Chijet Motor pany(CJET) - 2024 Q2 - Quarterly Report

Condensed Interim Consolidated Financial Statements Overview of Chijet Motor's interim financial performance and position for the period ended June 30, 2024 Condensed Interim Consolidated Balance Sheets Total assets decreased to $500,313 thousand by June 30, 2024, with shareholders' deficit increasing to $(108,407) thousand Balance Sheet Summary | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---| | Total Assets | 500,313 | 536,451 | | Total Liabilities | 608,720 | 615,325 | | Total Shareholders' Deficit | (108,407) | (78,874) | - Current assets decreased from $90,828 thousand at December 31, 2023, to $77,725 thousand at June 30, 2024, primarily due to a significant reduction in cash and cash equivalents[5] - Current liabilities remained high at $523,606 thousand as of June 30, 2024, slightly down from $525,054 thousand at December 31, 2023[5] Condensed Interim Consolidated Statements of Income Net loss improved to $(31,523) thousand for H1 2024, with increased revenues and reduced operating expenses Income Statement Summary | Metric | Six Months Ended June 30, 2024 (US$'000) | Six Months Ended June 30, 2023 (US$'000) | |:---|:---|:---| | Total Revenues | 3,407 | 2,615 | | Cost of Revenues | (8,172) | (3,410) | | Cost of Revenues - Idle Capacity | (7,567) | (16,725) | | Gross Loss | (12,332) | (17,520) | | Total Operating Expenses | 14,651 | 34,975 | | Loss from Operations | (26,983) | (52,495) | | Net Loss | (31,523) | (57,591) | | Net Loss Attributed to Ordinary Shareholders | (21,622) | (39,826) | | Basic and Diluted Net Loss Per Share | (3.93) | (7.71) | - Total revenues increased by 30.3% from $2,615 thousand in H1 2023 to $3,407 thousand in H1 2024, driven by higher vehicle sales[9] - Cost of revenues – idle capacity decreased significantly by 54.7% from $(16,725) thousand in H1 2023 to $(7,567) thousand in H1 2024, contributing to a reduced gross loss[9] Condensed Interim Consolidated Statements of Comprehensive Income Comprehensive loss improved to $(29,533) thousand for H1 2024, driven by net loss and foreign currency adjustments Comprehensive Income Summary | Metric | Six Months Ended June 30, 2024 (US$'000) | Six Months Ended June 30, 2023 (US$'000) | |:---|:---|:---|\n| Net Loss | (31,523) | (57,591) | | Other Comprehensive Income, Net of Tax: | | | | Changes in Post-Employment and Termination Benefits | (94) | (22) | | Foreign Currency Adjustments | 2,084 | 1,688 | | Comprehensive Loss | (29,533) | (55,925) | | Comprehensive Loss Attributable to Ordinary Shareholders | (21,152) | (39,492) | - Foreign currency adjustments contributed positively to other comprehensive income, increasing from $1,688 thousand in H1 2023 to $2,084 thousand in H1 2024[15] Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Shareholders' deficit increased from $(78,874) thousand to $(108,407) thousand due to net loss and currency adjustments Shareholders' Equity Summary | Metric | January 1, 2024 (US$'000) | June 30, 2024 (US$'000) | |:---|:---|:---|\n| Total Shareholders' Deficit | (78,874) | (108,407) | | Accumulated Deficit | (314,235) | (335,857) | | Accumulated Other Comprehensive Loss | 6,100 | 6,570 | | Non-controlling Interest | 53,960 | 45,579 | - The accumulated deficit increased by $21,622 thousand, reflecting the net loss attributable to ordinary shareholders for the six months ended June 30, 2024[18] - Foreign currency translation adjustment positively impacted equity by $2,084 thousand during the six months ended June 30, 2024[18] Condensed Interim Consolidated Statements of Cash Flows Net cash used in operating activities decreased to $(16,261) thousand, with lower investing and higher financing cash flows Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2024 (US$'000) | Six Months Ended June 30, 2023 (US$'000) | |:---|:---|:---|\n| Net Cash Used in Operating Activities | (16,261) | (27,050) | | Net Cash Used in Investing Activities | (1,061) | (4,005) | | Net Cash Provided by Financing Activities | 3,164 | 3,985 | | Net Change in Cash, Cash Equivalents, and Restricted Cash | (14,158) | (27,070) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | 1,457 | 21,785 | - The reduction in net cash used in operating activities was primarily driven by a lower net loss and favorable changes in certain operating assets and liabilities[24] - Cash, cash equivalents, and restricted cash at the end of the period significantly decreased from $21,785 thousand in H1 2023 to $1,457 thousand in H1 2024[25] Notes to Condensed Interim Consolidated Financial Statements Detailed notes providing context and breakdown for the condensed interim consolidated financial statements 1. Organization and Business Overview Chijet Motor, a NEV and traditional vehicle enterprise, faces going concern doubts due to losses and deficit - Chijet Motor is a Cayman Islands exempted company, with main operating entities including Shandong Baoya New Energy Vehicle Co., Ltd. and FAW Jilin Automobile