Carbon Revolution Public Ltd Co 20-F for FY2023
Carbon Revolution Public Ltd Co (CREVF)
20-F
2025-05-30
For: 2023-06-30
View Original
Added on
April 06, 2026
About this 20-F
Carbon Revolution Public Ltd Co filed this 20-F on May 30, 2025, covering the fiscal year ended June 30, 2023 (FY2023).
Headline figures
Fiscal year ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- 0 EUR
- compared with net income of 0 EUR a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
OR
For the fiscal year ended June 30, 2023
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Commission File Number: 001-41856
(Exact name of Registrant as specified in its charter)
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Not applicable
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(Translation of Registrant’s name into English)
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(Jurisdiction of incorporation or organization)
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(Address of principal executive offices)
Tel.: +353 -1 -920-1000
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
On June 30, 2023, the issuer had 25,000 ordinary
shares, par value €1.00 per share, outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See
definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☐
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Accelerated filer ☐
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Emerging growth company
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5,
2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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Other ☐
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If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐
Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
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EXPLANATORY NOTE
On November 3, 2023 (the “Closing Date”), Twin Ridge Capital Acquisition Corp., a Cayman Islands exempted company (“Twin Ridge”), Carbon Revolution Public Limited Company (formerly
known as Poppetell Limited), a public limited company incorporated in Ireland with registered number 607450 (“MergeCo”, or the “Company”), Carbon Revolution Limited, an Australian proprietary limited company with Australian Company Number (ACN) 128
274 653 (formerly a public company listed on the Australian Securities Exchange and now named Carbon Revolution Pty Ltd) (“Carbon Revolution PL”) and Poppettell Merger Sub, a Cayman Islands exempted company and wholly-owned subsidiary of the
Company (“MergerSub”), consummated the business combination pursuant to the terms of a Business Combination Agreement (the BCA”), dated November 29, 2022, as amended or supplemented from time to time, pursuant to which, among other things, Twin
Ridge merged with and into MergerSub, with MergerSub surviving as a wholly-owned subsidiary of the Company, with shareholders of Twin Ridge receiving Ordinary Shares (defined below), in exchange for their existing Twin Ridge ordinary shares and
existing Twin Ridge warrant holders having their warrants automatically exchanged by assumption by the Company of the obligations under such warrants, including to become exercisable for one-tenth of an Ordinary Share instead of one Twin Ridge
ordinary share, in proportion to the exchange ratio (the “Business Combination”). In addition, Twin Ridge, Carbon Revolution PL and the Company implemented a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) and a capital
reduction under Part 2J.1 of the Corporations Act 2001 (Cth) in accordance with the Scheme Implementation Deed, dated as of November 30, 2022, as amended or supplemented from time to time (the “Scheme Implementation Deed”), which resulted in all
shares of Carbon Revolution PL being canceled in return for consideration, with Carbon Revolution PL issuing one share to the Company (resulting in Carbon Revolution PL becoming a wholly-owned subsidiary of the Company) and the Company issuing
Ordinary Shares to the shareholders of Carbon Revolution PL. In addition, the Company undertook a capital reduction under Irish law immediately after the issuance of ordinary shares to consummate the Transaction and issuance of preference shares to
Orion Infrastructure Capital (“OIC”). The capital reduction was undertaken for no consideration to shareholders.
MergeCo had no operations prior to entering into the Scheme Implementation Deed and BCA, including as of June 30, 2023. MergeCo’s sole purpose was to become a holding company following the Business
Combination. Upon the closing of the Business Combination, the Company became the direct parent of Carbon Revolution PL.
On November 3, 2023, the Company completed the Business Combination and Carbon Revolution PL became a wholly owned subsidiary of the Company. Upon consummation of the transactions in connection with
the Business Combination (the “Transactions”), the Company’s ordinary shares, par value $0.0001 (“Ordinary Shares”) and the warrants to acquire one-tenth of an Ordinary Share at an exercise price of $11.50 per one-tenth of an Ordinary Share
($115.00 per whole Ordinary Share) (“Public Warrants”) became publicly traded on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “CREV” and “CREVW”, respectively. The Public Warrants may only be exercised for a whole number of Ordinary
Shares.
This Annual Report on Form 20-F (the “Report”) is for the fiscal year ended June 30, 2023. Unless otherwise stated herein or the context so requires, this Report includes information for the Company
as of June 30, 2023, without giving effect to the Business Combination.
This Report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements provide our current expectations or forecasts of
future events of the Company. Forward-looking statements include statements other than statements of historical fact, including statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements.
These forward-looking statements include, but are not limited to, statements relating to expectations for future financial performance, business strategies, financings and expectations for the Company’s business. Specifically, forward-looking
statements may include statements preceded by, followed by or that include the words “may”, “can”, “should”, “will”, “estimate”, “plan”, “project”, “forecast”, “intend”, “expect”, “anticipate”, “believe”, “seek”, “target” or similar expressions.
These forward-looking statements in this Report are based on information available as of the date of this Report and Company management’s current expectations, forecasts and
assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update
forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Although we believe the expectations reflected in the forward-looking statements were reasonable at the time made, they cannot guarantee future results, level of activity,
availability and terms of financings, volume of sales, performance or achievements. Moreover, no one assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary
statements contained or referred to in connection with the forward-looking statements contained in this Report.
You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance
may be materially different from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ include:
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changes in domestic and foreign business, market, financial, political and legal conditions;
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inability to obtain financing, equity, debt, or convertible debt financings to fund our operations on favorable terms or at all (including where such inability results in additional costs being incurred,
and/or additional funding not being available, under existing financing arrangements);
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the Company expects that it will need to refinance its long term debt, and may not be able to do so on acceptable terms, or at all.
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it may take longer for the Company to become cash flow breakeven or reach profitability than anticipated (or it may never occur).
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our failure to meet milestones, financial covenants and other key covenants under existing financing arrangements;
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growth in demand for our wheels being lower than expected, or eventuating later than expected (including but not limited to lower than expected sales of programs in production, delay in commencement of wheel
programs, and inability to win new program awards as expected);
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our capacity to produce sufficient volumes of wheels to meet customer demand, including as a result of insufficient capital resources to expand our production capabilities;
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the failure to secure materials cost reductions, including but not limited to, through securing price reductions from suppliers, internal economies of scale and other efficiencies;
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increase in prices of labor or materials, or adverse movements in foreign exchange;
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disruption to global supply chains;
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disruption to customer business as a result of industrial action by workers involved in automotive supply chains;
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deterioration of relationships with suppliers and technical partners;
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risks relating to our bespoke equipment and production process to create a highly complex and innovative product;
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downward pricing pressure from customers;
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changes in our competitive position or market share;
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the inability to maintain the listing of the Company’s securities on a U.S. securities exchange;
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holders of Preferred Shares (defined below) gaining certain governance and control rights, in the event of certain triggers under the Company’s Amended and Restated Memorandum and Articles of Association;
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obligations and restrictions that restrict our ability to engage in some business activities under the terms of the New Debt Program (defined below) and OIC Financing (defined below), which may restrict our
ability to do business and take advantage of certain opportunities;
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risks related to the rollout of our business strategy and the timing of expected business milestones;
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the effects of competition on our future business and our ability to grow and manage growth, establish and maintain relationships with customers, and retain management and key employees;
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risks related to domestic and international political and macroeconomic uncertainty, including the Israel-Hamas and Israel-Hezbollah and Russia-Ukraine conflicts;
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the outcome of any legal proceedings that may be instituted against us or any of our respective directors or officers;
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the impact of any pandemic or other public health crisis, and governmental responses;
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risks related to Carbon Revolution’s industry;
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introduction of tariffs, changes to government incentives for or relating to electric vehicles, and other changes in laws and regulations; and
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other risks and uncertainties described in the section of this Report entitled “Risk Factors.”
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Except as otherwise indicated or required by context, references in this Report to “Carbon Revolution PLC” or the “Company” refer to Carbon Revolution Public Limited Company, a public limited company
incorporated in Ireland with registered number 607450, and references to “Carbon Revolution”, “we”, “us”, “our”, the “consolidated entity” or the “Group”, refer to the Company and its consolidated subsidiaries, after the consummation of the
Business Combination. Except as otherwise indicated or required by context, references in this Report to “Carbon Revolution PL” refer to Carbon Revolution Limited (formerly a public company listed on the Australian Securities Exchange, now an
Australian proprietary limited company with Australian Company Number (ACN) 128 274 653), prior to consummation of the Business Combination, and references in this Report to “MergeCo” refer to Carbon Revolution Public Limited Company (formerly
known as Poppetell Limited), a public limited company incorporated in Ireland with registered number 607450, prior to the consummation of the Business Combination.
Trademarks, Trade Names and Service Marks
The logos, and other trademarks or service marks of the Company appearing in this Report are the property of the Company. Solely for convenience, some of the trademarks,
service marks, logos and trade names referred to in this Report are presented without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights
or the rights of the applicable licensors to these trademarks, service marks and trade names. This Report contains additional trademarks, service marks and trade names of other entities. All trademarks, service marks and trade names appearing in
this Report are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of
us by, any other companies.
Financial Information
Throughout this Annual Report on Form 20-F, other than in the Company’s consolidated financial statements, the terms “AUD” or “A$” refer to the Australian Dollar, the terms
“dollar,” “USD”, “US$” or “$” refer to the U.S. dollar and the terms “EUR” or “€” refer to the Euro, unless otherwise indicated.
The Company’s consolidated financial statements are contained in Item 18 from pages 114 to 127 and are presented in EUR and have been prepared in accordance with the IFRS Accounting standards as
issued by the International Accounting Standards Board (“IASB”) (together “IFRS”). The Company has made rounding adjustments to some of the figures included in this Report. Accordingly, any numerical discrepancies in any table between totals
and sums of the amounts listed are due to rounding.
Market and Industry Data
This Report contains industry, market and competitive position data that are based on general and industry publications, surveys and studies conducted by third parties, some of
which may not be publicly available, and our own internal estimates and research. Third-party publications, surveys and studies generally state that they have obtained information from sources believed to be reliable, but do not guarantee the
accuracy and completeness of such information. These data involve a number of assumptions and limitations and contain projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of
uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates.
| ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Directors and Senior Management
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Not applicable.
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Advisers
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Not applicable.
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Auditors
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Not applicable.
| ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
| ITEM 3. |
KEY INFORMATION
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[Reserved]
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Capitalization and Indebtedness
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Not applicable.
| C. |
Reasons for the Offer and Use of Proceeds
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Not applicable.
| D. |
Risk Factors
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You should carefully review and consider the following risk factors and the other information contained in this Report, including the financial statements
and notes to the financial statements included herein. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on
the business, cash flows, financial condition and results of operations of the Company. You should carefully consider the following risk factors in addition to the other information included in this Report, including matters addressed in the
section titled “Cautionary Note Regarding Forward-Looking Statements”. We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial
condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
Risks Related to the Company’s Financial Condition and Liquidity, Ability to Obtain Further Funding, and Existing Financing Arrangements
The Company is not yet profitable or cash flow positive. The Company will need to raise additional capital to continue operating, and it may not be able to do so.
The Company is not yet profitable and does not yet derive positive operating cash flows (and in the aggregate does not expect to for its 12.5-month cash flow projection period commencing May 14,
2025 (this cash flow projection has been prepared for the purpose of going concern referred to in Note 1(ix) Going concern of Item 18 of this Report (the “12.5 Month Cash Flow Projections”)).
In order to remain viable or to be considered viable, to cover anticipated cash outflows over the 12.5 Month Cash Flow Projection Period, to remain compliant with the minimum cash covenant under the
New Debt Program and to allow the Company to continue as a going concern, based on the 12.5 Month Cash Flow Projections US$5.4 million of funding is required to be raised over that period, which US$5.4 million is committed (subject to
conditions), via the sources outlined below.
The 12.5 Month Cash Flow Projections assume that the Company will have access to all of the US$5 million of remaining committed (but conditional) funding of the maximum US$25 million funding
agreed under the December 2024 amendments to the OIC Financing, which may, subject to satisfaction of the conditions precedent in the Securities Purchase Agreement be released in US$5 million tranches by OIC and utilized for the continuing
operations of the Company’s existing Mega-line plant operations in Australia. The 12.5 Month Cash Flow Projections also assume that in conjunction with such US$5 million tranche released by OIC, pursuant to December 2024 amendments to the
New Debt Program, an additional US$400,000 will be released from the payment reserve fund established under the New Debt Program, representing a maximum further US$0.4 million of additional reserve release.
