unchanged and no new standards having a material impact - Financial statements are prepared under IAS 34 and consistent with policies from the September 30, 2023 annual report[18][28] - No new standards, interpretations, or amendments adopted in the period had an impact on the financial statements[29] 2.1. Going Concern The company's accumulated deficit, net loss, and net cash used in operating activities, coupled with a low cash balance ($0.5 million) against high trade payables ($20.7 million), raise substantial doubt about its ability to continue as a going concern, which management plans to alleviate through a Standby Equity Purchase Agreement (SEPA) providing up to $9.5 million liquidity (with $8.3 million remaining as of the report date), additional share/debt issuances, and seeking extensions from suppliers, aiming to commence production and commercial launch in summer 2024 - Substantial doubt about going concern due to accumulated deficit, net loss, negative operating cash flow, and low cash ($0.5 million) vs. high payables ($20.7 million)[21][22] - Access to up to $9.5 million liquidity via SEPA with Yorkville Advisors, with $8.3 million remaining as of the report release date[23] - Raised $2.7 million since October 1, 2023, through share and debt issuance, with plans for further fundraising and supplier extensions[24] - Management believes funds are sufficient to commence production and launch commercially in summer 2024, but success is not guaranteed[25][26] 2.2. New Standards, Interpretations and Amendments Adopted by the Group The Group adopted new standards effective for accounting periods starting after October 1, 2022, but none of these amendments had a material impact on the unaudited condensed consolidated financial statements - No new standards, interpretations, or amendments adopted in the period had an impact on the financial statements[29] 3. Reverse Stock Split On April 11, 2024, shareholders approved a 20:1 reverse stock split, consolidating 20 ordinary shares into one post-RSS share, which retroactively adjusted the number of ordinary shares, warrants, and share options presented in the financial statements - A 20:1 reverse stock split was approved on April 11, 2024, consolidating 20 ordinary shares into one[30][31] - The impact of the reverse stock split has been retroactively applied to the financial statements[32] Impact of Reverse Stock Split | Instrument | Number Prior to RSS | Number Post RSS | Exercise Price Prior to RSS (USD) | Exercise Price Post RSS (USD) | | :---------------------- | :------------------ | :---------------- | :------------------------------ | :---------------------------- | | Ordinary shares | 62,601,280 | 3,130,164 | | | | Warrants | 26,437,500 | 1,321,882 | 11.50 | 230.00 | | Warrants | 2,280,979 | 114,049 | 0.79 | 15.80 | | Warrants | 1,140,490 | 57,025 | 4.49 | 89.80 | | Share options | 1,026,441 | 51,323 | 0.000022 | 0.00045 | | Share options | 1,123,382 | 56,179 | 0.78 | 15.69 | | Share options | 127,164 | 6,366 | 2.13 | 42.60 | | Management earnout shares | 8,518,290 | 425,915 | | | | Sponsor earnout shares | 754,687 | 37,735 | | | | SAP compensation | 856,720 | 34,186 | | | 4. Finance Income and Expenses For the six months ended March 31, 2024, total finance income decreased to $574 from $4,811 in the prior year, while total finance expense decreased to $(193,503) from $(344,509), primarily due to a significant reduction in interest on convertible notes Finance Income and Expenses | Metric | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------- | :--------------------------------- | :--------------------------------- | | Total finance income | 574 | 4,811 | | Interest on convertible notes | (28,121) | (317,866) | | Interest on loans and borrowings | (147,489) | (630) | | Total finance expense | (193,503) | (344,509) | 5. Other (Expense)/Income The company reported an "Other expense" of $(1,706,090) for the six months ended March 31, 2024, a significant improvement from $(4,427,021) in the prior year, mainly driven by the absence of large expenses related to the Business Combination ($4.58 million in 2023) and fair value movements, which included $2.36 million in losses from Forward Purchase Agreements but gains on warrants and embedded derivatives Other (Expense)/Income | Metric | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Fair value movements | (1,974,401) | 27,138 | | Foreign exchange movements | 268,273 | 121,255 | | Expenses relating to Business Combination | — | (4,576,853) | | Total Other (expense)/income | (1,706,090) | (4,427,021) | - Fair value movements in 2024 included $2,360,568 losses on the revaluation and termination of Forward Purchase Agreements, $353,168 gains on warrants, and $33,000 gains on embedded derivative liabilities[34] 6. Earnings Per Share Basic and diluted loss per share improved to $(1.61) for the six months ended March 31, 2024, from $(3.61) in the prior year, reflecting a reduced net loss, with potentially dilutive instruments being anti-dilutive due to net losses and thus excluded from diluted EPS calculation Earnings Per Share | Metric | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Loss for the period | (5,033,129) | (8,630,224) | | Basic weighted average ordinary shares | 3,130,164 | 2,388,355 | | Basic and diluted loss per ordinary share | (1.61) | (3.61) | - Potentially dilutive instruments (share options, warrants, management earnout shares, SAP earnout shares, sponsor earnout shares, and shares issuable upon conversion of loan notes) totaling 2,221,378 shares were anti-dilutive and excluded from diluted loss per share computation[38] 7. Property, Plant and Equipment The carrying amount of property, plant and equipment decreased to $510,877 at March 31, 2024, from $590,795 at October 1, 2023, primarily due to depreciation of $95,177 during the period Property, Plant and Equipment Carrying Amounts | Category | At Oct 1, 2023 (USD) | At Mar 31, 2024 (USD) | | :-------------------------- | :------------------- | :------------------- | | Leasehold and improvements | 63,986 | 54,684 | | Furniture, fixtures & office equipment | 109,908 | 103,376 | | Plant equipment | 264,675 | 228,811 | | Vehicles | 152,226 | 124,006 | | Total | 590,795 | 510,877 | - Depreciation for the period was $95,177[40] 8. Intangible Assets The carrying amount of intangible assets decreased to $980,394 at March 31, 2024, from $1,042,880 at October 1, 2023, mainly due to amortization of $68,977, with development costs, primarily for prototype vehicles, amortized over 10 years Intangible Assets Carrying Amounts | Category | At Oct 1, 2023 (USD) | At Mar 31, 2024 (USD) | | :-------------------------- | :------------------- | :------------------- | | Development costs | 882,026 | 820,113 | | Patents and trademarks | 47,144 | 44,308 | | Software | 113,710 | 115,973 | | Total | 1,042,880 | 980,394 | - Amortization for the period was $68,977[41] - Capitalized development costs, representing prototype vehicles, are amortized over 10 years, with 6.5 years remaining as of March 31, 2024[41] 9. Inventories Total inventories increased slightly to $588,981 at March 31, 2024, from $566,226 at September 30, 2023, with raw materials being the largest component and a provision for obsolete inventory of $83,328 maintained Inventories | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :---------------- | :------------------- | :--------------------- | | Raw materials | 450,878 | 432,744 | | Work in progress | 61,876 | 58,633 | | Finished goods | 76,227 | 74,849 | | Total | 588,981 | 566,226 | - Raw materials are stated net of an $83,328 provision for obsolete inventory[43] 10. Trade and Other Receivables Total trade and other receivables decreased to $880,860 at March 31, 2024, from $1,261,700 at September 30, 2023, primarily due to reductions in prepayments and other receivables, while income tax receivable remained constant Trade and Other Receivables | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------- | :------------------- | :--------------------- | | Income tax receivable | 460,738 | 460,738 | | Other taxation and social security receivable | 139,120 | 123,214 | | Prepayments | 120,697 | 396,190 | | Other receivables | 160,305 | 281,558 | | Total | 880,860 | 1,261,700 | 11. Trade and Other Payables Total trade and other payables increased to $20,744,737 at March 31, 2024, from $19,884,517 at September 30, 2023, with a significant portion ($18.05 million) relating to professional fees and excise taxes from the Business Combination, which the