Co., Ltd., focusing on NEVs and traditional fuel vehicles in China[27] - A 1-for-30 reverse stock split became effective on July 8, 2024, reducing issued ordinary shares from 160,707,171 to 5,471,661 and retroactively adjusting all share-related information[28][29] - The company consummated a reverse recapitalization on June 1, 2023, with Jupiter Wellness Acquisition Corp. (JWAC), where Chijet Motor was treated as the accounting acquirer for financial reporting purposes[30][36] - The company incurred net losses of $(31,523) thousand and $(57,591) thousand for the six months ended June 30, 2024 and 2023, respectively, and had a working capital deficit of approximately $(445,881) thousand as of June 30, 2024, raising substantial doubt about its going concern ability[46] (a) Principal activities Chijet Motor focuses on new energy and traditional fuel vehicles in China through key operating entities - Chijet Motor Company, Inc. (Chijet Motor) is a high-tech enterprise focused on the development, manufacture, sales, and service of new energy vehicles (NEV) and traditional fuel vehicles in China[27] - Key operating entities include Shandong Baoya New Energy Vehicle Co., Ltd. and FAW Jilin Automobile Co., Ltd[27] (b) Reverse Stock Split A 1-for-30 reverse stock split became effective July 8, 2024, retroactively adjusting all share data - A 1-for-30 reverse stock split became effective on July 8, 2024, converting every 30 outstanding ordinary shares into one[28] - The number of authorized shares increased from 500,000,000 to 10,000,000,000, while issued shares decreased from 160,707,171 to 5,471,661[28] - All share and share-related information in the financial statements has been retroactively adjusted to reflect the split[29] (c) Reverse Recapitalization Chijet Motor completed a reverse recapitalization with JWAC on June 1, 2023, treated as the accounting acquirer - On June 1, 2023, Chijet Motor consummated a business combination with Jupiter Wellness Acquisition Corp. (JWAC) through a merger, with JWAC becoming a wholly-owned subsidiary of Chijet Motor[30][31] - The transaction was accounted for as a 'reverse recapitalization' under U.S. GAAP, with Chijet Motor treated as the accounting acquirer, based on its shareholders holding a majority of voting power and its management representing the ongoing operations[36] - Net assets acquired from JWAC amounted to US$4,490 thousand, recorded as an increase in additional paid-in capital[38] (d) History of the Company and Reorganization The company's business originated in 2009, followed by a reorganization and subsidiary acquisitions by 2022 - The business originated under Shandong Baoya and its subsidiaries in April 2009[39] - Chijet Inc. completed a reorganization by June 2022, establishing several subsidiaries in BVI, Hong Kong, and PRC, and acquiring an 85.172% stake in Shandong Baoya[40][41][43] (e) Liquidity and going concern Recurring net losses and a significant working capital deficit raise substantial doubt about going concern - The Company incurred net losses of US$31,523 thousand and US$57,591 thousand for the six months ended June 30, 2024 and 2023, respectively[46] - As of June 30, 2024, the Company had a working capital deficit of approximately US$445,881 thousand and a cash outflow from operating activities of approximately US$16,261 thousand for the six months ended June 30, 2024[46] - Management is evaluating strategies including financing plans, increasing sales, expanding overseas markets, and implementing cost controls, but substantial doubt exists regarding the Company's ability to continue as a going concern[47] 2. Summary of Significant Accounting Policies Outlines significant accounting policies including basis of presentation, consolidation, estimates, and revenue recognition - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for new or revised financial accounting standards, which may affect comparability with other public companies[51][52] - Revenue is recognized when control of goods or services is transferred to customers, either over time or at a point in time, with specific policies for vehicle sales and parts/accessories[100][101][107][109] - Government grants are recognized as other income when conditions are met, or systematically over the depreciable lives of related assets, with US$1,706 thousand recognized in H1 2024[119][121][122][123] (a) Basis of presentation Financial statements are prepared under U.S. GAAP, with the company qualifying as an 'emerging growth company' - The consolidated financial statements are prepared in accordance with U.S. GAAP[50] - The Company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements[51] - The Company has elected not to opt out of the extended transition period for new accounting standards, which means it adopts new standards at the same time as private companies[52] (b) Principles of consolidation Consolidated financial statements include Chijet Motor and its controlled subsidiaries, with inter-company