The 12.5 Month Cash Flow Projections also assume that after the release of the remaining US$5 million tranche by the OIC Investors and release of the US$0.4 million from the payment reserve fund
as described above, pursuant to December 2024 amendments to the OIC Financing and the New Debt Program, each holder of Series 2023-A Notes agrees to waive cash interest not to exceed an aggregate of US$3 million in exchange for the Trustee
receiving payment in kind in an amount equal to such waived cash interest plus interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind for the benefit of the holders of the Series
2023-A Notes, and the OIC Investors also agree to waive cash interest on the Series 2024-A Notes and the Series 2025-A Notes, on the same terms, for the same period. The December 2024 amendments to the OIC Financing and the New Debt Program
are herein referred to as the “December 2024 Amendments”. For further information, see “Item 5 Operating and Financial Review and Prospects, A. Operating Results, Impact of Business Combination and Related
Financing Transactions” and the Company’s 6-K announcement of December 23, 2024 in relation to the December 2024 Amendments.
The Company may fail to satisfy the conditions required or may fail to agree on terms with OIC in order to draw on the remaining US$5 million available under the December 2024 Amendments or the
US$0.4 million of remaining reserve release available under the December 2024 Amendments, and if any such funding is not secured, the additional cash interest waiver agreed under the December 2024 Amendments will also not be available.
It is possible that the Company could consider capital raises through public or private offerings of debt or equity securities, or use of the Committed Equity Facility if other sources of funding are
not available, however the 12.5 Month Cash Flow Projections do not assume any funding from capital raises due to the uncertainties involved.
In connection with the Business Combination, Twin Ridge entered into a Committed Equity Facility with Yorkville Advisors with respect to the future issuance of up to US$60 million in Ordinary Shares
(the “CEF” or the “Committed Equity Facility”) from time to time as the Company may direct. Following the consummation of the Business Combination, all rights and obligations under the CEF agreement inured to the Company. Under this Committed
Equity Facility, for a period of three years from November 3, 2023, subject to certain conditions, the Company has the right to require Yorkville Advisors to purchase Ordinary Shares in a series of advances, with each advance being in an amount
up to the greater of (i) US$10 million or (ii) the aggregate trading volume of Ordinary Shares for the five trading days immediately preceding the Company requesting an advance.
The Company may not be able to raise the additional funding needed via capital raises through public or private offerings of debt or equity securities, or use the Committed Equity
Facility. There may be a delay in the Company’s ability to raise new equity from existing or new financing sources (which would require a registration statement to be declared effective by the SEC). The trading prices and valuations of the
Company’s securities may not be predictable. A depressed stock price could impact the Company’s ability to raise equity capital. This may result from the Company’s own performance or financial condition, or broad market and industry factors,
including a lack of shareholder confidence, irrespective of the Company’s business, prospects, financial condition or operational results. The stock market in general has experienced price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of the particular companies affected. Additionally, the OIC Financing includes certain restrictions on the Company’s ability to undertake equity raises. Warrants to purchase Ordinary Shares (“OIC
Warrants”) issued to OIC in connection with the OIC Financing require the Company to obtain the OIC Investors’ consent before issuing Ordinary Shares at a price per share lower than the maximum discount of 25% or where, as a result of an issuance,
the holders of the OIC Warrant will be diluted to less than 10% of the aggregate number of outstanding Ordinary Shares calculated on a fully-diluted basis. If additional funds are raised through the issuance of equity, such offering is likely to be
priced below the market price of our ordinary shares, diluting the interests of shareholders. The use of the CEF requires the filing and effectiveness of a registration statement, which has not yet been filed. There may be a delay in the
availability of the Committed Equity Facility (which requires a registration statement to be declared effective by the SEC). Additionally, the Company may have access to materially less than the total committed amount of US$60 million of the Equity
Purchase Agreement entered into in connection with the Committed Equity Facility. Yorkville Advisors is not required to purchase additional shares under the Committed Equity Facility beyond an overall ownership of 9.99%. Further, the Company’s
ability to draw down amounts under the Committed Equity Facility may be impacted if the stock price and/or the trading volume of the Company’s stock is lower than expected as Yorkville Advisors is not required to purchase additional Ordinary Shares
beyond the lower of CEF Ownership Restriction or US$10 million (A$15.0 million) per Advance Notice (as defined in the Equity Purchase Agreement).
Further, the terms of the New Debt Program and the OIC Financing restrict the Company’s ability to raise further new debt other than certain permitted indebtedness. Debt
financing, if it is available, may involve restrictions on financing and operating activities, and higher than expected interest and financing costs.
The 12.5 Month Cash Flow Projections assume that the Company will receive support from customers by way of continued working capital support or new working capital support, receive ongoing support
from certain key suppliers in the form of extended payment terms, and achieve its operational targets, including sales of wheels on existing programs to the levels forecast, and achieve ongoing production efficiencies and reductions in input
prices per wheel and other fixed cost reductions.
The 12.5 Month Cash Flow Projections assume that the Company will be successful in making certain claims against certain customers, including claim for payment for wheels shipped but not yet
utilized in production by a customer, potential claims in relation to programs in which ordered volumes have been below the volumes which the Company was required to build and reserve capacity for under its customer contracts, and a claim in
relation to cancellation of a wheel program. The 12.5 Month Cash Flow Projections assume that during the 12.5 month cash flow projection period, the Company will receive a total of US$6.5 million from customers in relation to such claims.
The Company has entered into agreements with certain advisors to the Company and Twin Ridge in connection with the Business Combination, to defer fees payable to such advisors in
connection with the Business Combination. Under an agreement the Group had reached with these creditors to delay payment, US$5 million (A$7.56 million) was payable in November 2024, with the remainder to be paid from the proceeds of certain
fundraising transactions or on a straight line basis over 5 years (depending on the option selected by the supplier). The US$5 million (A$7.6 million) payment was not made in November 2024 and a further US$10.0 million (A$15.0 million) is
currently payable or payable during the next 12 months from signing date, unless the relevant suppliers agree to or accept further deferral of the transaction costs for at least twelve months from signing date and until sufficient cashflow can be
generated from operations or alternative sources of funding are obtained to pay down these debts. The 12.5 Month Cash Flow Projections assume further deferral of such payment obligations.
The Company may fail to implement the initiatives referred to above to the extent needed to cover its funding needs. Any inability to achieve operational targets, receive support from customers by
way of continued working capital support or new working capital support, obtain successful outcomes in relation to certain customer claims, receive ongoing support from certain key suppliers in the form of price reductions and/or extended
payment terms, or reach agreements for further deferral of fees payable in connection with the Business Combination would increase the amount of funding required for the Company to fund its operations and capital expenditures above the US$5.4
million estimated by the 12.5 Month Cash Flow Projections. The Company may not be able to obtain such additional funding.
Based on the factors above, a material uncertainty exists which causes significant doubt as to whether the Company will continue as a going concern and therefore whether it will realize its assets
and discharge its liabilities in the normal course of business and at the amounts stated in the financial statements.
While there may potentially be other sources of funding available for the Company, there may be delays in the ability to access such funding, limits on the size of such
funding, or the funding may be on unacceptable terms.
As a result of the foregoing, the Company may not be able to raise debt or equity funding in the amounts and within the timeframes necessary for the Company to remain solvent
and to comply with its liquidity covenants on satisfactory terms, or at all.
In the event that the Company has insufficient funds, and the required funding is not available within the timeframe and in the amounts needed, the Company may need to enter
external administration, liquidation or examinership.
The Company expects that it will need to refinance its long term debt, and may not be able to do so on acceptable terms, or at all.
The Company plans to refinance its secured debt prior to the commencement of amortization payments in June 2026 under the New Debt Program and the 2024 Amendments (defined below) as
positive cash flows from operations will not be sufficient to cover the amortization payments.
The Company may not be able to complete such refinancing or restructuring, for reasons including inability to secure new investors, failure to secure agreement with the OIC
Investors or the parties to the New Debt Program, decline in operating performance or financial condition, and decline in market conditions.
If the Company is not able to complete such refinancing or restructuring, it will be unable to make payments to its secured lenders when required, and will also not be able to
meet the minimum cash covenant under the New Debt Program. In such circumstances the Company’s secured lenders will be entitled to exercise their rights under the financing agreements including accelerating payment of the principal and interest
owing, enforcing upon the security, taking legal action, and commencing liquidation proceedings, any or all of which would have a material adverse effect on the Company, its business, financial condition and its creditors, as well as the value of
its shares.
In the event that the Company does not complete a restructure or refinancing of existing financing arrangements, the Company may need to enter external administration,
liquidation or examinership.
It may take longer for the Company to become cash flow breakeven or reach profitability than anticipated (or it may never occur).
We currently anticipate that the Company will achieve improvements in operating cash flows and an improving level of profitability if it is successful at increasing its sales
volumes, including through the introduction to production of awarded programs that are not yet in production, and winning award of new programs, and if other key business objectives are achieved, including a reduction in labor hours per wheel and a
reduction in material cost per wheel, and a reduction in certain fixed costs.
However, the Company may not be able to increase its sales to the levels expected, raw material or labor costs may exceed our expectations and/or it may take longer than
expected for the Company to achieve one or more of these objectives.
In addition, our financial projections may prove to be inaccurate and assume, among other things, the demand, production schedules, pricing, cost of labor and materials,
overhead and foreign exchange rate assumptions on which they were based are accurate and there are no unexpected delays or other changes.
Various factors, including the time lag between recognition of revenue from the sale of wheels to customers to the receipt of payment for such sales, are also expected to
increase the period until which the Company becomes cash flow positive from operating activities. If and when the Company does derive positive cash flows from operating activities, it is expected that cash flow from investing activities in the
ordinary course will be negative (due to ongoing capital investment in capacity expansion) and cash flow from financing activities in the ordinary course will be negative (due to the cost of servicing debt, including under the New Debt Program and
under the 2024 Amendments).
If, prior to the point that it is self-funding, the Company is unable to raise sufficient funds within the timeframes required, in order to remain viable the Company may need
to enter external administration, liquidation or examinership.
The Company could fail to meet the financial covenants under the New Debt Program (including the 2024 Amendments).
The New Debt Program (and 2024 Amendments) include financial covenants, which Carbon Revolution is required to meet, including:
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agreed threshold for revenue, assessed monthly on a rolling trailing six-month basis with specific agreed targets for each testing period;
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agreed threshold for Adjusted EBITDA, assessed monthly on a rolling trailing six month basis with specific agreed targets for each testing period;
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maximum capital expenditure (capex) limits, initially assessed on a rolling trailing twelve months with specific agreed maximum capex for each testing period; and
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minimum cash available requirements for each month throughout the loan period (this requirement has been reduced to $0 for the remainder of CY 2025 other than in respect of a limited debt service fund
requirement under the New Debt Program, and will then increase to US$4 million for CY 2026 and US$5 million from January 31, 2027 to maturity in May 2027).
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The revenue and Adjusted EBITDA covenants are subject to cure provisions. In the event of revenue or Adjusted EBITDA performance falling below the covenanted threshold amount,
the Company is permitted to make a payment equal to or greater than the shortfall, which will also reduce the principal balance owed on the debt program. The amount of the payment would be added as a permanent adjustment to the revenue for the
relevant 6 month testing period. This cure right can be used up to five times over the course of the debt program but a maximum of twice in any four-month period.
The New Debt Program, and the debt funding released by OIC under the 2024 Amendments, are secured by all of the present and after-acquired property of Carbon Revolution, other
than certain excluded property (including certain excluded intellectual property). If the Company is not able to meet its financial covenants (including through exercise of any cure rights available to cure such breach), the Servicer may exercise
its rights under the program documents, including accelerating payment of the principal and interest owing, enforcing upon the security, taking legal action, and commencing liquidation proceedings, any or all of which would have a material adverse
effect on the Company, its business, financial condition and its creditors, as well as the value of its shares.
The Company could fail to make payments when due or otherwise fail to comply with other requirements under the New Debt Program (and the 2024 Amendments),
resulting in an event of default thereunder and acceleration of the Term Advances.
In addition to the financial covenants described above, the New Debt Program (and the 2024 Amendments) contain a number of other positive and negative covenants and obligations binding on the Company,
and its wholly owned subsidiaries Carbon Revolution PL and Carbon Revolution Operations Pty Ltd (“Carbon Revolution Operations”).
The New Debt Program (and 2024 Amendments) documents contain other customary events of default, including (amongst other things):
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failure to make a payment due under the agreement by the due date;
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existence of circumstances which could result in a material adverse effect;
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a change in control of the Company, which would include the departure of our Chief Technology Officer, Ashley Denmead, if a reasonably acceptable replacement has not been appointed within 120 days;
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events of insolvency, judgment debt, asset seizure and impairment of security;
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material misrepresentation; and
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if any portion of the guaranty ceases to be in full force and effect.
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An event of default entitles the Servicer to exercise its rights including accelerating payment of the principal and interest owing, enforcing upon the security, taking legal
action, and commencing liquidation proceedings, any or all of which would have a material adverse effect on Carbon Revolution, its business, financial condition and its creditors, as well as the value of its shares.
The terms of the OIC Financing impose obligations on us or restrict our ability to engage in some business activities, which could materially adversely affect our business,
results of operations and financial condition.
