NWTN(US:NWTN)2025-06-10 16:18PART I Item 3. Key Information NWTN, a Dubai-based SPV company, faces critical risks including Rabdan product cessation, internal control weaknesses, and substantial doubt about its going concern ability - NWTN is a Smart Passenger Vehicle (SPV) company headquartered in Dubai, focusing on a "passenger-centric" design philosophy with an asset-light manufacturing model4849 - The company qualifies as an "emerging growth company" and a "foreign private issuer," allowing for reduced reporting requirements compared to U.S. domestic issuers5860 - NWTN is a Cayman Islands holding company with operations primarily in the UAE and China, presenting unique risks to investors as dividends depend on subsidiary payments subject to local regulations636465 - On January 14, 2025, the company entered into a joint venture agreement with W Motors to establish a company for automobile modification, customization, and distribution, with NWTN holding a 51% stake5455 Risk Factors The company faces critical business, operational, regulatory, and ownership risks, including Rabdan cessation, internal control weaknesses, going concern doubts, and potential Nasdaq delisting - The cessation of the Rabdan branded vehicle line in 2024, following directives from a UAE authority, has materially and adversely affected the company's business, leading to a workforce reduction of 222 employees and severance charges of approximately $1.7 million737477 - The company has identified four material weaknesses in its internal control over financial reporting, including a lack of sufficient accounting personnel with U.S. GAAP knowledge, lack of formal closing procedures, deficient record management, and an insufficient expenditure approval process86474 - There is substantial doubt about the company's ability to continue as a going concern due to significant recurring operating losses, negative cash flows, a low cash balance of approximately $0.1 million as of December 31, 2024, and an accumulated deficit of $737.0 million9193441 - The company faces a delisting determination from Nasdaq for failing to file its 2024 Annual Report on time, currently under a one-year mandatory monitoring period, with an appeal requested on May 28, 2025213218219 - The company is a "controlled company" as Executive Chairman Alan Nan Wu exercises approximately 78% of the aggregate voting power, allowing him to significantly influence corporate decisions235244 - U.S. investors face the risk that NWTN could be classified as a Passive Foreign Investment Company (PFIC), which could result in adverse U.S. federal income tax consequences245612 Item 4. Information on the Company NWTN, a Dubai-based SPV company, established its UAE headquarters and assembly, but discontinued its Rabdan vehicle line in 2024, and operates an asset-light model with a product pipeline including MUSE, GHIATH, and Astra, while facing multiple legal disputes History and Development of the Company NWTN established UAE operations and listed on Nasdaq in 2022, terminated a major deal in 2023, and was directed to cease Rabdan vehicle production in 2024, leading to workforce restructuring, before a 2025 JV with W Motors - The company established its global headquarters in Dubai in March 2022 and an SKD (Semi-Knocked-Down) EV assembly facility in Abu Dhabi in September 2022, with an initial annual capacity of 5,000 to 10,000 units251253254 - A Share Subscription Agreement with China Evergrande New Energy Vehicle Group, entered into on August 14, 2023, was terminated by NWTN on December 31, 2023, as closing conditions were not met259268 - In March 2024, a UAE authority directed the company to stop producing Rabdan branded vehicles, leading to the suspension of new orders, and in June 2024, it was further directed to stop selling these vehicles in the UAE, prompting the company to re-brand its inventory275276 - Due to the discontinuation of the Rabdan brand, the company initiated a workforce restructuring in January 2024, reducing its workforce by approximately 222 employees and incurring severance charges of about $1.7 million277 Business Overview NWTN, a Dubai-based SPV company, employs an asset-light model targeting EV markets with products like MUSE, GHIATH, and Astra, while developing an AI-NAS ecosystem, but faces numerous legal disputes and compliance issues - The company's product pipeline includes MUSE (a full-sized SPV), GHIATH (a purpose-built public service vehicle), and Astra (an autonomous logistics vehicle)305309313 - NWTN employs an asset-light manufacturing model, partnering with automotive Engineering Service Providers (ESPs) like W Motors to reduce capital expenditures and accelerate production284344347 - The company is developing a proprietary AI-NAS (Artificial Intelligent Networked Appliance System) ecology to create a passenger-centric ecosystem integrating hardware, software, and cloud services322324 - NWTN is involved in multiple legal proceedings, including a dispute with Yizhong with an outstanding balance of $13.4 million, a dispute with Jinghong over a RMB 152.5 million claim, and a concluded dispute with Loop Capital resulting in a $14.7 million payment order367370375 Item 5. Operating and Financial Review and Prospects NWTN's 2024 financial performance deteriorated with a 67.9% revenue drop and a $172.7 million net loss, raising substantial doubt about its going concern ability due to recurring losses and low cash, alongside complex PIPE arrangements and identified accounting weaknesses Operating Results NWTN's 2024 net revenue decreased by 67.9% to $12.0 million due to Rabdan discontinuation, resulting in a $172.7 million net loss, while incurring $36.1 million in