eliminations - Consolidated financial statements include Chijet Motor and its subsidiaries, where Chijet Motor directly or indirectly controls more than half of the voting power[53] - All inter-company transactions and balances are eliminated in consolidation[54] (c) Use of estimates Financial statement preparation involves management estimates for fair value, warranty costs, and impairment assessments - Preparation of financial statements requires management to make estimates and assumptions, including fair value of acquired net assets, performance obligations, warranty costs, inventory valuation, impairment assessments, and deferred tax assets[56] (d) Functional currency and foreign currency translation Reporting currency is US$, with PRC subsidiaries using RMB, and translation adjustments in OCI - The Company's reporting currency is US$, while functional currencies of PRC subsidiaries are RMB[58] - Foreign currency translation adjustments are recorded in other comprehensive income or loss[60] (e) Fair value of financial instruments Fair value is determined using a hierarchy of inputs, with carrying values approximating fair values - Fair value is determined using a hierarchy (Level I, II, III) based on observable and unobservable inputs, and approaches like market, income, and cost[63][64][65][66] - The carrying values of the Company's financial instruments (cash, receivables, payables, etc.) approximated their fair values as of June 30, 2024, and December 31, 2023[68] (f) Cash and cash equivalents Cash and cash equivalents include unrestricted cash and demand deposits with maturities of three months or less - Cash and cash equivalents include cash and demand deposits with original maturities of three months or less, all unrestricted[69] (g) Restricted cash Restricted cash includes amounts frozen by court order and deposits for notes payable, totaling $387 thousand - Restricted cash represents cash frozen due to a court order and deposits for notes payable[70] Restricted Cash Breakdown | Type | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Frozen amount | 104 | 1,378 | | Security amount | 283 | - | | Total restricted cash | 387 | 1,378 | (h) Current expected credit losses The company adopted CECL on January 1, 2023, estimating allowance for credit losses based on various factors - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, using the modified retrospective transition method[73] - Allowance for credit losses is estimated based on historical losses, market conditions, customer financial condition, and payment patterns[74][75] Allowance for Credit Losses | Metric | Six Months Ended June 30, 2024 (US$'000) | Six Months Ended June 30, 2023 (US$'000) | |:---|:---|:---|\n| Balance as of January 1 | 129 | 73 | | Reversal | (8) | - | | Balance as of June 30 | 121 | 73 | (i) Inventory Inventories are valued at the lower of cost or net realizable value, with write-downs for excess or obsolete items - Inventories are stated at the lower of cost or net realizable value, with cost calculated on a weighted average basis[80] - Write-downs are recorded for excess or obsolete inventories based on demand forecasts and estimated selling prices[80] (j) Property, plant and equipment, net Property, plant and equipment are stated at cost less depreciation and impairment, with significant assets pledged - Property, plant and equipment are stated at cost less accumulated depreciation and impairment, depreciated using the straight-line method over estimated useful lives (e.g., Buildings: 20 years, Machinery: 3-25 years)[81][82] - Gain on disposal of property, plant and equipment was US$1,271 thousand for H1 2024, significantly higher than US$21 thousand for H1 2023[85] (k) Intangible assets, net Intangible assets include finite-lived software/patents and indefinite-lived manufacturing permission/trademark - Intangible assets include computer software, patents (finite lives), and automotive manufacturing permission and trademark (indefinite lives)[86][87] - Finite-lived intangible assets are amortized using the straight-line method (e.g., Patent: 5-10 years, Computer software: 2-10 years)[86] - Indefinite-lived intangible assets are tested for impairment annually or when circumstances indicate, with no impairment recognized for H1 2024 and H1 2023[87] (l) Land use rights, net Land use rights are lease prepayments amortized over 40-50 years, with a portion pledged as collateral - Land use rights are lease prepayments to local government authorities, identified as operating lease right-of-use assets under ASC 842[88] - Amortization is provided on a straight-line basis over 50 and 40 years[88] (m) Long-term investments Long-term investments primarily consist of a 30% equity interest in Baosteel, accounted for using equity method - Long-term investments primarily consist of a 30% equity interest in Jilin FAW Baosteel Auto Steel Parts Co., Ltd. (Baosteel)[89] - The Company uses the equity method of accounting for investments