The documents governing the OIC Financing contain obligations and other financial and operating covenants that place restrictions on the Company. For example, the Company has provided the OIC
Investors a right of first offer for financing for material upgrades to the Company’s existing plant operations in Australia or for the development, construction and/or tooling associated with any future manufacturing facility until the earlier
of the expiration of 24 months from November 3, 2023, or the first date on which all of the US$110m OIC funding has been released (although there is no guarantee the Company will receive all of this funding given its release is subject to the
Company satisfying various conditions which the Company may not be able to satisfy). From the Initial Closing and until all the Preferred Shares are redeemed in full, the Company Board cannot undertake certain matters (the “Structured Voting
Rights Matters”) without the prior written consent of the holders of a majority of the Preferred Shares then on issue, including, but not limited to, the issuance of securities having rights senior or pari passu to the Preferred Shares, the entry
into or amending a material contract, the disposal of assets above a certain amount, undertaking a change of control transaction, senior management changes, the adoption of an operating or capital expenditures budget, incurring general and
administrative expenses above amounts set forth in a budget, making capital expenditures above a certain amount or entering into joint ventures.
These restrictive covenants have reduced and may continue to reduce the Company’s flexibility in conducting its operations, limit its flexibility in planning for, or reacting to, changes in its
business and industry, and limit the Company’s ability to engage in activities that may be in its long-term best interest, including the ability to take advantage of other business opportunities that may arise, any of which could materially
adversely affect the Company’s growth prospects, future operating results and financial condition. In particular, the requirement that the Company adhere to a budget approved by the OIC Investors has limited and may continue to limit the Company’s
expenditures on director and executive compensation, as well as its ability to engage third-party service providers. The Company may need to incur greater capital expenditures for manufacturing equipment than predicted, but may be prohibited from
doing so if the increased expenditures require consent under the OIC Financing which the holders of a majority of the Preferred Shares may not provide. If this occurred, it would lead to a delay in the Company’s capacity expansion plans thereby
potentially leading to a loss of revenue and adversely affecting the Company’s financial position.
In the event of certain triggers under the Company’s Amended and Restated Memorandum and Articles of Association and the certificate of designation of the
Class B Preferred Shares, holders of Preferred Shares will gain certain governance and control rights.
In connection with the OIC Financing, the Company’s Amended and Restated Memorandum and Articles of Association provide that from and after the occurrence of certain triggers,
being the failure to effect a mandatory redemption, failure to obtain the required consent of the holders of Class A Preferred Shares in issue before undertaking a Structured Voting Rights Matter, failure to undertake Further Share Capital
Reductions in accordance with the OIC Financing purchase agreement and a failure of the Company to abide by the right of first offer requirements in the OIC Financing purchase agreement (collectively, “Springing Rights Events”) until (a) all of the
Class A Preferred Shares are redeemed in full or (b) if earlier, in the case of a Springing Rights Event occurring other than from a failure to effect a mandatory redemption of the Class A Preferred Shares, until the non-compliance by the Company
with the relevant obligations referred to therein giving rise to the Springing Rights Event (x) if capable of rectification, is rectified to the satisfaction of the holders of a majority of the Class A Preferred Shares in issue or (y) is otherwise
waived in writing by the holders of a majority of the Class A Preferred Shares, such holders shall be entitled to direct the directors of the Company with respect to certain “Springing Rights Matters” (as set out in Schedule 2 of the Company’s
Amended and Restated Memorandum and Articles of Association), which include the entrance into, termination of, or amendment to certain material contracts, determination of operating and capex budgets, actions related to management hiring,
termination, and compensation, issuance or redemption of securities, and the initiation or undertaking of a change of control transaction, among other matters. If a Springing Rights Event were to occur, and the holders of the Preferred Shares
elected to exercise their rights, the Company’s directors and management may have reduced flexibility in conducting operations and engaging in activities that they may otherwise consider to be in the best interests of the Company, including
entering into certain contracts, determining budgets, actions related to hiring, the issuance and redemption of securities or a change of control transaction, any of which could materially adversely affect the Company’s growth prospects, future
operating results and financial condition. In addition, in exercising their consent rights in respect of the Structured Voting Rights Matters, the holders of a majority of the Preferred Shares may withhold consent to various actions that the
directors of the Company may otherwise consider to be in the best interests of the Company. The certificate of designation of the Class B Preferred Shares includes substantially similar triggers as the Class A Preferred Shares.
The Company has a limited operating history which does not provide a meaningful basis for investors to evaluate the business, financial performance and
prospects.
The Company has a limited operating history, and given the Company does not yet derive positive cash flow from operations and has not yet become profitable, the Company’s operating history does not
provide a meaningful basis for investors to evaluate the business or its financial performance and future prospects. Accordingly, investors should consider the Company’s business and prospects in light of the risks, uncertainties, expenses and
challenges that may face an early-stage business.
Risks Related to the Company’s Operations
The Company’s customers may not order wheels as expected.
The 12.5 Month Cash Flow Projections, and the Company’s growth in the longer term, are predicated on various assumptions relating to demand for its wheels.
Demand for the Company’s wheels may be lower than anticipated because the Company’s current automotive original equipment manufacturer (“OEM”) customer contracts, which are typical of the industry,
are not take-or-pay contracts, therefore customers are not committed to purchase a minimum number of wheels, and therefore, there is no guarantee that the Company will secure the sales volume it anticipates from its existing customer contracts.
There is also no guarantee that the Company’s projected revenue from awarded programs will eventuate at the levels expected.
Sales volumes for a program may be lower than expected for a variety of reasons including the sales for the vehicle being lower than anticipated, the take rate on the optional carbon fiber wheel being
lower than anticipated which may in turn occur for a variety of reasons including the customer not marketing the carbon fiber wheel to the extent anticipated, consumer dissatisfaction with retailer pricing and consumer dissatisfaction with the
aesthetics of the wheel. There is also a risk that macroeconomic factors adversely impact sales of wheels, such as the introduction of new or increased tariffs which apply to the importation of the Company’s wheels into the US or other countries
and/or any delay or reduction in the uptake of electric vehicles associated with the removal or modification of government incentives or other forms of support for or relating to electric vehicles, including in the US.
The Company is in discussions with customers and potential new customers about new wheel programs and forecasts that it will win new customer program awards which, together with existing awarded
programs (both those currently in production and yet to enter production) would fill, or substantially fill, the capacity at the existing Australian manufacturing facility (such capacity will be added over time in line with expected demand). The
discussions with customers and potential new customers about new wheel programs are at various stages of the quotation process and the Company may fail to be awarded such new customer programs, or such programs may be delayed or be in lower
quantities or yield lower margins than expected.
Awarded vehicle programs have in the past been delayed, and may in the future be delayed by the customer, or as a result of the Company’s delay in bringing a new wheel to production readiness.
Even if, over the life of a program, a customer does order as many wheels as projected by the Company for the life of the program, the customer’s ordering patterns may fluctuate and the orders for
a particular period during the program life may be lower than expected. Such fluctuations resulting in lower than expected orders have occurred in the past, including with limited notice being provided by customers.
A delay of a new program will result in lower than expected orders for the period of the delay. A lower volume of orders for wheels than expected may cause the Company’s
failure to meet growth targets and its financial performance and prospects. Lower than anticipated revenue from customer programs may also impact the Company’s ability to secure anticipated margin improvements through labor and materials cost
reductions that are anticipated to be derived from scale.
Wheel programs warranting further expansion to a low cost manufacturing location may not be awarded or may not be awarded for the expected volumes or level of returns.
The Company expects to expand production to a low-cost manufacturing location, or locations, when demand exceeds built-out capacity at the Australian facility and providing funding
can be obtained for such facility. Demand for such further capacity may not eventuate, or the returns associated with such demand may not justify the cost of expansion or attract investment to fund such expansion.
Wheel programs may commence later than expected due to the design development and engineering phase taking longer than expected.
The commencement of wheel programs may be delayed due to various reasons. Such delays have occurred in the past. The customers may delay the launch of their vehicle program
which may extend the development and engineering phase of the Company’s wheel programs. The Company may have limited resources in the design and development teams working on multiple programs in the engineering phase at the same time and
accordingly, the teams may not be able to meet the program deadlines as a result of delays in the wheel design process or engineering challenges. Also, reaching agreements with customers on aesthetic exterior design, or other specifications and
requirements, may take longer than expected. In addition, prototypes may fail in testing during validation resulting in required rework. Such delays have occurred in the past.
Delays in design and engineering may result in programs coming online later than expected and, therefore, production and sales commencing later than expected. In such a
circumstance, the Company’s ability to generate revenue and profit may be adversely impacted. Delays in design and engineering will also delay the expected benefits to be derived from manufacturing scale, including lower production costs per unit,
which would adversely impact the Company’s financial performance and prospects.
Also, any delay in development or production of wheel programs or a lower wheel production volume than expected and agreed with the customer may result in damages claims of
customers because of the Company not meeting contractual obligations or may adversely affect the Company’s reputation, profitability and ability to generate revenue and therefore, in turn, impact the Company’s financial performance and prospects.
The margin received by the Company for its wheels may be lower than expected. Similarly, the Company may not recover engineering and development or tooling
costs from its customers to the extent expected.
The price the Company quotes for a wheel depends on certain forecasts and assumptions regarding development costs, raw material costs, manufacturing costs, and desired margin.
Further, the Company expects to be able to achieve reductions in materials prices with certain suppliers as production volumes increase and also to otherwise reduce its
manufacturing costs via scale and other efficiencies.
The Company has experienced and may in the future experience higher costs per wheel than anticipated for various reasons such as:
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manual labor hours required to produce wheels being higher than anticipated, higher materials or supply chain costs than anticipated, wheel programs may experience delays in development or production, or
wheel production volume increases may not be as expected or may not materialize;
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the Company may not be able to achieve its manufacturing quality, volume and cost targets (including targets relating to reduction in labor cost per wheel and materials cost per wheel);
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the Company may not be able to increase its capacity to service customer demand or the cost to increase capacity may be more than expected, or it may otherwise be unable to execute its industrialization
plans, including the Mega-line project, as planned;
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the Company may be exposed to volatility in demand, resulting in disruption to the Company’s operations and supply chain and increased costs;
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the Company may be manufacturing lower volumes than expected when production for the relevant wheel commences which would result in the benefits of scale being lower than expected, and the costs per wheel
being higher than expected;
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the Company may not have the flexibility to adjust its raw material supply orders on short notice based on the fluctuations in its customer’s orders, which may adversely affect the Company’s profitability,
cash flow and operations; or
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the Company’s equipment not performing to the level expected, or product quality not being to the level expected.
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As a result, the Company’s development costs, materials costs, labor costs or other overheads may be higher than expected or the Company may experience more or worse quality
issues than expected.
The Company has in the past incurred and may incur greater engineering, development or tooling costs, and unit costs of production, in relation to a program than it expected
when quoting. This may arise as a result of higher than expected inflation, changes in customer specifications or designs during the design and engineering phase, or wheel design or engineering challenges that were not anticipated when quoting. Due
to the industry standard contracts with favorable terms for the Company’s customers, the Company may not be able to pass on all incurred costs for engineering, development or tooling, and unit costs of productions, or an increase of such costs to
its customers.
The inability to pass on such costs to its customers may materially and adversely impact the Company’s profitability, financial performance and prospects.
The Company may not be able to achieve the manufacturing quantity and quality assumed in its forecasts or required or expected by its customers.
The Company has failed and may in the future fail to achieve manufacturing output (in terms of quantity of wheels manufactured) at the levels planned by it. The Company has experienced and may
experience claims from its OEM customers that wheels which have been delivered do not conform to specification. The Company may experience commissioning delays following the installation of new equipment.
Inadequate capability of the Company’s manufacturing processes and procedures to consistently produce the required quantity and quality of wheels, within the required customer
timeframes, and at the expected cost levels has resulted in and may result in higher scrap rates and/or higher costs per wheel than expected, or shipping wheels late or not according to the customer’s specifications. These outcomes may result in a
loss of customers or failure to obtain new wheel programs, which could have a material adverse impact on our financial performance.
Additionally, the failure to achieve the desired quality targets has resulted in and may result in higher labor costs (in processing or rectifying wheels), additional
management and engineering resources and overhead (addressing and solving quality issues), reduced production output, and/or reduced margins. It may also result in a reduced ability to access a broader cross section of the wheel market due to
product costs that are higher than forecasted.
Shipping wheels late has resulted in and could result in the Company being required to incur air freight costs and/or pay costs or damages to its customers. Shipping wheels not
according to specification has resulted in and could result in the Company being required to replace such wheels at its cost and to pay costs or damages to its customers or may result in warranty issues or product recalls. This in turn could result
in negative reputational damage and could adversely impact the Company’s ability to maintain or secure new programs or retain customers, which would have an adverse impact on its ability to generate revenues.
The Company may not be able to execute its plans to increase its capacity to the extent expected within the timeframes as expected and/or at the expected
cost.