financial expenses from a PIPE investment guarantee Consolidated Results of Operations (USD in thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net revenue | $11,995 | $37,333 | $- | | Cost of revenues | (9,327) | (49,014) | - | | Gross profit (loss) | 2,668 | (11,681) | - | | Total operating expenses | (98,044) | (200,313) | (41,047) | | Loss from operations | (95,376) | (211,994) | (41,047) | | Net loss | $(172,726) | $(266,695) | $(48,243) | - Net revenue for 2024 decreased by 67.9% year-over-year to $12.0 million, primarily due to the discontinuation of the Rabdan-branded vehicle line and intense market competition403 - General and administrative expenses decreased by 46.2% to $91.0 million in 2024 from $169.0 million in 2023, driven by lower credit loss allowances, share-based compensation, and professional services fees due to business downsizing405 - The company incurred financial expenses of $36.1 million in 2024 and $30.0 million in 2023 related to a 15% guaranteed annual return on a PIPE investment, which is an obligation of certain shareholders but expensed by the company410421437 Liquidity and Going Concern NWTN's going concern ability is in substantial doubt due to recurring operating losses, an accumulated deficit of $737.0 million, and a sharp decline in cash to $0.1 million, with unsecured external financing and unresolved litigation posing significant challenges - The company's financial statements have been prepared on a going concern basis, but recurring operating losses, a significant decline in cash, and dependence on external financing raise substantial doubt about its ability to continue operations441443714 Key Financial Position Indicators (USD in thousands) | Indicator | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $148 | $23,188 | | Accumulated deficit | $(737,049) | $(564,514) | Summary of Cash Flows (USD in thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $33,577 | $(138,046) | $(178,012) | | Net cash used in investing activities | (656) | (21,229) | (6,835) | | Net cash (used in) from financing activities | (55,000) | (26,979) | 393,210 | Critical Accounting Estimates NWTN's critical accounting estimates include fair value of warrant liabilities, significant allowances for expected credit losses ($65.7 million in 2024), inventory write-downs, and a full valuation allowance against deferred tax assets due to realization uncertainty - The company's Private and Representative's Warrants are classified as derivative liabilities and are re-measured at fair value each reporting period, with changes recognized in the income statement463784 - The company recorded a significant allowance for expected credit losses of $65.7 million in 2024 and $85.4 million in 2023, reflecting doubts about the collectability of its receivables and other financial assets467780 - Inventory write-downs of $0.9 million in 2024 and $16.1 million in 2023 were recognized to state inventory at the lower of cost or net realizable value468837 - A full valuation allowance has been provided against all deferred tax assets as of December 31, 2024 and 2023, as management believes it is more likely than not that these assets will not be realized470904 Item 6. Directors, Senior Management and Employees NWTN's leadership includes Executive Chairman Alan Nan Wu and CEO Benjamin Bin Zhai, with 2024 executive cash compensation of $4.2 million. The company had 68 employees, and share ownership is highly concentrated with Mr. Wu controlling 78% of voting power, making it a controlled company with an equity incentive plan - Alan Nan Wu serves as Executive Chairman, and Benjamin Bin Zhai was appointed CEO in May 2025, succeeding Mr. Wu in that role480481 - For the year ended December 31, 2024, aggregate cash compensation for senior officers was approximately $4.2 million, with an additional 3,635,001 earnout shares issued to a company controlled by Executive Chairman Alan Nan Wu491492 - As of December 31, 2024, the company had 68 employees513 - Executive Chairman Alan Nan Wu beneficially owns 100% of Class A ordinary shares, representing approximately 78.0% of the total voting power, making NWTN a "controlled company"517 - The company adopted the 2022 Equity Incentive Plan, authorizing 42,845,000 Class B ordinary shares for issuance, with an automatic annual increase feature520522523 Item 7. Major Shareholders and Related Party Transactions NWTN engaged in significant related party transactions, including loans and a $36.1 million financial expense for a PIPE investment guarantee, with $75.3 million due from related parties fully impaired and $5.3 million due to related parties as of December 31, 2024 Significant Related Party Transactions (USD in thousands) | Nature | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Accrued financial expenses to PIPE Investor (Al Ataa) | (36,137) | (30,000) | (3,863) | | Loan to a related party (Tianjin Tuoda) | - | 15,679 | - | | Share-based compensation (Muse Limited) | - | 23,338 | 3,197 | Related Party Balances (USD in thousands) | | As of Dec 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | Amounts due from related parties: | | | | The Pledgor (PIPE escrow) | 60,000 | 15,000 | | Tianjin Tuoda | 13,662 | 14,045 | | Subtotal | 75,293 | 30,198 | | Less: Allowance for expected credit loss | (75,293) | (15,000) | | Amount due from related parties, net | - | 15,198 | | Amounts due to related parties, current | 5,295 | 24,307 | - The company recorded a full allowance for expected credit losses of $75.3 million against amounts due from related parties as of December 31, 2024, indicating management's assessment of non-collectability562924926 Item 8. Financial Information NWTN's consolidated