where it has significant influence but not control[91] - No impairment loss was recorded for long-term investments during H1 2024 and H1 2023[92] (n) Goodwill Goodwill from the FAW Jilin acquisition is tested for impairment annually, with no impairment recognized - Goodwill is initially measured at cost, representing the excess of purchase price over the fair value of net assets acquired[93] - The Company adopted ASU 2017-04, simplifying the goodwill impairment test by comparing the fair value of each reporting unit to its carrying amount[94] (o) Impairment of long-lived assets Long-lived assets are evaluated for impairment when circumstances indicate carrying amounts may not be recoverable - Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be fully recoverable[95] - An impairment loss is recognized if the sum of expected future undiscounted cash flows is less than the carrying value, based on the excess of carrying value over fair value[95] (p) Warranties A warranty reserve is accrued for vehicles sold, based on estimated repair costs, recorded as cost of sales - The Company accrues a warranty reserve for vehicles sold, based on estimated costs to repair or replace items under warranties and recalls[97] - Warranty expense is recorded as a component of cost of sales[97] Accrued Warranty Rollforward | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Accrued warranty - beginning of period/year | 204 | 319 | | Warranty costs incurred | 46 | (106) | | Accrued warranty - end of period/year | 244 | 204 | (q) Revenue recognition Revenue is recognized upon transfer of control of goods or services, allocated based on standalone selling prices - Revenue is recognized when control of goods or services is transferred to customers, either over time or at a point in time[100][101] - For contracts with multiple performance obligations, the overall contract price is allocated based on relative standalone selling prices[103] Revenue by Type | Revenue Type | H1 2024 (US$'000) | H1 2023 (US$'000) | |:---|:---|:---|\n| Vehicle sales (Third Parties) | 3,161 | 2,041 | | Sales of vehicle parts and accessories (Related Parties) | 245 | 508 | | Total Revenues | 3,407 | 2,615 | (r) Cost of revenues Cost of revenue includes direct costs, manufacturing overhead, warranty reserves, and inventory write-downs - Cost of revenue includes direct parts, material, labor, manufacturing overhead, and reserves for estimated warranty costs[112] - It also includes charges to write-down inventory when its carrying value exceeds net realizable value or for obsolete/excess inventory[112] (s) Cost of revenues – idle capacity Idle capacity costs, expensed as incurred, significantly decreased from US$16,725 thousand in H1 2023 - Idle capacity costs are production-related costs in excess of charges allocated to finished goods, expensed in the period incurred[113] - Idle capacity expenses decreased from US$16,725 thousand in H1 2023 to US$7,567 thousand in H1 2024[113] (t) Research and development expenses All R&D costs are expensed as incurred, decreasing significantly to US$1,078 thousand in H1 2024 - All R&D costs are expensed as incurred, primarily consisting of employee compensation, design and development, materials, and supplies[115] - R&D expenses decreased significantly from US$5,504 thousand in H1 2023 to US$1,078 thousand in H1 2024[115] (u) Selling, general and administrative expenses Selling, general, and administrative expenses decreased, with G&A seeing a substantial reduction in H1 2024 - Selling and marketing expenses were US$738 thousand in H1 2024, down from US$782 thousand in H1 2023[116] - General and administrative expenses decreased from US$28,689 thousand in H1 2023 to US$12,835 thousand in H1 2024[117] (v) Employee benefits PRC employees participate in government-mandated defined contribution plans, with total expenses decreasing - PRC full-time employees participate in government-mandated defined contribution plans for pension, injury, maternity, medical, and housing benefits[118] - Total employee benefit expenses were approximately US$1,999 thousand in H1 2024, down from US$2,915 thousand in H1 2023[118] (w) Government grants Government grants are recognized as other income when conditions are met or over asset depreciable lives - Subsidies from local governments are recognized as other income when conditions are met or over the depreciable lives of related assets[119] Government Grants Received | Type of Subsidies | H1 2024 (US$'000) | H1 2023 (US$'000) | |:---|:---|:---|\n| Compensating for expenses or losses | 1,426 | 1,542 | | Related to fixed assets | 280 | 281 | | Total | 1,706 | 1,823 | (x) Income taxes Income taxes are accounted for under ASC 740, with PRC subsidiaries subject to a 25% CIT rate - Income taxes are accounted for under the asset and liability method (ASC 740), recognizing deferred tax assets and liabilities for temporary differences[124] - PRC subsidiaries are subject to a Corporate Income Tax (CIT) statutory rate