The Company is not yet profitable and requires further scale, and a reduction in labor and materials costs per wheel, in order to become profitable and to then grow
profitability. The Company intends to grow its wheel sales from wheels produced at the Australian facility as new awarded programs and yet to be awarded programs come into production, expand its capacity to facilitate such sales, and to achieve a
reduction in its unit costs of production.
The Company’s ability to achieve these objectives is dependent on the success of its ongoing capacity expansion plans. The process may take longer or cost more than anticipated, or
unforeseen issues may arise during the engineering design, fabrication, supply or commissioning process for new tooling and equipment, as has occurred in some instances in the past. The Company has items of tooling and equipment on order on
tight delivery timetables and the 12.5 Month Cash Flow Projection assumes these items will be delivered on time. There is a risk that they will not be
delivered on time due to supplier capacity constraints or other issues. Also, the capital cost of expanding operations may be higher than anticipated, resulting in a lower return on investment than expected. Our liquidity constraints may result
in delays in completion of these plans. The expansion plans may not achieve the outcomes anticipated such as delivering the expected capacity increases, including but not limited to reduced cycle times, reduced labor hours per wheel, volumes,
or other production efficiencies or cost reduction benefits.
If the Company cannot scale its manufacturing process to the extent anticipated, it may have a material adverse impact on the Company’s financial performance and competitive
position.
New OEM wheel programs, which the Company plans to commence production in the 12.5 Month Cash Flow Projection period, may experience delays or cost overruns, or even loss of such program(s) if there
are delays in completing the expansion plans or if the plant does not perform to expectations or other challenges arise in relation to the installation and commissioning of major equipment projects. This may result in lower revenue or margins
than expected, or contractual claims (by customers for non-shipment or late shipment of wheels) against the Company.
The Company may not have the internal resources or capability or be able to employ or engage the appropriate capability, required in order to successfully build, install and
commission new production assets or fully utilize the expected benefits of those assets once commissioned and in production.
Due to industry standard contractual provisions which are favorable to the Company’s customers, the Company may be exposed to volatility in demand and
changes to customer forecasts on short notice, resulting in disruption to the Company’s operations and supply chain and increased costs and lower margins. The Company may not be able to adjust its raw material supply orders on short notice to meet
such demand, which may adversely affect the Company’s profitability, cash flow and operations.
Under the Company’s current OEM supply contracts, which are typical of the industry, customers place firm orders with only limited lead times. While these orders are legally
binding, volume predictions or forecasts provided by the customer are non-binding forecasts that the customer can materially change at any time. This has occurred in the past including at short notice and impacting material quantities and may occur
in the future.
Given that in many cases the Company’s arrangements with its suppliers require significantly longer lead times, the Company typically places orders for raw materials with its
suppliers prior to having firm orders from its customers. To be prepared for delivering in accordance with the customer’s forecast, the Company may also have already invested in labor and equipment without being able to easily adjust the investment
if the customer orders less or more than forecasted on short notice, resulting in working capital being tied up. In situations where the OEM customer orders less than forecast, the Company may also incur additional storage costs for unused raw
materials and the shelf life of the raw materials may expire, leading to the risk of such raw materials no longer being qualified to be used in production, which in turn may impact the Company’s costs and operations. In this situation the Company
may also have underutilized labor. A reduction in the ordering volume may also impact the Company’s ability to meet its revenue forecasts.
Conversely, the customer may significantly increase the volume in its binding orders compared to the forecast and that may lead to the Company being required to invest in additional labor or raw
materials on short notice at higher costs, or otherwise be limited in its ability to fulfill orders in full or on time.
Customers have in the past and may provide materially higher or lower orders than expected, and both scenarios may result in higher costs per wheel and cost inefficiencies,
that can only be recovered from the customer to a very limited extent. That in turn may have a material adverse impact on the Company’s financial performance and prospects.
The Company is exposed to claims against it by its customers for late delivery or delivery of products which do not meet the desired specification. However,
the Company does not have the same ability to make claims against all of its raw materials suppliers for late delivery or delivery of materials which do not meet our specification.
Under the Company’s contracts with its customers, the Company’s customers have in the past and may raise claims towards the Company for late delivery or delivery of wheels that
do not meet the relevant specification. Some of the Company’s contracts with its suppliers contain terms that make it difficult for the Company to enforce delivery on time or compliance with the relevant quality requirements (including the
specification), and/or limit the Company’s ability to recover from its suppliers in circumstances where the supplier has failed to deliver on time or in accordance with specification. A claim by a customer for which the Company has no or limited
recourse may impact the Company’s profitability and could have a material adverse effect on the Company’s financial performance and prospects.
The Company is exposed to price increases from suppliers and may not be able to pass those increases on to customers in full or at all.
Under some of the Company’s current arrangements with certain suppliers, such suppliers have in the past and may increase their prices for raw materials based on an increase of
prices of the supplier’s raw materials, labor costs, shipping and storage costs, government and legal regulations, energy costs, and/or other factors. While some contracts require certain increased thresholds to be met first before any price
increase can be claimed and evidence for the price increase factors to be given by the supplier (or the increase is index bound), the Company is exposed to price increases from suppliers.
On the other hand, given the industry standard contractual provisions which are favorable to the Company’s customers, many of the Company’s current OEM contracts include fixed
prices and give the Company only limited rights to adapt the price. If consequently, the Company cannot pass on price increases of its suppliers to its customers, the Company’s profitability may be impacted, which, in turn, may adversely affect the
Company’s financial performance and prospects.
Some of the materials used by the Company in its manufacturing processes are highly technical and only capable of being supplied from a small number of suppliers. On its wheel
programs, the Company typically only has single suppliers validated for key material inputs such as resin and carbon fiber.
In addition, because the Company’s wheel designs go through a validation process with customers, the Company may lack flexibility in sourcing validated materials from multiple
suppliers, and therefore may be more exposed to price increases and supply shortages, than would otherwise be the case if it had flexibility to source from multiple suppliers (and swapping a validated material for an altered or different material
may require some form of revalidation (partial or full)).
In the event of a supplier failure or supply issues, for example where a supplier of OEM validated material components were to suffer a shortage in its own supply chain, force
majeure, cease trading, or otherwise reduce business with the Company for, any reason, the Company may incur increased costs to secure alternative sources of supply, the Company’s production commitments to OEMs may not be fulfilled (on time or at
all), or the Company may be required to re-validate a wheel, which may involve delays in shipments to customers, increased costs (costs incurred in the validation process) or increased materials costs.
These risks in turn may have a material adverse impact on the Company’s operating and financial performance and its financial prospects.
Artificial intelligence may result in reputational harm or liability, or could otherwise adversely affect the Company’s business.
Artificial intelligence may be relied upon by the Company, its employees, suppliers or customers. Although we do not currently rely substantially on artificial intelligence in connection with the
operations of our business, we believe artificial intelligence is used and will increasingly be used by our suppliers, third party service providers, customers and competitors and such use presents risks to our business.
If our suppliers, third party service providers, customers or competitors implement or rely on artificial intelligence, including for product design, production, forecasting, ordering,
manufacturing, sales, distribution or for processing financial information, retail operations or other business activities, our business could be harmed. Artificial intelligence algorithms may have errors or inadequacies that are not easily
detectable. For example, datasets may contain biased information or otherwise be insufficient, leading to negative outcomes for us, our suppliers, our third party service providers or customers if relied upon. Our third party suppliers may rely on
artificial intelligence for the services they provide us and such third parties’ use of such technologies may impact their ability to carry out certain functions or impact their ability to supply us. In addition, artificial intelligence could
persuade customers to change their purchasing strategy which could negatively impact our business or help our competitors develop lower cost alternatives to our products.
Increasing use of artificial intelligence by us, our suppliers, third party service providers, customers or competitors could cause the Company to be subject to competitive harm, legal liability or
brand or reputational harm. The use of artificial intelligence may also present ethical issues. In addition, the Company expects governments to continue to assess and implement new laws and regulations concerning the use of artificial intelligence.
If, in the future, the Company increasingly uses or relies on artificial intelligence, the Company may be subject to new burdensome regulations that could negatively impact our business.
The Company’s relationships with suppliers and technical partners may deteriorate or there may be other issues with goods, services or equipment received
from suppliers.
The Company’s operations are dependent on the timely supply of raw materials, consumables, equipment and services that comply with the required specifications.
The Company anticipates that the price it pays for key raw material inputs for production of its wheels will decrease as its wheel volumes (and consequently raw material
orders) increase. It also intends to pass risk onto its suppliers should they fail to supply the Company as required. However, there is no guarantee that the Company will be able to negotiate the favorable outcomes with suppliers that it intends.
If there are shortages in materials, delays in receiving materials or parts from its suppliers, or if materials, consumables or equipment are outside the required
specification, this has in the past and may impact the Company’s ability to manufacture wheels that may in turn result in the Company failing to supply its OEM customers in full on time or at all or with products which meet the required
specification. As a result, the Company may have to respond to damages claims, may lose anticipated sales, or new programs, and may suffer reputational damage. The Company may have limited or no recourse for any liability that it incurs in this
regard.
In addition, the Company relies on technical relationships with various parties for the development, manufacturing, testing and validation of its wheels. The Company has
developed a number of relationships with technology organizations and institutes that are key participants in the global advancement of carbon fiber and resin technology, including for example Deakin University, with which the Company conducts a
variety of research and development activities. Deterioration of relationships with these parties may adversely impact the Company’s operations. In particular, this could result in inferior technological outcomes and additional cost and time in
further developing the Company’s carbon fiber wheels.
The Company relies on suppliers of services, such as freight providers, in order to provide timely delivery of products to customers. There is a risk that delays or failure in
the delivery of services by such suppliers may result in delay in delivery of the Company’s products to its customers.
Finally, the Company’s head office and manufacturing facility is located at a single premises at Deakin University’s Geelong Campus. Although this lease is a long-term lease
with options to extend, in the event that this lease was terminated (for example for breach) or the Company was otherwise required to relocate, this could cause material disruption to the Company’s operations, cash flow, profitability and financial
position.
The above-described risks will be amplified by macroeconomic factors, and global or local disruptions, such as COVID-19. The occurrence of any of these events may adversely
impact the Company’s operations and ability to generate revenue, and in turn may impact the Company’s financial performance and position.
Loss or failure of key manufacturing infrastructure or equipment may impact the Company’s operations and lead to loss of revenue and/or increased costs.
The Company’s wheel manufacturing process is complex and contains numerous distinct processes, many of which utilize specialized and bespoke equipment that is not readily
replaceable. In addition, the Company intends to increase the capacity of its manufacturing facility in line with increasing demand. Currently, the Company has only one manufacturing facility and the loss or failure of this facility would have a
material adverse impact on the Company’s financial performance and position.
Equipment necessary for the production of the Company’s wheels has in the past and may in the future break down, perform poorly, fail or be impacted by events within or outside
of the Company’s control, respectively resulting in production delays, increased production costs or inability to meet vehicle program volume requirements. Such loss, failure or breakdown of key infrastructure or equipment has in the past and may
in the future cause significant and/or sustained disruption or interruption to the Company’s manufacturing process. Such disruption or interruption may adversely impact the Company’s production capacity within a short period of time and the ability
to meet customer on-time delivery requirements. Some equipment suppliers are based outside of Australia, and the rectification of equipment has in the past and may in the future be delayed or face additional challenges if travel restrictions (such
as those that were in place as a result of COVID-19) prevent supplier personnel from visiting the Company’s manufacturing facility.
Shipping wheels late or failing to ship wheels could result in the Company losing revenue and being required to pay air freight costs and/or costs or damages to its customers,
or result in negative customer perception about the Company’s ability to meet its supply obligations under its supply contracts. This in turn could damage relationships with customers and adversely impact the Company’s ability to secure new
programs with existing and new customers, reducing the Company’s sales and profitability, which would have a material adverse impact on the Company’s financial performance and position.
Due to the bespoke nature of much of the Company’s manufacturing equipment, the business may potentially have a higher risk as compared to off-the-shelf
equipment, that the supply and new commissioning of such equipment is delayed and/or the equipment supplier claims additional costs for modifications during the commissioning phase, that the equipment does not perform to the level expected or meet
the process requirements or that the equipment breaks down or requires repair or refurbishment.
The Company’s manufacturing equipment consists partly of off-the-shelf equipment (with or without modifications) and partly of bespoke equipment that is specifically designed
and manufactured for the Company’s needs.
Due to the innovative character of the bespoke equipment and limited experience and empirical data available to the supplier and to the Company, there is a higher risk,
compared to off-the-shelf equipment, that the equipment does not meet the required functionality. Therefore, the Company has experienced and may experience delays in commissioning, and other equipment challenges, which may delay and interrupt the
production process and/or adversely impact the operations of the Company.
Challenges and delays in commissioning of new equipment have resulted in and may result in the Company shipping wheels late or not at all and being required to incur air
freight costs and/or pay costs or damages to its customers.
