Financial Performance and Projections - The company incurred net losses of $222.1 million for the year ended September 30, 2023, and expects to continue incurring significant expenses and losses in the near and medium term [37]. - The company has trade and other payables totaling $20.7 million as of September 30, 2024, and anticipates increased operating cash outflows during 2025 compared to 2024 [40]. - The company has commenced a small number of customer deliveries in 2024 but expects cash flows from operating activities to remain insufficient to cover operating expenses and interest payments [40]. - The company may need to secure additional external sources of capital to fund operations, including through debt or equity financing transactions, which may not be available on commercially reasonable terms [41]. - The company expects to incur significant research and development costs, which may reduce profitability without immediate revenue generation [83]. - Financial results may vary significantly due to fluctuations in operating costs and product demand, complicating revenue forecasting [91]. - The company may experience difficulties in obtaining necessary licenses and approvals for its operations, which could adversely affect its business prospects [128]. - The company does not expect to pay dividends in the foreseeable future, as it plans to retain available funds for business development and growth [207]. Market and Competitive Landscape - The company faces significant competition in the electric powered two-wheel vehicle (EVP2W) market, which may lead to lower vehicle unit sales and downward price pressure [48]. - The company's future growth is highly dependent on consumer adoption of EVP2Ws and battery solutions, which are influenced by various market factors [49]. - The company faces risks related to the potential elimination of government incentives for electric vehicles, which could impact its competitiveness in the market [165]. - The global P2W market was approximately $114 billion in 2023, with sales of EVP2Ws expected to outpace ICEP2Ws due to increasing consumer readiness to transition to electric vehicles [217]. Production and Supply Chain - The company intends to utilize contract manufacturers for vehicle production as it scales, but delays in design, manufacture, and production could harm its business prospects [56]. - The company relies on contract manufacturers for vehicle production, and any failure to maintain these relationships could lead to increased costs and production delays [74]. - The company faces risks related to securing necessary components and managing supplier relationships, which could disrupt the supply chain and impact operations [67]. - The company has entered into a receivables financing arrangement with EXIM to finance exports from Thailand, which can be terminated at any time, posing a risk to production and delivery [66]. - The new micro-factory in Thailand has a capacity to deliver up to 21,500 units per year and can be replicated in other high-demand regions, aiming for a production capacity of 300,000 units by 2026 [218]. Product Development and Innovation - The company intends to expand its product lineup beyond the i300 and introduce new models in other categories, which may require adjustments to strategies [62]. - The i300 electric motorcycle consists of less than 150 component parts and requires only 105 assembly steps, significantly simplifying the manufacturing process compared to competitors [219]. - The i300 features acceleration from 0 to 30 mph in 2.3 seconds and 0 to 50 mph in 5.0 seconds, positioning it as a premium product in the market [223]. - Each i300 comes with two portable battery packs that can be charged in less than an hour using standard wall sockets, alleviating range anxiety for consumers [224][225]. - The i300 has won nine international design awards, highlighting its innovative design and performance attributes [222]. Customer Engagement and Distribution - The company plans to enhance customer experience through a drop-ship-direct-to-customers (DSDTC) model, ensuring seamless delivery and maintenance services [228]. - A full-stack e-commerce platform will streamline order processing and enhance customer interaction, integrating various partners for a cohesive experience [230]. - The company intends to provide training and programs to retail partners to assist in selling its products, but there is no assurance of success in creating demand [76]. - The company emphasizes the importance of building strong relationships with retail partners to enhance brand recognition and customer acquisition [78]. - Deliveries and after-sale services will primarily be conducted through independent service agents called "Zappers," which may face challenges due to lack of experience in servicing vehicles [107]. Regulatory and Compliance Risks - The company is subject to anti-corruption and anti-bribery laws, and noncompliance could lead to significant penalties and reputational harm [124]. - The company must comply with economic and trade sanctions laws, and failure to do so may result in severe penalties and reputational damage [125]. - The evolving regulatory framework for data privacy may require costly modifications to services and expose the company to legal claims [105]. - Compliance with evolving data protection laws, such as GDPR, may impose additional regulatory obligations and costs on the company [95]. - The company may incur significant expenses to comply with privacy and security standards imposed by laws and regulations [104]. Financial and Operational Risks - The company has identified a material weakness in its internal control over financial reporting, which could lead to misstatements and loss of investor confidence [135]. - The company is at risk of losing competitiveness if it fails to keep up with rapid technological changes in the EV industry and alternative fuel sources [109]. - The company may face significant product liability claims, which could adversely affect its financial condition and liquidity [121]. - A substantial increase in interest rates or tightening of credit availability could negatively impact vehicle sales and the company's financial results [117]. - The company operates in multiple jurisdictions and is exposed to fluctuations in foreign currency exchange rates, which could adversely affect its financial results reported in U.S. dollars [167]. Corporate Governance and Shareholder Matters - The company has received a notification from Nasdaq indicating non-compliance with the minimum market value of listed securities requirement of $35 million, which must be met for at least 10 consecutive business days during the compliance period ending March 31, 2025 [168]. - If the company fails to regain compliance, it may face delisting from Nasdaq, which could negatively impact its ability to raise capital and the market price of its shares [169]. - The company is classified as an "emerging growth company," allowing it to take advantage of reduced SEC reporting requirements, which may affect investor attractiveness [179]. - The company is required to file an annual report on Form 20-F within four months of the fiscal year-end, but the information provided is less extensive compared to U.S. domestic issuers [184]. - As of January 28, 2025, directors and executive officers beneficially own approximately 21.0% of the issued and outstanding Ordinary Shares, allowing them significant control over shareholder decisions [203].
Zapp(ZAPP) - 2024 Q4 - Annual Report