of 25%[132] - No significant interest and penalties associated with uncertain tax positions were recognized for H1 2024 and H1 2023[126] (y) Warrants Warrants are classified as equity if they meet specific physical or net-share settlement criteria - Warrants are classified as equity if they require physical or net-share settlement, or if the Company has a choice of net-cash or share settlement[127][128] - Warrants indexed to the Company's stock and meeting equity classification requirements under ASC 815-40 are initially measured at fair value, with no subsequent changes recognized[128] (z) Value-added tax The company is subject to PRC VAT rates of 13%, 6%, and 9% for various sales and services - The Company is subject to statutory VAT rates of 13%, 6%, and 9% for revenue from sales of vehicles, spare parts, and other services in PRC, respectively[130] (aa) Statutory reserves PRC subsidiaries are required to appropriate after-tax profits to non-distributable statutory reserve funds - PRC subsidiaries are required to make appropriations to non-distributable reserve funds (statutory surplus reserve, staff bonus and welfare fund) from after-tax profit determined under PRC GAAP[131][132] - The general reserve fund can offset losses or increase capital but is not distributable as cash dividends[133] (bb) Comprehensive income (loss) Comprehensive loss includes net loss, foreign currency translation adjustments, and actuarial loss - Comprehensive loss includes net loss and other comprehensive loss, primarily foreign currency translation adjustments and actuarial loss from defined contribution plans[135] (cc) Leases The company adopted ASC 842, with short-term operating leases having no ROU assets or lease liabilities - The Company adopted ASC 842, Leases, on January 1, 2022, using a modified retrospective transition approach and elected practical expedients[136] - As of June 30, 2024, and December 31, 2023, right-of-use assets and corresponding lease liabilities for existing operating leases were nil due to their short-term nature[137] - Land use rights are separately presented as operating lease right-of-use assets[139] (dd) Loss per share Basic and diluted loss per share are calculated based on net loss attributable to ordinary shareholders - Basic loss per share is calculated by dividing net loss attributable to ordinary shareholders by weighted-average ordinary shares outstanding[140] - Potentially dilutive shares are excluded from diluted loss per share calculation when their effect is anti-dilutive, resulting in basic and diluted loss per share being the same for the periods presented[142] - Earnout Shares issued to Chijet Inc. sellers are classified in equity and do not affect earnings per share calculation as of June 30, 2024[150] (ee) Segment reporting The company operates as one segment, with all long-lived assets and sales primarily located in the PRC - The Company operates in one operating segment, with the Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)[151] - All long-lived assets and sales are substantially located in and derived from the PRC, so no geographical segments are presented[151] 3. Recent Accounting Pronouncements Details recently adopted and issued accounting pronouncements, with no material impact expected from new ASUs - The Company adopted ASU 2020-06 (Accounting for Convertible Instruments and Contracts in an Entity's Own Equity) in fiscal 2024, with no significant impact on consolidated financial statements[153] - ASU 2022-06 (Deferral of the Sunset Date of Reference Rate Reform) was adopted in fiscal 2024, also without a material impact[154] - The Company will adopt ASU 2023-07 (Improvements to Reportable Segment Disclosures) in fiscal 2024 and does not expect a material impact[156] - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for annual reporting periods beginning after December 15, 2025, and the Company is evaluating its effect[157] 4. Concentration of Risk Exposed to credit, customer concentration, and foreign currency exchange rate risks due to PRC operations - Credit risk is concentrated in cash, cash equivalents, restricted cash, accounts and notes receivable, and accounts and notes payable, with most cash held in PRC banking institutions[159] - As of June 30, 2024, four third-party customers accounted for 20%, 20%, 12%, and 11% of total accounts and notes receivable, respectively[161] - During H1 2024, two customers accounted for 23% and 11% of total revenue, respectively[162] - The Company is exposed to foreign currency exchange rate risk as PRC operations are in RMB, while overseas financing is in US$[163] 5. Accounts and Notes Receivable, Net Accounts and notes receivable, net, decreased from $2,241 thousand to $1,241 thousand by June 30, 2024 Accounts and Notes Receivable Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Accounts receivable | 3 | 20 | | Notes receivable | 1,238 | 2,221 | | Less: allowance for credit losses | - | - | | Accounts and notes receivable, net | 1,241 | 2,241 | - Notes receivable, which are non-interest bearing and due within six to twelve months, decreased by $983 thousand[165] - The Company reported no allowance for credit losses as of June 30, 2024, and December 31, 2023, based on its CECL model[166] 6. Inventory, Net Net inventory increased from $14,785 thousand to $16,719 thousand, driven by finished goods Inventory Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Finished goods | 6,316 | 3,665 | | Raw materials | 15,803 | 15,720 | | Work-in-process | 6,963 | 7,517 | | Inventory, subtotal | 29,082 | 26,902 | | Less: inventory impairment provision | (12,363) | (12,117) | | Inventory, net | 16,719 | 14,785 | - Finished goods increased by $2,651 thousand (72.3%) from December 31, 2023, to June 30, 2024[167] - Inventory write-downs to net realizable value were US$1,772 thousand for H1 2024, significantly higher than US$362 thousand for H1 2023[168] 7. Other Current Assets Other current assets increased from $9,951 thousand to $13,028 thousand due to prepayments and VAT input Other Current Assets Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Prepayments for materials | 10,104 | 7,509 | | Deductible value-added tax input | 627 | 207 | | Other receivables | 1,715 | 1,662 | | Net balance | 13,028 | 9,951 | - Prepayments for materials increased by $2,595 thousand (34.6%) from December 31, 2023, to June 30, 2024[170] - Deductible value-added tax input increased by $420 thousand (202.9%) due to China's VAT rebates for eligible industries[170] 8. Property, Plant and Equipment, Net Net property, plant and equipment decreased to $166,413 thousand, partly pledged as collateral for borrowings Property, Plant and Equipment Summary | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Property, plant and equipment, subtotal (at cost) | 548,715 | 565,359 | | Less: accumulated depreciation | (379,298) | (380,090) | | Less: accumulated impairment | (3,004) | (3,892) | | Property, plant and equipment, net | 166,413 | 181,377 | - Depreciation expenses for H1 2024 were US$10,605 thousand, a decrease from US$18,329 thousand in H1 2023[173] - Carrying amounts of buildings, molds, tooling, machinery, and land use rights totaling US$90,424 thousand were pledged as collateral by FAW Jilin, Xiangyang Yazhi, and Dezhou Yarui as of June 30, 2024[174][175][176] - Machinery and equipment of Bijie Yabei that were frozen were sold to repay a loan, with no frozen assets remaining as of June 30, 2024[177] 9. Intangible Assets, Net Net intangible assets decreased to $124,464 thousand, mostly indefinite-lived trademark and manufacturing licenses Intangible Assets Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Total finite-lived intangible assets (net) | 18 | 33 | | Total indefinite-lived intangible assets (net) | 124,446 | 127,378 | | Total intangible assets (net) | 124,464 | 127,411 | - Indefinite-lived intangible assets, primarily trademark and manufacturing licenses, account for over 99% of total net intangible assets[178] - Amortization expenses for intangible assets were US$14 thousand for H1 2024, down from US$41 thousand for H1 2023[180] 10. Land Use Rights, Net Net land use rights decreased to $121,696 thousand due to amortization, with a significant portion pledged Land Use Rights Summary | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Land use right (cost) | 149,678 | 153,204 | | Less: accumulated amortization | (27,982) | (27,055) | | Land use right, net | 121,696 | 126,149 | - Amortization expenses for land use rights were US$1,552 thousand for H1 2024, a slight decrease from US$1,671 thousand for H1 2023[184] - Land use rights with a carrying amount of US$45,519 thousand were pledged to lenders by Xiangyang Yazhi and FAW Jilin as of June 30, 2024[183] 11. Operating Leases (Excluding Land Use Rights) Operating leases are primarily short-term, with no ROU assets or lease liabilities recorded on the balance sheet - Operating leases mainly comprise short-term leases (12 months or less) for plants, warehouses, and machinery[185][138] - No lease-related assets or liabilities were recorded on the consolidated balance sheets as of June 30, 2024, and December 31, 2023[186] Operating Lease Costs | Metric | H1 2024 (US$'000) | H1 2023 (US$'000) | |:---|:---|:---|\n| Short-term lease cost | 450 | 841 | | Total lease cost | 450 | 841 | 12. Goodwill Goodwill decreased to $2,633 thousand due to foreign currency adjustments, with no impairment losses recognized - Goodwill originated from the acquisition of FAW Jilin on December 27, 2019, representing the excess of purchase price over the fair value of net assets acquired[188][191] Goodwill Movement | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Beginning balance | 2,695 | 2,774 | | Translation adjustment | (62) | (79) | | Goodwill (end of period) | 2,633 | 2,695 | - The change in goodwill was due to foreign currency translation adjustments, and no accumulated impairment losses were recorded[191] 13. Other Assets Other