There is also a higher risk that due to the limited experience and empirical data, the required functionality cannot be determined in advance in detail. As a result, the
Company has been required to and may be required to make modifications after commissioning to meet the Company’s needs. This in turn may result in increased costs of purchasing equipment than anticipated.
There is also a higher risk with bespoke equipment that it breaks down and/or requires repair or refurbishment, resulting in equipment down time and potentially reducing
production capacity and the Company’s ability to fulfill customer orders in full on time. Such repair and refurbishment may cost more than expected and/or take longer than expected.
These risks may also result in the Company not being able to increase its capacity as quickly as planned or incurring greater than expected capital expenditure in order to meet
capacity in a timely manner. The risks may also result in equipment not performing to expectations such that production quality is lower than expected or the expected reduction in manual labor per wheel is not as great as expected.
Such consequences may impact the Company’s cash flow and profitability and thereby the Company’s financial performance and prospects.
As a manufacturer of a highly complex and innovative product (which is continuing to evolve), the Company is subject to inherent risks in the development
and use of new technology, equipment and processes.
The implementation of new technology (in the product, or the equipment used to manufacture it), product innovations or manufacturing processes may be challenging and involve
risks inherent in the development and use of new technology.
The Company’s strategy involves the manufacture of one-piece carbon fiber wheels at scale. This involves complex technology and processes which have not been used before at
scale, and foreseen and unforeseen challenges arise as a result. Such challenges have in the past and may result in unexpected costs (in operating expenditure, cost of goods or capital expenditure), production delays, and exhaustion of management
and engineering resources.
Failure to properly implement new technology, product innovations or manufacturing processes may result in the Company’s product failing during trials, failing to gain customer
approval or being difficult and more costly to profitably commercialize.
The above risks have resulted in and may result in higher scrap rates and quality issues than anticipated after customer validation and commencement of production, which may
lead to higher than expected production costs, additional expenditures on new production equipment or upgrades to existing production equipment, lower output, greater use of management and engineering resources, and other costs, and/or delays in
deliveries to customers, which could result in the Company being required to pay costs or damages to its customers.
Failing to deliver to customer program deliverables may also result in reduced sales and negative customer perception about the Company’s ability to meet its supply obligations
under its supply contracts. This in turn could adversely impact the Company’s ability to secure new programs, which could have an adverse impact on its ability to generate revenues which would adversely affect its operations, financial performance
and position.
New wheel designs for new customers or other changes to product and process may take longer to achieve customer validation than expected, may be more
difficult to manufacture than expected, may cost more to manufacture than expected, or may result in more quality issues than expected resulting in lower returns than anticipated.
The Company supplies its wheels to a variety of OEMs, and in order to respond to their requests for unique and innovative designs, particularly for high end performance and
premium vehicles, the Company creates and manufactures a unique wheel design for each individual program. The Company also aims to implement improvements to its products, new production processes and other innovations.
Due to the challenges that are also inherent with the development and implementation of new technology, as outlined above, research and development costs may be higher than
expected and changes to products and processes have taken longer and may take longer than expected to achieve customer validation, unforeseen challenges have and may arise in manufacturing the modified product, manufacturing costs have been and may
be higher than expected, and more quality issues than expected have arisen and may arise resulting in less efficient production, higher scrap rates or costs per wheel than expected and thereby the Company losing the opportunity to realize all of
the expected benefits of any changes. Additionally, an OEM customer may require the Company to satisfy new or varied tests for validation purposes compared to the Company’s previous wheel programs with the same OEM customer and the Company may not
be able to meet these new or varied requirements or it may take longer for the Company to do so, and the Company may need to modify the design of its wheels at greater cost, and if the testing requirements can be satisfied, this process may take
longer than expected for the Company to complete. There is a risk that the price per wheel originally quoted by the Company to its customers does not account for and cover these unexpected developments and its cost increases, and does not result in
a margin that delivers the expected level of profitability or profitability at all. Consequently, the Company may have to renegotiate prices and runs the risk that the customer rejects or does not adequately respond to this renegotiation request,
which would have an adverse impact on the Company’s profitability.
The above risks may also have the effect that the Company’s customers lose the confidence in the Company’s ability to successfully implement modified products or processes.
This may result in lower financial returns than anticipated and may negatively impact the Company’s financial performance and prospects.
Failure to have systems and processes in place, or failure to adhere to such systems and processes, that ensure robust compliance with contractual
requirements, product specifications, and quality systems, may result in increased cost, scrap or quality issues, or shipping of wheels not according to specification.
The Company has developed procedures and workflows, and contract and risk management documentation, contract templates and forms, to identify, monitor and manage contractual
obligations, quality and risks, and it continues to refine such documents and processes as it conducts its business.
However, these documents and procedures may not be fully adequate, sufficient or effective in mitigating the Company’s risk exposure relating to contractual obligations and
quality requirements, in particular as the Company is using complex technology that it constantly develops further. The Company has shipped and may ship wheels which do not match specification, for example due to a failure to detect a batch of
material supplied by one of the Company’s suppliers failing to comply with applicable specifications, or failing to follow quality procedures during a stage of production.
Moreover, the Company is subject to the risks of errors and misconduct, including by its officers, employees and independent contractors, including non-compliance with policies
and processes. These risks are difficult to detect and prevent or avoid and could result in damages claims of the Company’s customers due to late supply or supply of wheels that do not comply with the specifications, and may harm the Company’s
business, operations or profitability.
A lack of proper processes or non-compliance with established processes can also lead to a loss of the Company’s contractual rights due to failure to comply with required
notification periods or otherwise forfeiting rights, that may in turn adversely affect the Company’s operations and profitability.
Although the Company seeks to maintain insurance and uses other traditional risk mitigation tools, such as third-party indemnification, where appropriate and feasible, to
manage certain exposures, they are subject to terms such as deductibles, coinsurance, limits and exclusions, as well as risk of counterparty denial of coverage, default or insolvency. If the Company’s policies and procedures do not adequately
protect it from exposure and the Company’s exposure is not adequately covered by insurance or other risk-mitigating tools, the Company may incur losses that would adversely affect its cash flows, financial performance and position.
Customer return and warranty claims may be higher than expected.
The Company has in the past and may experience claims from its OEM customers that wheels (including any associated parts supplied by the Company such as attachment inserts used
as part of the arrangement for attaching each wheel to the vehicle) which have been delivered do not conform to specification. If wheels have been delivered that do not conform to specification, the OEM customer will return the wheels at the
Company’s cost and the Company will be required to provide replacement wheels at its cost to the OEM customer. The Company may also be required to apply countermeasures or repairs at its cost, and reimburse other costs incurred by its customers.
This may impact the Company’s reputation, financial performance and prospects.
The Company or its OEM customers have experienced and may experience warranty claims from end consumers in relation to the Company’s wheels which they have purchased on a
vehicle supplied by an OEM. Such claims may arise if the wheel suffers damage, has a fault or does not perform as expected. In such cases, the Company may be required to expend significant time and resources investigating such claims, even if the
relevant wheels were found to have been supplied in accordance with specification and if there is no basis for a warranty claim. If there is a basis for a warranty claim, the Company will be required to provide replacement wheels at its cost. This
may impact the Company’s reputation, financial performance and prospects. In the event of more serious warranty issues or warranty issues that represent a product safety issue, a product recall may be necessary.
The Company may suffer reputational damage or incur liability and other costs due to poor product performance or failures, product recalls or other issues
with its wheels.
The Company’s brand and the reputation of its wheels are an important factor in the Company being able to continue selling wheels and growing its volumes. The Company’s
reputation and brand would be adversely impacted by failure of the wheel to perform as expected, safety issues and concerns, negative publicity, and negative customer experiences, and any disputes relating to the same.
While the Company’s products are subjected to a validation process prior to being approved by the customer for serial production, including industry standard laboratory and
on-vehicle testing, there is a risk that such testing is not fully representative of operational conditions or does not capture all conditions that end users may expose the Company’s wheels to, and there is a risk that end users may misuse the
Company’s wheels, and as a result the Company’s wheels may not function as expected.
The Company’s reputation and its relationships with customers may be damaged as a result of negative end-user experiences due to poor product performance or product failures,
adverse media coverage or other publicity (in relation to matters such as durability or impact resistance concerns, manufacturing defects, product recalls, warranty issues, product liability claims or failure to meet customer expectations).
Product recalls can create significant costs for the Company that may not entirely be covered by the Company’s insurance. Product recalls may also lead to severe brand and
reputational damage that results in reduced consumer demand for the Company’s wheels and/or to OEMs not awarding the Company any further programs. In such a case, the Company may lose market share to competitors, or the level of confidence in the
automotive industry and market for carbon fiber wheels may decrease.
Damage to the Company’s reputation or the reputation of its wheels may also occur where another vehicle component that interacts with or relates to the wheel (for example, the
tires or brakes) malfunctions or performs poorly, and it is perceived (whether correctly or not) that this is related to the use or performance of the Company’s wheels.
Hence, damage to the Company’s reputation as a result of one or a combination of these factors may reduce the demand for the Company’s wheels, adversely impact existing
relationships with key customers, suppliers, employees or government grant providers, and diminish the prospects of securing new programs with existing and new OEM customers, which in turn may adversely impact the Company’s financial performance
and position.
As a supplier in the automotive industry, the Company may be exposed to severe product liability claims, including claims for bodily injury and/or death.
The Company may suffer reputational damage or incur liability due to poor product performance or failures, product recalls or other issues with its wheels (including any
associated parts). Such poor product performance or failures or other issues with its wheels may cause the Company to become exposed to the risk of product liability claims being brought against it, either by OEMs or end users of the Company’s
wheels or other claimants.
Being a supplier in the automotive industry and supplying safety relevant components such as wheels brings an inherent risk of potentially severe product liability claims
involving bodily injury and/or death.
Product liability claims and recalls may result in significant cost and management attention in defending and/or responding thereto. Product liability claims and recalls may
require the Company to pay significant damages or an increase in insurance premiums, and it may result in reputational harm. Further, if the Company is not able to obtain sufficient product liability insurance coverage at an acceptable cost or at
all, this could prevent the Company from commercializing its products.
Even if we are insured for a relevant category of risk, our insurance policies may not cover all possible claims, coverage may be excluded or limited in certain scenarios, and
covered claims may be costly and have material adverse effects on the Company’s activities, business, operating results, financial position and reputation, including that coverage will not exceed any applicable coverage limit. Likewise, a failure
to succeed in defending any such claims may have a material adverse effect on the Company’s activities, business, operating results and financial performance and position.
The Company may be unable to retain and increase its workforce as required, or the cost of doing so may be higher than expected. Workforce engagement issues
and industrial action may impact the Company’s operations and growth. Further, loss of or failure to replace or hire key persons may impact the Company’s operations and growth.
The successful development and envisaged growth of the Company’s business will require retaining key management personnel and employees as well as having access to the services
of additional technical, manufacturing and sales staff, alongside our current staff. We may not be able to attract and retain the services of such people, particularly given the competitive and specialized nature of the automotive industry. If the
Company is unable to attract, retain and motivate its staff, the Company could face losses of or disruptions in its operations or in respect of strategic relationships, key information, expertise or know-how, and unanticipated recruitment, training
and onboarding costs. The Company’s ability to attract and retain talented personnel may be dependent upon its ability to provide competitive compensation. The payment of cash compensation may be constrained by the Company’s budget, which requires
the approval of the OIC Investors to increase, while the payment of equity compensation may be constrained by the size of the any equity incentive plan of the Company (“Equity Incentive Plan”) pool. In addition, in connection with the New Debt
Program, if our Chief Technology Officer departs and a reasonably acceptable replacement has not been appointed within 120 days, we would be in breach of a covenant under the terms of the New Debt Program.
While the Company views workforce engagement as a priority and adopts a wide variety of measures to foster a culture of engagement, the Company may still not be able to attract
and retain high performing employees and key personnel. Given the current employment market situation, the Company may not be able to replace key personnel with candidates of the same experience and skills; also, key personnel could leave us and
join one of our competitors.
Loss of key personnel may result in loss of valuable know-how and expertise and the leakage of intellectual property to competitors. The potential loss of know-how and the time to
train new employees may create a loss of quality in certain aspects of wheel production and may also increase the safety risk for new employees and other employees who work with new employees.
The most recent Enterprise Agreement has been certified by the Fair Work Commission, operating effective from July 11, 2023 to July 4, 2025. This agreement outlines pay rates
and other conditions of employment. Where this agreement is silent or does not explicitly state an entitlement or provision, the relevant entitlement or provision of the Manufacturing and Associated Industries and Occupations Award 2020 covers or
the National Employment Standards applies. The outcome of any future negotiation of a new Enterprise Agreement or any changes to an applicable Industry Award from time to time may increase the overall costs of running the Company’s business and
such increased costs may not be able to be passed through to customers in full or at all and may adversely impact the Company’s margins and financial performance.
