Carbon Revolution Public pany(CREV) - 2024 Q4 - Annual Report

Financial Viability and Funding - The company is not yet profitable and does not expect to achieve positive operating cash flows during the 12.5 month cash flow projection period starting May 14, 2025, requiring US$5.4 million in funding to remain viable[37][38] - The 12.5 Month Cash Flow Projections assume access to US$5 million of remaining committed funding under the December 2024 amendments to the OIC Financing, which may be released in US$5 million tranches[39] - The company anticipates receiving US$6.5 million from customers related to claims during the 12.5 month cash flow projection period[48] - The company has a Committed Equity Facility with Yorkville Advisors for the future issuance of up to US$60 million in Ordinary Shares, allowing advances of up to US$10 million at a time[44] - The company plans to refinance its secured debt before amortization payments commence in June 2026, as positive cash flows from operations will not cover these payments[55] - Financial covenants under the New Debt Program include thresholds for revenue and Adjusted EBITDA, with minimum cash requirements increasing to US$4 million in CY 2026 and US$5 million from January 31, 2027[67] - The company may face significant uncertainty regarding its ability to continue as a going concern if it cannot secure necessary funding[51] - The company has deferred payments of US$5 million due in November 2024 and an additional US$10 million payable within the next 12 months, contingent on further deferral agreements[49] - The company may not be able to raise additional funding needed through public or private offerings due to market conditions and restrictions from existing financing agreements[45] Operational Challenges and Risks - The company has a limited operating history and does not yet derive positive cash flow from operations, which poses risks for investors evaluating its financial performance[78] - The Company forecasts that it will win new customer program awards to fill capacity at its existing Australian manufacturing facility, but these discussions are at various stages and may not yield expected results[83] - The Company faces risks related to demand for its wheels, as current OEM contracts are not take-or-pay, leading to uncertainty in securing anticipated sales volumes[81] - Delays in the design and engineering phases of wheel programs may result in later-than-expected production and sales, adversely impacting revenue generation[90] - The Company may experience higher costs per wheel than anticipated due to various factors, including inflation and unexpected design changes, which could affect profitability[94] - The inability to pass on increased costs to customers may materially impact the Company's financial performance and profitability[97] - The Company has experienced and may continue to experience claims from OEM customers regarding non-conformance of delivered wheels, which could lead to loss of customers[99] - The Company is restricted by covenants in the OIC Financing that limit its operational flexibility and ability to engage in certain business activities[75] - The company is not yet profitable and requires further scale and a reduction in labor and materials costs per wheel to achieve profitability[102] - The company anticipates that the price for key raw material inputs will decrease as wheel volumes increase, but there is no guarantee of favorable negotiations with suppliers[125] - Shipping wheels late may result in the company incurring air freight costs and damages to customers, negatively impacting revenue and customer relationships[134] - The company faces risks related to delays in capacity expansion plans, which may lead to lower revenue or margins than expected[105] - The company relies on a single manufacturing facility, and any loss or failure of this facility could materially impact financial performance[132] - The company is exposed to claims from customers for late delivery or non-compliance with specifications, which may adversely affect profitability[113] - The company may experience increased costs due to price increases from suppliers that cannot be fully passed on to customers[116] - The company has limited flexibility in sourcing materials due to reliance on single suppliers for key inputs, increasing exposure to supply shortages[118] - Challenges in commissioning new equipment may lead to production delays and increased costs, impacting the ability to meet customer demands[138] - The company’s operations are dependent on timely supply of raw materials and equipment, and any disruptions may adversely affect manufacturing capabilities[124] - The company faces risks related to bespoke equipment breakdowns, which could lead to increased repair costs and production downtime, potentially impacting its ability to fulfill customer orders on time[141] - The implementation of new technology and manufacturing processes may result in higher than expected capital expenditures and production delays, affecting cash flow and profitability[142] - The company has experienced higher scrap rates and quality issues than anticipated, leading to increased production costs and potential damages to customers[147] - Customer return and warranty claims may exceed expectations, impacting the company's reputation and financial performance[160] - The company may incur significant costs and reputational damage due to product recalls, which could lead to reduced consumer demand and loss of market share[166] Regulatory and Environmental Concerns - The company may incur substantial costs related to compliance with environmental regulations, which could negatively impact its financial performance[199] - The Company is under pressure to find recycling solutions for scrap and end-of-life wheels, which may take longer or cost more than expected, impacting financial performance[200] - The Company's customers are increasingly concerned with environmental, social, and governance (ESG) matters, which may affect demand for its products if expectations are not met[204] - The Company may incur increased costs due to climate change initiatives and may not be able to pass these costs onto customers, affecting profitability[197] Human Resources and Labor Issues - The company has experienced higher than expected staff turnover, which may disrupt operations and impact strategic plans[180] - The current employment market conditions are challenging, making it difficult for the company to retain key personnel essential for maintaining customer and supplier relationships[179] - The company’s ability to execute its business strategy depends on the expertise of its key personnel, and loss of such personnel may adversely affect its operations[178] - Future negotiations of new Enterprise Agreements may increase overall business costs, potentially impacting the company's margins and financial performance[176] - Labor strikes in the U.S. automotive industry may adversely affect the demand for the Company's products, potentially leading to delays, reductions, or cancellations of orders[182] - The Company has experienced disruptions due to the COVID-19 pandemic, resulting in production disruptions and increased supply chain costs, which negatively impacted revenue[186] - International conflicts may cause supply chain disruptions and increase material input costs, leading to production delays and lower margins for the Company[189] Intellectual Property Risks - The Company holds an extensive intellectual property portfolio but faces risks of infringement claims from third parties, which could result in significant costs and operational disruptions[212] - If the Company cannot successfully defend against infringement claims, it may face damages and injunctions that could materially impact its operations and financial performance[216] - The Company seeks patent protection primarily in key markets such as the United States, certain European countries, China, Japan, and Mexico to manage costs effectively[220] - There is a risk that the Company's patented technologies may be exploited in jurisdictions without enforceable rights, potentially reducing demand for its products and adversely affecting financial performance[221] - The scope of patent protection can vary by jurisdiction, which may lead to narrower protections and challenges in maintaining competitive advantages in certain markets[222] - The Company has obtained trademark registrations in a limited number of countries, facing risks from third parties potentially using similar trademarks in unregistered jurisdictions[223] - The Company's confidential know-how and trade secrets are crucial for maintaining product quality and competitive advantage, with unauthorized access posing significant risks[224] - Misappropriation of confidential information could lead to reduced sales and profitability, as competitors may develop similar technologies[225] - The Company may face challenges in protecting, registering, and maintaining its intellectual property rights, particularly in securing patents across multiple jurisdictions[227] - Patent applications must be filed in each country for enforceable rights, and there is no guarantee of patent grants, which may limit protection scope[228]