assets, mainly long-term deferred expenses, decreased from $4,292 thousand to $3,800 thousand Other Assets Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Long-term deferred expenses | 3,800 | 4,292 | | Total | 3,800 | 4,292 | - Long-term deferred expenses are mainly advances to FAW Jilin's suppliers for molds and tool manufacturing, amortized over their expected periods of use[192] 14. Accounts and Notes Payable Accounts and notes payable increased from $14,824 thousand to $20,001 thousand by June 30, 2024 Accounts and Notes Payable Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Accounts payable | 19,718 | 14,824 | | Notes payable | 283 | - | | Total | 20,001 | 14,824 | - Notes payable, consisting of bank acceptance drafts, are generally payable within six months and are guaranteed by banks, often requiring a guaranteed deposit classified as restricted cash[193] 15. Contract Liabilities Contract liabilities decreased from $2,525 thousand to $2,639 thousand, reflecting revenue recognition timing - Contract liabilities primarily consist of advance payments from customers before goods or services are transferred[195] Contract Liabilities Rollforward | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Contract liabilities - beginning of period/year | 5,008 | 3,654 | | A change in time frame for a performance obligation satisfied | (6,405) | (11,747) | | Advance received | 5,511 | 13,205 | | Contract liabilities - end of period/year | 2,639 | 2,525 | - Contract liabilities to related parties decreased from $2,483 thousand to $1,360 thousand[196] 16. Accruals and Other Current Liabilities Accruals and other current liabilities decreased from $47,428 thousand to $45,737 thousand by June 30, 2024 Accruals and Other Current Liabilities Breakdown | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Payroll payable | 6,294 | 6,876 | | Accrued post-employment and termination benefits - current portion | 8,134 | 8,809 | | Accrued expenses | 17,800 | 18,362 | | Other payable | 12,484 | 9,400 | | Total | 45,737 | 47,428 | 17. Long-Term Payables, Current Long-term payables, reclassified as current, decreased to $95,580 thousand due to currency changes and unmet loan conditions - Loans from a government entity for Electric Vehicle industry development, originally non-interest bearing, were reclassified as current due to unmet conditions for government subsidies and repayment[198][199] - The outstanding principal decreased from US$97,832 thousand to US$95,580 thousand, primarily due to currency exchange rate changes[200] - The Company faces potential penalties and repossession of land if conditions are not met, and is actively negotiating with lenders[199][202] - Machinery, equipment, buildings, and land use rights with a carrying amount of approximately US$39,948 thousand were pledged as collateral for these loans[203] 18. Promissory Note Payable A promissory note payable from a 2014 legal dispute was fully settled as of June 30, 2024 - A legal dispute from 2014 regarding a loan of US$1,376 thousand with interest was settled[204] - Fixed assets of Bijie Yabei were sold and transferred to the Plaintiff to offset the loan principal and partial interest[204] - As of June 30, 2024, there was no outstanding principal owed on the promissory note[204] 19. Accrued Post-Employment and Termination Benefits Net obligation for post-employment and termination benefits decreased to $47,745 thousand by June 30, 2024 - The Company has three defined benefit, non-contributory retirement or termination plans covering qualifying employees[206] Accrued Post-Employment and Termination Benefits Rollforward | Metric | June 30, 2024 (US$'000) | June 30, 2023 (US$'000) | |:---|:---|:---|\n| Beginning of period | 52,350 | 60,915 | | Service costs | 39 | 32 | | Interest costs | 554 | 745 | | Benefits paid | (4,151) | (4,334) | | Translation adjustment | (1,181) | (2,827) | | End of period | 47,745 | 54,444 | - The net amount due after one year was US$39,611 thousand as of June 30, 2024, while the current portion was US$8,134 thousand[210][212] 20. Ordinary Shares and Statutory Reserve Issued ordinary shares totaled 5,471,661 after a reverse stock split, with outstanding warrants classified as equity - As of June 30, 2024, Chijet Motor had 5,471,661 issued ordinary shares and 5,470,076 outstanding ordinary shares, adjusted for the 1-for-30 reverse stock split[214] - The Company has GT Warrants and I-Bankers Warrants outstanding, classified as equity, with total prices of $8,900 thousand and $4,968 thousand, respectively, as of June 30, 2024[216][219] - PRC subsidiaries are required to make appropriations to statutory surplus reserves, which are non-distributable as cash dividends, with an accumulated balance of US$6,656 thousand as of June 30, 2024[224][225] (a) Warrants GT and I-Bankers Warrants are outstanding, classified as equity, with specific exercise prices Outstanding Warrants | Warrant Type | Number of Warrants | Total Price (US$'000) | |:---|:---|:---|\n| GT