financial statements are presented, with no history or expectation of cash dividends, and no significant changes reported since the audited financial statements date - The company has never declared or paid cash dividends and does not expect to in the foreseeable future569 Item 10. Additional Information This section covers material contracts, including a PIPE agreement with a 15% guaranteed return backed by a $100 million escrow, exchange controls in China, and detailed tax considerations across jurisdictions, highlighting potential PFIC risks for U.S. investors - A material contract with PIPE investor Al Ataa involves a shareholder guarantee for a minimum 15% annual return, supported by a $100 million escrow account funded by NWTN, resulting in financial expenses of $26.1 million for the company in 2024578579580 - The company is an exempted company in the Cayman Islands and is not subject to income, corporate, or capital gains tax there, having received a 20-year tax concession undertaking586588589 - The company's PRC subsidiaries are subject to a 25% enterprise income tax rate, and operations are also subject to PRC regulations on foreign currency exchange and outbound investment582594 - There is a risk that NWTN may be treated as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. Holders, including higher tax rates on distributions and gains612613615 Item 12. Description of Securities Other Than Equity Securities As of June 9, 2025, NWTN had 12.87 million outstanding warrants, including public, private, and Representative's Warrants, exercisable at $11.50 or $12.00 per share, with company redemption rights under certain conditions and specific adjustment provisions - As of June 9, 2025, there were 12,874,392 outstanding warrants647 - Public and private warrants are exercisable for one-half of a Class B share at $11.50 per full share, while Representative's Warrants are exercisable for one full Class B share at $12.00647649 - The company has the right to redeem public warrants at $0.01 each if certain conditions are met, including the share price exceeding specified levels, and management can also require a "cashless basis" exercise during a redemption650652 PART II Item 15. Controls and Procedures As of December 31, 2024, NWTN's disclosure controls were ineffective due to four material weaknesses in internal control over financial reporting, including insufficient U.S. GAAP personnel, inadequate closing procedures, and deficient record/expenditure management, with a remediation plan underway - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were ineffective due to the existence of material weaknesses666 - Four material weaknesses were identified: (i) lack of sufficient competent financial reporting personnel with U.S. GAAP knowledge, (ii) lack of period-end financial closing policies, (iii) lack of internal file management procedures, and (iv) lack of sufficient approval process for expenditures668474 - The company's remediation plan includes hiring qualified accounting personnel, organizing regular training, formulating a U.S. GAAP accounting manual, and establishing formal closing and document management policies669475 Item 16. Other Information This section covers governance, including the audit committee financial expert and Code of Ethics. Principal accountant fees were $450,000 in 2024. A key event was the change in certifying accountant to Assentsure PAC in January 2025 due to restatement needs. As a foreign private issuer and controlled company, NWTN follows home country governance, and has insider trading and cybersecurity policies - On January 9, 2025, the company dismissed Marcum Asia CPAs LLP and appointed Assentsure PAC as its independent registered public accounting firm, related to the conclusion that prior financial statements should be restated due to the accounting treatment of shareholder obligations under the Al Ataa Agreements679681685 Principal Accountant Fees (USD) | | 2024 | 2023 | | :--- | :--- | :--- | | Audit fees | $450,000 | $830,000 | | Total | $450,000 | $830,000 | - As a foreign private issuer, the company follows certain Cayman Islands home country corporate governance practices, exempting it from some Nasdaq requirements, such as those related to shareholder approval for certain transactions and the distribution of interim reports686688692 - The company has established a cybersecurity risk management policy, with oversight provided by the CEO and the audit committee695697 PART III Item 18. Financial Statements NWTN's consolidated financial statements for 2024 and 2023 are presented, with the auditor's report expressing substantial doubt about going concern due to recurring losses, a $737.0 million accumulated deficit, and declining cash, while notes detail critical accounting policies, related party transactions, and legal disputes - The independent auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern, citing recurring operating losses, an accumulated deficit of approximately $737.0 million, and a significant decline in cash714 Consolidated Balance Sheet Highlights (USD in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $41,465 | $166,250 | | Total Liabilities | $108,032 | $105,316 | | Total Shareholders' (Deficit) Equity | $(66,567) | $60,934 | - The company adopted ASC 606 for revenue recognition on January 1, 2023, with revenue generated from sales of smart electric vehicles and auto parts, recognized when control is transferred to the customer786790 - As of December 31, 2024, the company's PRC subsidiaries had restricted net assets of approximately $88.0 million, which are not available for distribution to the parent company due to PRC laws and regulations932