If employees take industrial action, the Company could be exposed to loss to the extent the industrial action impairs the Company’s ability to meet production demand or causes
disruption to the Company’s customers, if the relevant customer contracts do not include industrial action as a force majeure event or, even if they do, the Company is otherwise not able to rely on the force majeure provisions. A failure of the
Company to increase and retain its workforce as required or if engagement costs are higher than expected, the Company’s growth may be limited, which may adversely affect the Company’s future financial performance and prospects.
Additionally, the Company’s ability to effectively execute its business strategy depends upon the performance and expertise of its key personnel. These employees guide the
Company’s business strategy and success, as they have extensive industry experience, technical knowledge and are responsible for maintaining relationships with customers and suppliers.
Current employment market conditions are challenging and there is high demand for quality candidates in the competitive and specialized sectors in which the Company operates.
Hence, there can be no assurance that the Company will be able to retain its key personnel, in particular those in critical roles, those with significant knowledge of the Company’s proprietary processes and know-how, and those who are key to
maintaining customer and supplier relationships.
The Company has experienced higher than expected staff turnover at certain times, and may experience higher than expected turnover levels, which may cause disruptions to its business and impact its
ability to achieve its strategic plans. The loss of key personnel, any delays in their replacement, high staff turnover, or industrial action may adversely affect the Company’s operations and future performance and, thereby, the Company’s financial
performance and prospects.
If the Company does not achieve its operational objectives, or is required for other reasons to reduce costs, it may need to reduce the size of its workforce and in doing so may lose valuable
expertise which may be difficult and costly to replace, and which may cause disruptions to its business and impact its ability to achieve its strategic plans.
Labor strikes in the U.S. automotive industry may have an adverse effect on the demand for the Company’s products and the financial condition of its
customers.
A substantial portion of the Company’s revenues result from sales to U.S. auto manufacturers a substantial number of whose employees are members of the United
Auto Workers union (“UAW”). We have in the past and may in the future be adversely affected by labor strikes in the U.S. For example, the UAW resolved industry strikes at three US OEMs in 2023. If the agreements that have been reached are
terminated and the strikes resume or there are future strikes, it could affect plants to which the Company’s wheels are currently sent and lead to work stoppages that could disrupt the operations at such sites, resulting in delays, reductions or
cancelations of orders for the Company’s products. In addition, increased labor or other costs generally as a result of strikes may cause U.S. auto manufacturers to implement cost-savings measures, including in relation to the development and production of electric vehicles, for example, and this may
include or lead to reductions or cancelations of orders for the Company’s products or efforts to renegotiate the pricing or payment arrangements or terms for such products. Any delays, reductions or cancelations of orders, the lowering of the
prices that customers are willing to pay for the Company’s products, or adverse changes to payment arrangements for the Company’s products, could have a material adverse effect on the Company’s revenue, results of operations and financial
condition.
Force majeure events may have an adverse effect on the demand for the Company’s products and on its supply chain and ability to manufacture according to
customer demand, resulting in lower revenue and/or increased costs.
Force majeure events could impact the Company’s operations. These events include but are not limited to acts of terrorism, international conflicts, fires, floods, earthquakes,
labor strikes (including UAW strikes), civil wars, natural disasters, COVID-19 or other pandemics, epidemics or health emergencies, governmental restraint (including governmental restraints due to epidemics or pandemics) or other natural or
man-made events or occurrences that can have an adverse effect on the Company’s business. The Company has only a limited ability to insure against some of these risks. If a force majeure event impacts the Company’s customers, there is a risk that
the demand of the customer for the Company’s wheels decreases or is delayed. If a force majeure event impacts the Company’s supply chain, the Company may incur increased costs to minimize or mitigate delays or to secure alternative sources of
supply. In such a case, the Company may not, however, be successful in finding alternative sources and it may not be able to fulfill its production commitments to its customers, which could have a material adverse impact on the Company’s operating
and financial performance and position and its relationships with its customers.
Risks associated with pandemics, and other macroeconomic factors have in the past and may in the future impact the Company’s operations and financial performance.
The COVID-19 pandemic impacted the Company’s customers, resulting in production disruptions, shortage of components within automotive supply chains, and delays to vehicle
launches. These developments impacted demand for the Company’s wheels, including delays to program launch and reduction in revenues. The Company also experienced disruptions at its own production facility (for example, due to employee absenteeism),
supply chain disruption and increased supply chain and logistics costs.
There is also a risk that pandemics and other global events (for example, terrorist activity or global or localized recessions or other macroeconomic developments, or international conflicts) may also
result in disruption to the automotive industry, and may result in a decline in consumer demand for OEM vehicles.
In turn, the Company’s customers may reduce or cease ordering wheels, or they may delay production plans (including as a result of supply chain shortages), which may reduce
demand for carbon fiber wheels, or they may delay the launch of new programs for which the Company’s wheels are awarded. This may all adversely impact the Company’s ability to generate revenue.
International conflict or other forms of international disruptions may cause supply chain disruption or shortages and may result in price increases for material inputs for the
Company’s wheels, which may result in production delays and lower margins for the Company. Additionally, the Company may be required to hold larger levels of safety stock of the materials that it uses to make wheels than it otherwise would,
resulting in higher storage costs, inefficient use of working capital, and increased potential for some materials to pass their expiry date, meaning they cannot be used in production.
If the Company’s production is restricted as a result of disruption at its own production facility or as a result of supply chain shortages or delays in the future, the Company
may not be able to meet production targets under customer contracts which may result in reputational damage and customer damage claims which could adversely impact the Company’s financial performance and prospects. In addition, the Company may
continue to incur costs related to its obligations to pay employees or suppliers despite failing to generate revenue from customers, which would have a material adverse impact on the Company’s cash flow and financial position.
The Russian-Ukrainian and Israel-Hamas and Israel-Hezbollah conflicts or other similar disputes may have an impact on global supply chains, materials
availability, materials costs and transport and logistics costs.
The Russian-Ukrainian and Israel-Hamas and Israel-Hezbollah conflicts or other similar conflicts may have an impact on transport and logistics costs of the Company, its
suppliers or the Company’s customers. Such disruptions may increase the time and resources required to obtain critical raw materials and transmit finished product, which would have a material adverse impact on the Company’s operations,
profitability and ability to generate revenue.
The Company’s business may be impacted by climate change, existing or new environmental regulations, and related risks.
The Company’s operations, suppliers, and customers may be directly or indirectly affected by climate change, extreme weather events, and other natural disasters caused by
climate change.
Extreme weather events, and other natural disasters caused by climate change may directly impact the Company’s production facility, interrupting or disrupting its ability to
supply wheels to customers in full on time. This may result in a loss of anticipated sales, a deterioration in relationship between the Company and its customers, and reputational damage. It may further result in damages or costs claims from
customers to the extent that the Company is not able to rely on force majeure provisions in its customer contracts.
Extreme weather events, and other natural disasters caused by climate change may directly impact the Company’s suppliers’ facilities or operations, which may result in delays
in materials being delivered to the Company, or increases in costs to minimize or mitigate delays or to secure alternative sources of supply. In such a case, the Company may not, however, be successful in finding alternative sources and it may not
be able to fulfill its production commitments to its customers. This may result in a loss of anticipated sales, a deterioration in relationship between the Company and its customers, and reputational damage. It may further result in damages or
costs claims from customers to the extent that the Company is not able to rely on force majeure provisions in its customer contracts, or to pass on such liabilities to its suppliers.
Extreme weather events, and other natural disasters caused by climate change may directly impact the Company’s customers’ production facilities or operations. If a force
majeure event impacts the Company’s customers, there is a risk that the demand of the customer for the Company’s wheels decreases or is delayed.
The Company’s costs may increase as it implements initiatives in response to climate change, either voluntarily or in response to requirements imposed by customers, suppliers
or regulators. Suppliers may pass on cost increases related to the impact of climate change on their own operations, and the Company may not be able to pass these cost increases on to customers via increased wheel prices. The Company’s costs may
also increase as a result of increased taxes or tariffs related to climate change.
Changing regulatory requirements or customer, consumer or investor standards, and expectations in relation to climate change, sustainability and environmental matters may
increase the Company’s operational and compliance costs.
The Company, its suppliers and service providers are required to comply with environmental laws and regulations. The production and transportation of the Company’s products and
other inputs in the production process involve the risk of accidents, spills or contamination. Any of these occurrences could cause harm to the environment, which may lead to disruption in the Company’s operations and supply chain, regulatory
sanctions and remedial costs, and reputational harm, any of which could negatively impact the Company’s operating and financial performance.
The Company may be legally required, or may face increased pressure from stakeholders, to find a recycle and re-use solution for scrap and end-of life
wheels; doing so may take longer than expected, cost more than expected, or not be feasible.
The Company currently does not have a feasible recycling or re-use solution for production scrap wheels or end of life wheels. Customers, consumers, regulators, investors and
other stakeholders may place pressure on the Company to find a feasible recycling or reuse solution for production scrap or end of life wheels.
As with all R&D activities, ongoing projects for finding and implementing recycle or reuse solutions for production scrap or end of life wheels may take longer or cost more
than expected or not be feasible at all, and finding and implementing a recycle or reuse solution for end of life wheels may take longer or cost more than expected or not be feasible at all. If the Company does not have a recycling or reuse
solution for production scrap or end of life wheels in place that meets expectations, the Company may suffer adverse publicity or reputational damage, demand for the Company’s wheels may decrease or projected increase in demand may not materialize,
and the pool of investors willing to invest in the Company may decrease. Any of the foregoing impacts may adversely affect the Company’s financial performance and the price of its securities.
The Company may be unable to meet government, stock exchange, investor, customer or consumer standards, requirements and expectations, particularly in
relation to environmental, social and governance matters, or may incur substantial costs in doing so.
Demand for the Company’s products may be impacted by its ability to meet any applicable government, investor, stock exchange, customer and consumer standards, requirements and
expectations.
In particular, the Company’s customers are increasingly concerned with environmental, social and governance (“ESG”) matters. For example, some OEMs require completion and
passing of a sustainability survey as a hurdle in the quoting process. If the Company does not meet consumer or customer ESG expectations, demand for its products may not grow as expected, or may decline.
If the Company does not meet applicable government or stock exchange ESG requirements, the Company’s reputation may be adversely impacted and it may incur fines and penalties.
If the Company does not meet investor ESG expectations, the pool of investors willing to invest in the Company may decrease which may adversely impact the trading price and volume of the Company’s securities and the Company’s prospects.
Workplace incidents or accidents may occur that may damage the Company’s reputation and/or expose the Company to claims and litigation, increased insurance
premiums or otherwise adversely impact operations.
The manufacturing of the Company’s wheels involves certain labor-intensive processes, exposure to hazardous chemicals (such as paints) and the use of complex machinery and
equipment. There is also a high incidence of new production equipment being commissioned which may increase the risk of workplace incidents or accidents occurring during the commissioning and training phase. In addition, the Mega-line involves the
use of new equipment and processes in day-to-day production operations. These activities may carry a greater risk to health and safety compared to standard production operations using different equipment. Workplace injuries have occurred at the
Company’s production facility from time to time.
Incidents or accidents may occur at the Company’s facility that may result in serious injury or death to employees, contractors or other third parties, or damage to property.
Employees of the Company or other persons may also suffer injuries from engaging in research and development, and product testing activities, which can involve driving vehicles
fitted with the Company’s wheels at various speeds and in various conditions.
In addition to the above, employees or other personnel may have mental health issues which may be caused by or exacerbated at the workplace or may affect work performance.
Further there is a risk that behaviors or work practices take place at the Company, that could result in a psychological safety issue for employees or other personnel. There is a risk that these matters are not identified by management or not
brought to management’s attention or are not addressed appropriately.
The occurrence of any workplace incident may result in a fine imposed by a regulatory authority, an interruption of manufacturing operations, a worker’s compensation claim, a
work health and safety claim or a damages claim against the Company. Such claims or events may not be covered by the Company’s insurance or may exceed the Company’s insured limits, and may also adversely impact the Company’s business and reputation
and, thereby, its ability to win new programs. Safety incidents and near misses can also result in delays to project timetables and may adversely impact the Company’s operations and profitability.
The Company manufactures and supplies a complex product incorporating many technologies, components and materials. If a court upheld a third-party
intellectual property infringement claim against the Company, the Company may be subject to adverse court rulings or orders, including in relation to injunctions, declarations and/or the payment of damages.
The Company is the recognized leader in the lightweight automotive carbon fiber wheel sector and it has invested significantly in the development of its technologies over the
past 15 years. The Company holds an extensive intellectual property portfolio, including patents and advanced composite wheel process know-how/trade secrets. However, third parties may (currently or in the future) hold intellectual property rights,
including patents, which may be infringed by the Company or its products or processes. The Company is aware of certain patents that do or may overlap with the Company’s processes and/or products and which are owned by the Company’s
competitors/industry participants in countries into which the Company supplies its carbon fiber wheels. There is a risk that these third parties may allege that the Company or its products or processes infringe or could infringe these patents. The
Company may also be using third party intellectual property rights under the mistaken belief that it is licensed to use the rights in the way that it is using them. Infringement risks may also arise in the future if the Company enters new markets
beyond automotive wheels despite the Company undertaking reasonable clearance searches.