company has agreed to delay settling Trade and Other Payables | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------------- | :------------------- | :--------------------- | | Accounts payable and accrued liabilities | 20,522,910 | 19,754,628 | | Other taxation and social security payable | 207,121 | 114,590 | | Deferred income | 14,706 | 15,299 | | Total | 20,744,737 | 19,884,517 | - $18,045,105 of accounts payable and accrued liabilities are for professional fees and excise taxes related to the Business Combination, with delayed settlement agreements[45] 12. Loans and Borrowings Total loans and borrowings increased to $5,181,414 at March 31, 2024, from $4,736,583 at September 30, 2023, driven by new convertible notes and promissory notes, including one issued to a related party Loans and Borrowings | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------------- | :------------------- | :--------------------- | | Current loans and borrowings | 3,889,845 | 3,713,717 | | Non-current loans and borrowings | 1,291,569 | 1,022,866 | | Total | 5,181,414 | 4,736,583 | - A new promissory note of $274,962 was issued to a director, bearing 15.0% interest and repayable in January 2026[47] Standby Equity Purchase Agreement (SEPA) On February 10, 2024, the company entered into a SEPA with YA II PN, LTD, allowing it to sell up to $10.0 million of ordinary shares, receiving a $1.5 million pre-paid advance in two tranches in exchange for convertible promissory notes, which were fully repaid by June 13, 2024, through share issuances - SEPA with YA II PN, LTD allows the company to sell up to $10.0 million in ordinary shares[49] - Received a $1.5 million pre-paid advance in exchange for convertible promissory notes, disbursed in March and April 2024[50] - The pre-paid advance was fully utilized and repaid by June 13, 2024, through the issuance of 906,219 ordinary shares[51] 13. Leases The carrying amount of right-of-use assets decreased to $328,983 at March 31, 2024, from $359,057 at October 1, 2023, primarily due to depreciation of $38,334, while lease liabilities also decreased to $345,831 from $396,734 over the same period Right-of-Use Assets Carrying Amounts | Category | At Oct 1, 2023 (USD) | At Mar 31, 2024 (USD) | | :-------------------------- | :------------------- | :------------------- | | Leasehold property | 271,295 | 253,648 | | Furniture, fixtures & office equipment | 7,800 | 7,000 | | Vehicles | 79,962 | 68,335 | | Total | 359,057 | 328,983 | - Depreciation expense on right-of-use assets for the period was $38,334[53] - Lease liabilities decreased from $396,734 at October 1, 2023, to $345,831 at March 31, 2024[53] 14. Share Capital As of March 31, 2024, the company had 3,130,164 ordinary shares outstanding, with share capital of $6,260 and share premium of $122,679,578, reflecting new share issuances for employee options, cash, SEPA commitment fees, and MSA compensation during the period, with a 20:1 reverse stock split approved post-period end - As of March 31, 2024, 3,130,164 ordinary shares were outstanding[57] - New shares were issued for employee share options (99,793 shares), cash (122,704 shares), SEPA commitment fee (9,091 shares), and MSA compensation (3,606 shares)[57][58] - 1,321,882 warrants remain outstanding, expiring April 28, 2028, with an exercise price of $230.00 per share[59] 15. Share-Based Payments The Group recognized a total share-based payment charge of $43,247 for the six months ended March 31, 2024, significantly lower than $249,087 in the prior year, primarily relating to informal share option arrangements and MSA compensation, with no new share options, awards, or RSUs granted during the period Share-Based Payment Charge | Category | 6 Months Ended Mar 31, 2024 (USD) | 6 Months Ended Mar 31, 2023 (USD) | | :-------------------------- | :--------------------------------- | :--------------------------------- | | Informal share option arrangements | 13,602 | 249,087 | | MSA compensation | 29,645 | — | | Total | 43,247 | 249,087 | - No new share options, share awards, or RSUs were granted during the period[60] - 99,793 ordinary shares were issued on February 23, 2024, upon exercise of an employee share option agreement[57][62] 16. Financial Instruments The company's financial instruments