Warrants | 148,334 | 8,900 | | I-Bankers Warrants | 13,800 | 4,968 | - GT Warrants were issued to Greentree to purchase shares at an exercise price of US$60.00 per share, classified as equity[216] - I-Bankers Warrants were issued to I-Bankers to purchase shares at an exercise price of $360.00 per share, also classified as equity[219] (b) Treasury stock The company holds 1,585 shares of treasury stock from a promissory note repayment by JWAC - The Company holds 1,585 shares of treasury stock, resulting from JWAC repaying US$500 thousand of promissory notes by delivering its Class A common stock to Chijet Inc[221] (c) Statutory Reserves and Restricted Net Asset PRC subsidiaries maintain statutory surplus reserves, restricting a portion of net assets from distribution - PRC subsidiaries are required to make appropriations to statutory surplus reserve (at least 10% of after-tax profit until 50% of registered capital) and discretionary surplus reserve[224] - The accumulated balance of statutory reserves was US$6,656 thousand as of June 30, 2024, and December 31, 2023[225] - The aggregate amount of paid-in capital and additional paid-in capital of PRC entities, not available for distribution, was US$148,357 thousand as of June 30, 2024[227] 21. Income Taxes PRC subsidiaries face a 25% CIT rate, with no income tax expenses due to valuation allowances on deferred tax assets - Cayman Islands and British Virgin Islands subsidiaries are not subject to income or capital gains tax[228][229] - Hong Kong subsidiary is subject to a two-tiered profit tax rate (8.25% for first HKD $2.0 million, 16.5% thereafter), but no provisions were made due to no assessable profits[231] - PRC subsidiaries are subject to a Corporate Income Tax (CIT) statutory rate of 25%[232] Income Tax Reconciliation | Metric | H1 2024 (US$'000) | H1 2023 (US$'000) | |:---|:---|:---|\n| Loss before income tax expenses | (31,523) | (57,591) | | Income tax benefits computed at 25% | (7,881) | (14,398) | | Changes in valuation allowance and others | 7,868 | 14,509 | | Income tax expenses | - | - | - A full valuation allowance is provided against deferred tax assets (totaling US$159,969 thousand as of June 30, 2024), as it is more-likely-than-not that they will not be utilized[236][237] 22. Related Parties Extensive related party transactions include receivables, payables, contract liabilities, and significant loans - Related parties include entities significantly influenced by the Company (e.g., Jilin FAW Baosteel Auto Steel Parts Co., Ltd.), non-controlling interest shareholders (e.g., China FAW Co., Ltd.), and their affiliates (e.g., Yantai Guofeng Investment Holding Group Co., Ltd.)[239] Related Party Balances | Metric | June 30, 2024 (US$'000) | December 31, 2023 (US$'000) | |:---|:---|:---|\n| Accounts receivable | 183 | 208 | | Other current assets | 1,662 | 2,786 | | Amounts due from related parties | 43,435 | 48,748 | | Accounts payable | 45,854 | 47,192 | | Contract liabilities | 1,360 | 2,483 | | Accruals and other current liabilities to related parties | 84,791 | 78,495 | | Loans attributable to related parties | 267,256 | 273,412 | Related Party Operations | Metric | H1 2024 (US$'000) | H1 2023 (US$'000) | |:---|:---|:---|\n| Sales of goods | 245 | 559 | | Purchase of goods | 4,448 | 1,101 | | Interest Expense | 8,077 | 7,491 | - Loans attributable to related parties totaled US$267,256 thousand as of June 30, 2024, with significant amounts from Yantai Guofeng Investment Holding Group Co., Ltd. and FAW Finance Co., Ltd[247] - Independent directors received compensation of US$200 thousand, split between cash and ordinary shares, for the period[256] 23. Commitments and Contingencies Capital commitments total $43,524 thousand, with ongoing legal proceedings not expected to have a material effect - Capital commitments totaled US$43,524 thousand as of June 30, 2024, with US$23,291 thousand due within one year, covering construction, equipment, and molds[258] - Parts purchase commitments amounted to approximately US$2,088 thousand as of June 30, 2024, down from US$6,029 thousand at December 31, 2023[260] - The Company is subject to legal proceedings in the ordinary course of business and is aware of four threatened lawsuits alleging breach of a Non-Redemption Agreement and a Contingent Value Rights Agreement[261][262] - Management does not anticipate a material adverse effect from these legal matters on the consolidated financial statements[261] 24. Subsequent Events A 1-for-30 reverse stock split was effective July 8, 2024, and a $200 million shelf registration was filed - A 1-for-30 reverse stock split was approved on June 28, 2024, and became effective on July 8, 2024, reducing issued ordinary shares from 160,707,171 to approximately 5,471,661[263][265] - The Company filed a shelf registration statement on Form F-3 on August 6, 2024, for up to $200,000,000 of various securities, which was declared effective by the SEC on August 16, 2024[266][267]