It is possible that a third-party could bring a claim against the Company or one or more of its customers alleging that the Company or the relevant customer(s) are infringing
the third party’s rights, including by manufacturing, supplying, exporting or selling the Company’s wheels (or vehicles featuring such wheels) in one or more jurisdictions around the world.
The Company may incur substantial costs to defend any such claims. The Company may seek to reach a commercial resolution to any such claims, which may involve the Company
incurring substantial costs, including the payment of licensing or royalty fees. The Company may not be able to successfully defend any such claim and/or may be unable to reach a satisfactory commercial resolution. The Company may, if necessary and
feasible, seek to implement a change(s) to its wheels or processes to avoid any actual or potential infringement, of a third party’s intellectual property rights. This would cause the Company to incur additional and significant costs, and could
require the Company to delay or suspend production of any wheels with any actually or potentially infringing feature(s) while it seeks to implement the relevant change(s). Any such change(s) may not be successfully implemented or validated and/or
the relevant third party could allege that the modified wheels or processes still infringe its rights. Any delay in or suspension of production of any wheels could place the Company in breach of its contractual commitments to its customers and,
thereby, have a material adverse effect on the Company’s operations and prospects.
If a third party brought an infringement claim against the Company, there is a risk that the third party may seek an interlocutory (temporary) injunction preventing the Company
from manufacturing or supplying, for example, wheels with any allegedly infringing feature(s) in the particular jurisdiction(s) in which the third party has intellectual property rights which it is seeking to enforce against the Company while the
relevant infringement claim(s) are pending. If any such motion is granted or court order made, it may have a material adverse impact on the Company’s operations and prospects.
If the Company is unable to successfully defend against such claims or proceedings or reach a commercial resolution or other solution to avoid any material impact of such
claims or proceedings, the Company may be liable to the third party for damages, including compensatory, statutory, additional, punitive, lost profits or enhanced damages and/or an account of profits, and the Company may be restrained by a final
(permanent) injunction, for example, from manufacturing and supplying wheels with the relevant infringing feature(s) in the jurisdiction(s) in which the third party establishes any such infringement claim(s).
In addition, the Company may be liable to its customers for breach of contract/warranty and/or under any indemnity given by the Company to its customers in relation to
third-party intellectual property claims. This could have a negative impact on the Company’s relationships with its customers and its customers’ trust and confidence in the Company and its products. All of these matters could have a material
adverse effect on the Company’s financial performance, profitability and prospects.
There are geographical and other limitations to the Company’s patent and trademark portfolio, including because it is not economically feasible to register
all such intellectual property in all jurisdictions around the world.
The Company generally prefers to seek patent protection for certain key product-related technologies. Patents are country-specific. A patent application must be filed in each
jurisdiction in which patent protection is desired and each patent application will go through a separate process of examination and prosecution in each country or region (in the case of Europe). Additionally, third parties can challenge a patent
application or granted patent (depending on the jurisdiction) by a process known as an “opposition”. Oppositions are normally defended by the patent applicant or registered owner (as applicable). The patent process gives rise to a range of
significant costs (particularly when protection is sought and maintained in multiple jurisdictions), including patent attorney professional fees for drafting, advising on and filing patent applications, prosecuting such applications (including
responding to patent office objections) and defending oppositions, as well as government/official fees that are charged at various stages, including for filing new applications and registering and renewing patent applications or granted patents
(patents must be renewed throughout the duration of their term to remain registered and enforceable). As a result, for reasons including costs management purposes, the Company only seeks patent protection in the jurisdictions that it considers are
key manufacturing or sales markets, including, for example, the United States of America, certain European countries, China, Japan, and more recently, Mexico.
There is a risk that the Company’s patented technologies will be used and exploited by third parties in jurisdictions in which the Company does not have any enforceable rights
in relation to those technologies, with the result being that the Company is unable to prevent the third parties from using or exploiting the technologies in those jurisdictions. The Company may not have patent protection in every country which is
or becomes a market for carbon fiber wheels. This may mean that the Company’s competitive advantage (to the extent associated with relevant product features the subject of the Company’s granted patents) is reduced in the countries where the Company
does not have broad patent protection. This may mean that demand for the Company’s wheels may be lower in those countries, as a result of competitor activities, which might adversely affect the Company’s financial position and growth prospects.
The scope of protection provided by the Company’s patents within the same patent family can differ between different jurisdictions. This may arise where the Company is required
to amend the claims in its pending applications in one or more countries in order to overcome patent office objections that are not raised by the patent offices in other countries. If such amendments are required in certain countries, the scope of
protection provided by any patents ultimately granted in those countries may be narrower, and it may be more difficult for the Company to prevent competitors broadly adopting the relevant technology in those countries. This may have a material
adverse effect on the Company’s ability to maintain its competitive advantage (to the extent arising from such technology) in any such countries which may have a material adverse effect on the Company’s financial performance and prospects.
The ability to seek trademark protection via registration of trademarks is also country specific. The Company has obtained trademark registrations for certain key trademarks in
a limited number of countries. There is a risk that third parties may seek to use trademarks or register trademarks that are the same or similar to the Company’s trademarks in countries where the Company has not obtained trademark registrations,
which could lead to the Company’s brand, reputation, goodwill, lost profits or products being confused with those of the third party, which may result in a deterioration in the Company’s brand and/or reputation, and/or goodwill, and/or lost
profits, and/or a loss of revenue and/or this may prevent the Company from using such trademarks in those countries and/or require the Company to take costly legal action in such countries to seek to recover or secure any required rights. There is
a risk that even in countries where the Company has obtained trademark registrations that certain third party actions could lead to similar outcomes. The Company may need to incur further expenditure to expand its trademark portfolio to include
additional specific trademarks and /or to seek registration in other countries. The Company may also need to incur further expenditure to prevent third parties from infringing its trademarks, or in responding to third party actions which lead to
the Company’s brand or products being confused with those of the third party. If the Company takes any such actions, it may not be successful. Additionally, the Company may be unable to enforce its unregistered trademarks in countries in which it
does not have a sufficient reputation in the trademarks including where the trademarks are found to be too descriptive and not distinctive of the Company. A potential infringer may seek to make the same or similar arguments in defending any
infringement claim relating to the Company’s registered trademarks in any relevant countries.
The Company’s confidential wheel process know-how and trade secrets have been developed over many years, and any unauthorized access to use or disclosure of
relevant materials and information could materially and adversely impair the Company’s prospects.
The Company’s carbon fiber composite wheels and manufacturing processes are technically complex. The Company has developed valuable know-how and trade secrets which protect key
processes and technologies that enable the Company to produce higher quality products, more effectively and efficiently.
If the Company’s confidential know-how and/or trade secrets were misappropriated or accessed without the Company’s knowledge or authorization, disclosed publicly or shared with
third parties including its competitors, other companies could develop technologies, designs or products that effectively compete with the Company, which could reduce the Company’s sales and profitability and its competitive advantage associated
with such know-how and/or trade secrets. The Company may not be or become aware of any misappropriation or unauthorized access or disclosure of its confidential information, including trade secrets, at the relevant time any such incident occurs,
and the Company may only become aware of this after an extended delay, which may compromise the Company’s ability to mitigate the loss of its confidential information and recover and reinstate protection over the information. Even if the Company
does become aware of the same, the Company may not be able to identify any or all recipients of the information and the Company may not be able to take effective enforcement and recovery action. This may result in Company confidential information
including some or all of its trade secrets losing protection and becoming publicly available which would adversely affect the Company’s competitive position and future prospects.
The Company may not be able to protect, register and maintain its intellectual property rights.
The Company generally seeks to protect certain key product-related technologies with patents, and generally prefers to protect process-related technologies as confidential
know-how/trade secrets.
If the Company elects to seek patent protection, it must file patent applications in each country in which it wishes to obtain a granted patent. Until a patent has been granted
in a country, the Company will not have any enforceable patent rights in the relevant country in relation to the invention the subject of the pending application. A patent will not necessarily be granted in each country in which the Company files
an application. A patent office may refuse the Company’s application, or reduce its scope. A patent examiner may determine, for example, that the Company’s invention is not new or sufficiently inventive, and the Company may not be able to persuade
the examiner otherwise. Additionally, even if a patent examiner agrees that the invention is patentable and the application is accepted or granted, a third party may be able to successfully challenge the application or patent. Either way, the
Company may be unable to obtain patent protection for the invention in one or more countries in which the Company seeks such protection or such protection may be more limited in scope than anticipated and may not protect all aspects of the
technology described in the patent specification. Further, publication of patent applications is a normal step in the patent process. The consequence of this is that any complete application describing the details of any invention for which the
Company seeks patent protection will be published (unless the application is withdrawn by the Company before that occurs, to the extent that is possible) and the information in the patent application about the invention will enter the public
domain. Publication may occur even if the Company does not obtain a granted patent.
The patent application process is lengthy and costly and the Company may not have sufficient financial resources at all relevant times to fully fund pursuing comprehensive
patent protection for all patentable inventions which it owns in all key jurisdictions. This may mean that the Company is unable to protect all such inventions in all or some of the jurisdictions in which it manufactures or supplies its wheels (or
in which its wheels are sold by the Company’s customers).
If a patent is not ultimately granted in a country, the Company will not be able to prevent a third party from using or exploiting the relevant published invention in that
country. If the Company does not hold valid patent protection for an invention incorporated in a Company wheel and a third party is able to reverse-engineer the invention from analyzing the wheel, the Company may be unable to prevent the third
party from using the relevant technology.
There is a risk that the Company may be unable to protect its process trade secrets. Existing records may not be sufficient to establish that particular trade secrets are held,
controlled or owned by the Company, which may mean that the Company is unable to protect and/or effectively take enforcement action in relation to relevant sensitive materials and/or information. Additionally, relevant sensitive information may be
inadvertently or deliberately disclosed to the public (including to actual or potential competitors) without authorization (in breach of confidentiality obligations) by an employee or another recipient of the relevant information. Similarly, such
individuals may disclose relevant sensitive information to a third party (including on or via an external platform or service) under the mistaken belief that a confidentiality agreement is in place with the third party, when that is not the case
(including where an earlier confidentiality agreement has expired or lapsed before it was extended or renewed and/or a new confidentiality agreement has not been entered into) or without appreciating the confidentiality risks. Similarly, sensitive
information may be improperly accessed by a third party such as by a security breach, ransomware, hack or other intrusion. If a trade secret is accessed, disclosed or shared without authorization, the Company may be unable to recover and reinstate
protection over the information when it becomes aware of the issue and the technology may thereby cease to be protected (to the extent the technology has been disclosed). See “-The Company’s confidential wheel
process know-how and trade secrets have been developed over many years, and any unauthorized access to use or disclosure of relevant materials and information could materially and adversely impair the Company’s prospects” for more
information.
Where the Company has obtained patent protection for a technology, the patents the Company holds will each have a fixed lifespan, which is generally 20 years from the
applicable filing date. If a patent is granted, once this period has expired, the patent will lapse and the technology will become free for any third party to use in any country in which the Company does not have any other relevant intellectual
property rights.
If the Company’s suppliers own any intellectual property which the Company has contributed to, and/or the Company is not able to register or otherwise protect, or the Company
does not otherwise own the rights to, any intellectual property it has created or contributed to relating to the supplier’s goods or services, and the Company does not have exclusive supply arrangements in place with the relevant supplier, subject
to any applicable confidentiality obligations, the supplier may be free to supply the relevant goods or services (possibly including in such circumstances any improvements created or contributed to by the Company) to the Company’s competitors.
Registered intellectual property rights generally need to be renewed on an ongoing basis to remain registered and enforceable. If the Company missed a renewal deadline due to
an administrative error or oversight, for example, and an extension of time could not be secured to renew any relevant rights, such rights could lapse and cease to be enforceable.
If the Company is unable to protect (and maintain protection over) its intellectual property, it may have a material adverse effect on the Company’s business, operating results
and financial performance.
The Company may be unable to enforce its intellectual property and may be involved in disputes regarding intellectual property or contractual obligations.
If the Company identifies that a third party may be infringing the Company’s rights, the Company may decide to notify the third party of its concerns. If the third party
dismisses the Company’s concerns, refuses to provide any requested information or otherwise refuses to provide the Company with adequate assurances that address the Company’s concerns, the Company may need to take further legal action against the
third party. If the Company takes such action, the Company may not be successful.