include financial assets at amortized cost (lease deposits) and financial liabilities at amortized cost (payables, loans, lease liabilities) and fair value through profit or loss (warrants, convertible loan notes), with the fair value of public warrants and embedded derivatives measured using Level 1 inputs, while private placement warrants use Level 3 inputs - Financial assets at amortized cost primarily consist of lease deposits ($37,513)[64] - Financial assets at fair value through profit or loss (Forward Purchase Agreement) decreased from $2,660,568 to $0, as the agreement was terminated[64][65] - Total financial liabilities increased to $26,481,014 at March 31, 2024, from $25,490,973 at September 30, 2023[66] - Warrants accounted for as financial liabilities generated $353,168 in revaluation gains for the period[66] 16.1. Financial Assets Total financial assets decreased significantly to $37,513 at March 31, 2024, from $2,697,446 at September 30, 2023, primarily due to the termination of the Forward Purchase Agreement, which previously represented a significant non-current derivative asset Financial Assets | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------------- | :------------------- | :--------------------- | | Financial assets at amortized cost (Lease deposits) | 37,513 | 36,878 | | Financial assets at fair value through profit or loss (Forward purchase agreement) | — | 2,660,568 | | Total financial assets | 37,513 | 2,697,446 | - The Forward Purchase Agreement was terminated on January 23, 2024, eliminating the associated derivative asset[65] 16.2. Financial Liabilities Total financial liabilities increased to $26,481,014 at March 31, 2024, from $25,490,973 at September 30, 2023, including a significant portion of accounts payable and accrued liabilities, as well as an increase in current loans and borrowings, including new convertible loan notes Financial Liabilities | Category | March 31, 2024 (USD) | September 30, 2023 (USD) | | :-------------------------------- | :------------------- | :--------------------- | | Financial liabilities at amortized cost | 26,050,154 | 24,887,945 | | Financial liabilities at fair value through profit or loss | 430,860 | 603,028 | | Total financial liabilities | 26,481,014 | 25,490,973 | - Current loans and borrowings increased to $4,254,148 from $3,713,718, including $500,000 in convertible loan notes[66] - Non-current loans and borrowings increased to $1,291,569 from $1,022,866, including new promissory notes to related parties[66] 16.3. Fair Value Management assessed that the fair value of other receivables and trade and other payables approximates their carrying value due to short-term maturities, using Level 3 valuation inputs, while public warrants and embedded derivatives in convertible loan notes are measured using Level 1 inputs, and private placement warrants use Level 3 inputs - Fair value of short-term receivables and payables approximates carrying value (Level 3 inputs)[68] - Public warrants and embedded derivatives use Level 1 inputs; private placement warrants use Level 3 inputs for fair value measurement[69] 17. Contingencies Zapp UK is currently involved in a civil action filed by SPAC Advisory Partners LLC for alleged non-payment of $3.63 million in advisory fees related to the Business Combination, with Zapp UK believing it has meritorious defenses and intending to vigorously defend the matter - Zapp UK is a defendant in a civil action seeking $3.63 million for alleged unpaid advisory services related to the Business Combination[71] - Zapp UK believes it has meritorious defenses to the claims and intends to vigorously defend the matter[71] 18. Subsequent Events Key subsequent events include the approval of a 20:1 reverse stock split on April 11, 2024, the receipt of $1,140,178 under the SEPA and issuance of 990,909 ordinary shares between April 23 and June 17, 2024, fully utilizing the pre-paid advance, and the expiration of 171,074 Zapp EV Exchange Warrants on May 28, 2024 - A 20:1 reverse stock split was approved on April 11, 2024[72] - Received $1,140,178 under the SEPA and issued 990,909 ordinary shares between April 23 and June 17, 2024, fully utilizing the pre-paid advance[72][73] - 171,074 Zapp EV Exchange Warrants expired on May 28, 2024[73]