Centro(CENN) - 2023 Q4 - Annual Report

Financial Performance - The company's revenues for the year ended December 31, 2023, were approximately $22.1 million[165] - The company incurred losses from operations of approximately $51.9 million for the year ended December 31, 2023, compared to $54.7 million in 2022, indicating a reduction in losses[166] - In 2023, the total material cash transfer within the organization was approximately USD 23 million, including $15 million loan to Cenntro Electric Group Inc. and $8 million loan to Cenntro Automotive Corporation[248] - The company does not intend to pay dividends for the foreseeable future, relying on stock price appreciation for returns[295] - As of December 31, 2023, Cenntro had 191 holders of its Common Stock[338] Research and Development - The company has invested approximately $8.5 million in research and development activities since inception through December 31, 2023, and plans to continue significant investments in this area[166] - Cenntro has developed the iChassis™, a programmable "smart" chassis for remote-controlled or autonomous driving applications[235] - The company has developed eight vehicle models and is focusing on modular designs to allow for local assembly, which requires less capital investment[263] Market and Industry Trends - The last-mile delivery market in the U.S. and EU is expanding rapidly, driven by e-commerce growth and a focus on low-emission logistics, which is expected to increase demand for electric commercial vehicles[185] - The global electric vehicle (EV) market was valued at approximately $163.01 billion in 2020 and is projected to reach approximately $823.75 billion by 2030, representing a compound annual growth rate (CAGR) of 18.2% from 2021 to 2030[249] - The market for alternative fuel vehicles, including ECVs, is rapidly evolving, and any slower-than-expected market development could harm the company's financial condition[340] Manufacturing and Distribution - The company has established local assembly facilities in Jacksonville, Florida, and Freehold, New Jersey, with plans for an additional facility in Ontario, California[213] - The acquisition of CAE (formerly TME) in 2023 is expected to expand local assembly capacity in the European Union for ECV models[213] - Cenntro has established seven manufacturing and/or assembly facilities across the United States, China, Germany, and Mexico as of the date of this report[264] - Cenntro added six EV Centers to its global distribution system in 2022, with additional centers opened in the United States in 2023, totaling eleven EV Centers[270] - The company is shifting its distribution strategy from relying on third-party partners to a model combining wholly-owned EV Centers with local dealers[236] Regulatory and Compliance Risks - The company is subject to compliance with various regulations in North America, Europe, and Asia, which may limit its ability to sell certain ECV models[321] - Compliance with environmental regulations is crucial, and failure to do so could result in significant fines or operational suspensions[325] - The company is subject to various legal and regulatory requirements across different jurisdictions, which may affect its operations and sales[347] - The company must comply with the General Data Protection Regulation (GDPR) and other data protection laws, which may require additional resources[359] Supply Chain and Operational Challenges - The company’s business is subject to risks related to supply chain disruptions, which could adversely affect operations and financial results[178] - Shipping costs have increased significantly due to geopolitical factors, impacting vehicle production and gross profit margins[300] - The company has faced disruptions in ECV deliveries due to limited shipping capacity and increased shipping costs from China to North America and Europe[300] - The company anticipates significant increases in operating costs as it develops additional ECVs and establishes new partnerships and facilities[306] - The company faces risks related to fluctuating raw material costs, particularly for lithium, nickel, and cobalt used in lithium-ion cells[343] Technology and Innovation - The Logistar™ 400 has received certification as a zero-emission vehicle from both the California Air Resources Board and the EPA, allowing it to be sold in all U.S. states[195] - The Logistar™ 200, designed for the EU market, is available in three models and is specialized for last-mile delivery, city delivery, and city services, with homologation completed in January 2022[255] - The LMH864 hydrogen fuel-cell semi-tractor has a total weight of 25 tons and is designed for short- and long-haul applications, with operational range and refueling time comparable to diesel trucks[257] - Cenntro's distributed manufacturing model allows for lower capital investment compared to traditional automotive companies[236] Financial and Market Risks - Cenntro's business is significantly dependent on government subsidies and economic incentives for electric commercial vehicles (ECVs), and any reduction in these could adversely affect competitiveness[314] - The company has experienced price increases from component suppliers due to inflation, which may require raising ECV prices and negatively impact demand[316] - The company may seek equity or debt financing to meet capital requirements, which could be subject to unfavorable market conditions[309] Cybersecurity and Internal Controls - The company is exposed to cybersecurity risks, including ransomware and phishing attacks, which could adversely affect its financial condition[363] - Cenntro identified a material weakness in its internal control over financial reporting, which has not yet been remediated despite improvements in controls and supervision[313] - The company has implemented safety procedures for handling lithium-ion battery cells, but incidents could disrupt operations and harm brand reputation[312] Intellectual Property - The company relies on a combination of patents and trade secrets to protect its intellectual property, which may be vulnerable to infringement[348] - The company may face challenges in enforcing its intellectual property rights, potentially leading to a loss of competitive advantage[348]