The Company may be unable to establish that the third party’s product or process infringes the Company’s rights (such as where the competitor has adopted the Company’s
technology but modified it to a sufficient extent to avoid infringement) and/or where a third party is able to successfully establish that the Company is not entitled to enforce its intellectual property, either because the Company does not own, or
otherwise have the right to enforce the intellectual property, or because the asserted rights are invalid. Additionally, even if the Company is able to establish that its intellectual property rights have been infringed, it may not be awarded all
of the remedies that it seeks.
Third parties have and may in the future also independently challenge the Company’s intellectual property. For example, a third party has and may in the future oppose or apply
to revoke/cancel a Company patent application or granted patent. The Company defends or may defend its intellectual property rights if and when challenged.
A third party may also claim that it owns intellectual property which the Company claims it owns. For example, a customer or supplier may argue that under the relevant contract
between the parties it is entitled to own (or jointly own) or that they have exclusive rights to use intellectual property which the Company claims as its own. If the parties were unable to reach a commercial resolution, litigation may ensue.
For example, the Company’s OEM customer contracts contain intellectual property provisions which are largely in favor of the respective OEM customers and which vary between
different OEM customer contracts. Generally, under these provisions, the OEM may own (or jointly own) or have the right to use (in some cases on an exclusive basis for a period) certain intellectual property developed by the Company in connection
with the relevant contract/order, as well as the right to use other relevant intellectual property owned by the Company, including to manufacture the contracted wheels or have those wheels manufactured by a third party (which could be a Company
competitor), including in certain circumstances, such as where the Company is unable to supply the contracted wheels in accordance with the relevant contract. If an OEM exercised any such rights, it may result in the disclosure of sensitive Company
technology to one or more of the Company’s competitors. Additionally, in some cases, and in the absence of a separate non-disclosure agreement with the OEM, these provisions may not provide for effective confidentiality protection over all
confidential information which the Company provides to the OEM. With respect to certain OEMs, the Company has procured a deviation or letter of comfort which is intended to clarify or modify the effect of certain relevant provisions. Subject to the
terms of the applicable contract, if the OEM customer has an ownership interest or exclusive rights in respect of any Company-developed intellectual property, there is a risk that the customer may claim that the Company has used such intellectual
property for another customer in breach of the Company’s obligations and/or thereby infringing the customer’s rights. This claim could adversely impact the Company’s relationship with the relevant customers, cause the customer’s future orders of
the Company’s wheels to decline, result in confidential information of the Company being revealed to its competitors, and/or limit the Company’s ability to exploit technology it has developed other than in connection with supplying the relevant
contracted wheels (or related services) to the relevant OEM customer. Any of these outcomes could have a material adverse effect on the Company’s operations and financial position and performance.
If the Company is required to take legal action against a third party to enforce or defend its intellectual property rights, or otherwise becomes involved in
intellectual-property related disputes, litigation or other proceedings, the Company would incur significant legal costs and the attention of key personnel may be diverted from operational activities to address such matters.
If the Company is unable to protect, control or enforce its intellectual property including any intellectual property it has developed, the Company’s competitive position may
decline and sales may decrease or not increase to the level anticipated, which would adversely impact the Company’s financial performance and prospects.
The Company may face the risk of being restricted in the use of intellectual property developed jointly with another party coupled with restrictive
exclusive supply of goods arrangements if the Company has been unable to reach an agreement to the contrary in advance with the relevant party.
The Company engages in research and/or development activities, including with third parties, on a regular basis.
Where intellectual property is created by two or more parties, the parties may jointly-own the intellectual property, unless they have agreed otherwise. A joint owner of
intellectual property is generally unable to use or exploit the intellectual property without the consent of the other joint owner(s).
If the Company develops intellectual property in conjunction with other parties, the intellectual property may be jointly owned and the Company may be unable to use or exploit
it as the Company sees fit, unless the Company reaches an agreement with the other joint owner(s) which gives the Company exclusive ownership of the relevant intellectual property or at least the right to use the intellectual property as the
Company desires. If the Company has not secured or is unable to secure such an agreement, the Company may be restricted from using the relevant intellectual property, or alternatively securing such agreement may cost more than expected or may be on
terms not favorable to the Company. Depending on the nature and importance of the intellectual property, this may have a material adverse effect on the Company’s design, development or manufacturing activities, which could in turn have a material
adverse effect on the Company’s financial performance and prospects.
The Company’s or a third party’s information technology systems or processes may fail, become materially inoperable or be subject to attack and the
Company’s business may be adversely impacted.
The Company relies on its own information technology (“IT”) systems and on IT systems provided by third-party technology vendors to perform key functions and support its
operations, including its production processes. The Company also holds sensitive employee and customer data and information related to its intellectual property. The Company’s IT systems may be adversely affected by a number of sources, including
natural disasters, power losses, computer systems failures, internet and telecommunications or data network failures, operator negligence, improper operation by or supervision of employees or contractors, physical and electronic losses of data and
similar events, computer viruses, penetration by hackers seeking to disrupt operations or misappropriate information and other breaches of security.
Additionally, as the Company’s operations grow, they will also become more complex and require more complex IT support. Introducing more complex and sophisticated IT systems
may require additional resources or divert management attention. Implementation of new systems may not be successful.
Any failure of, or damage or interruption to the Company’s information systems or those provided by third-party technology vendors may compromise the Company’s data integrity
(which may result in an inadvertent security breach in relation to such data) and may lead to unauthorized access to Carbon’s Revolution’s intellectual property or automated aspects of its manufacturing. As a result, the Company may lose critical
or commercially sensitive data or intellectual property, may incur significant costs to rebuild or re-establish its information systems or respond to regulatory inquiries or actions, and may be exposed to third-party claims.
Exploitation, unauthorized access or hacking of the systems or networks on which the Company data is stored, could lead to corruption, theft, including by employees or
third-party hackers, or loss of the Company’s data and proprietary information. This could cause disruption to the Company’s operations, unauthorized disclosure of confidential and proprietary information to third parties (including actual or
potential competitors) and may result in regulatory action against the Company for breach of privacy and data protection laws, and may have a material adverse effect on the Company’s operations, financial position or performance. In early 2019,
there was an instance of unauthorized access of the IT systems of a subsidiary of the Company prior to it becoming part of the Group in November 2023, which involved unauthorized access to one email account. When the unauthorized access was
identified, the access was terminated immediately and steps were then taken to increase security. There have been no known repeat events of unauthorized access of the Company’s IT systems. There was no material impact to the operations or financial
condition of the Company or its affected subsidiary as a result of this unauthorized access.
The Company’s Board participates in the development of the Company’s cyber security policies, procedures and protections and the oversight thereof is included in the Company’s
risk framework, with responsibility therefor assigned to the audit and risk committee of the Company Board. The Company’s IT and cyber policies are also discussed at regular meetings of the Company’s IT steering committee.
If the Company is not able to operate its IT systems as a result of any of the above issues and it is required to run its production equipment with manual instruction or
records, the Company may not be able to produce the same volume of wheels and it may therefore be unable to meet customer demands and supply requirements.
The Company’s customer contracts impose IT and cybersecurity compliance requirements and allow for the customer to audit the Company’s systems.
One or more of the Company’s customers impose or may in the future impose IT and cybersecurity compliance obligations which do and may in the future require the Company to
upgrade its cybersecurity systems and processes and/or allow the Company’s systems to be audited. Implementing these compliance requirements and facilitating audits will or may require additional resources, divert management attention and expose
sensitive information to review by auditor representatives. Failure to implement these requirements or facilitate audits may result in a deterioration of the relationship with the relevant customer, result in a claim for breach of contract, cause
or contribute to increased cybersecurity risks for the Company, and/or lead or contribute to a loss of sales or failure to win new programs with existing or new OEM customers.
Any confidential information held by the Company or its agents could be accessed by employees or third parties via IT security breaches, attacks,
ransomware, hacking and similar actions or occurrences, potentially exposing the Company to liability.
The Company and certain agents or other service providers acting on its behalf receive and hold confidential information of third parties, such as the Company’s customers,
suppliers and shareholders, pursuant to confidentiality obligations. This information is held on the Company’s servers and may be downloaded and saved on local hard drives. If there was a security breach of the Company’s IT systems and/or the
Company was otherwise the victim of an IT intrusion, hack, ransomware or the like, whether by employees or third parties, there is a risk that such third-party confidential information could be accessed, downloaded or used by other parties without
the consent of the relevant third party to which the Company owes confidentiality obligations. In addition, certain errors within the account management processes and/or other systems or processes of the Company’s transfer agent caused shareholders
to receive access to the information of other shareholders on two separate occasions. The Company’s service providers may experience future breaches of their IT systems or unauthorized release of information held thereby for the benefit of the
Company or its customers, suppliers and shareholders. Incidents or events like the foregoing could expose the Company to liability to any such third party if the third party made a claim for breach of contract or negligence, or contravention of
privacy or data protection laws, for example, against the Company, the Company may be required to incur legal costs with respect to any such claim, and the dispute may divert the attention of key personnel. If the relevant information was
confidential to a Company customer, any dispute in relation to the matter could have an adverse effect on the Company’s relationship with the customer that may lead to reduced wheel sales to the customer and thereby adversely affect the Company’s
profitability and performance. Similarly, if the information was confidential to a key supplier, any dispute could adversely affect the Company’s relationship with the key supplier, which could have an adverse impact on the Company’s operations if
the Company is unable to procure the relevant goods or services from the supplier (or an alternative supplier) on acceptable terms or at all. See “-The Company’s confidential wheel process know-how and trade
secrets have been developed over many years, and any unauthorized access to use or disclosure of relevant materials and information could materially and adversely impair the Company’s prospects” and “The Company may not be able to protect,
register and maintain its intellectual property rights” for more information.
An attack, ransomware or the like on or to the Company’s IT systems may expose any third-party IT systems integrated or linked to the Company’s IT systems
depending on their level of vulnerability and this could expose the Company to liability.
If any third party IT systems are integrated or linked to the Company’s IT systems, they could be exposed if the Company’s IT systems are subjected to a security breach, IT
hack, ransomware or other intrusion depending on the vulnerability of the third party’s IT systems. If this occurred, it could expose the Company to liability for breach of contract or negligence in certain circumstances and/or damage the Company’s
relationship with the third party. Any such circumstance may have an adverse effect on the Company’s operations, production processes, financial performance and prospects.
The Company’s competitive position or market share may deteriorate including as a result of actions by it or its competitors.
The Company operates in a competitive industry, and its competitors could include existing wheel manufacturers, new entrants and OEMs. The Company’s competitive position may
deteriorate, as a result of the action of any of these participants or any deterioration of its relationship with its customers.
Competitors may enter the market and take market share from the Company. Competitors may accelerate taking market share from the Company by developing equivalent or better
technology for one piece carbon fiber wheels, and/or by offering equivalent or better pricing, service and/or fulfillment rates than the Company offers. Competitors which are more financially secure than the Company may take market share from the
Company by offering more supply security for customers than the Company currently offers. OEMs may seek to establish alternative options for carbon fiber wheel supply to increase their own supply security and establish competitor supply tension.
Existing manufacturers of steel or aluminum wheels may seek to produce their own carbon fiber wheels. Any increase in the number of industry players manufacturing carbon fiber wheels may affect the demand for the Company’s wheels and may result in
downward pricing pressure for carbon fiber wheels which would impact the Company’s profitability, financial performance and prospects.
If the Company fails to maintain product design, manufacturing and performance leadership in the global automotive carbon fiber wheel market, the Company may have to quote
lower prices in order to win programs, which could result in lower than expected margins; or programs may be awarded to competitors, which could result in lower sales. In addition, other wheel technologies may be developed which are lighter than
carbon fiber wheels, and/or cheaper to make, and/or have other characteristics which make them more attractive to purchase for OEMs or end consumers than carbon fiber wheels. Any such circumstance may reduce the Company’s profitability and revenue.
The concentration of the Company’s wheel programs and customers may adversely affect demand for the Company’s wheels if its relationships with customers
deteriorate.
As of April 24, 2025, the Company has eleven active awarded programs with five OEMs, of which seven programs are currently in production with three of those OEMs and a further four awarded customer
programs are in development. Therefore, the number of customers that the Company currently has awarded programs with, is currently relatively concentrated, and the number of programs which the Company has in production at any single point in
time is relatively concentrated. In addition, the wheel programs the Company has been awarded are relatively concentrated in terms of vehicle type (being limited to premium and high-performance vehicles and premium performance SUVs and pickups
across internal combustion engine and electric vehicle drivetrains).
The Company’s OEM customers can readily terminate their relationship with the Company should they choose to do so including by ceasing ordering wheels from the Company, and can
significantly reduce orders, should they choose to do so, without major disruption to their business as the Company’s wheels are an optional upgrade in most instances and therefore the OEM customer generally has an alternative metal wheel that can
be fitted to the relevant vehicle.
The effect of losing any one OEM customer, or customer program (depending on its size), may significantly adversely affect the Company’s financial condition, cash flow and
liquidity position.
Also, in order to expand the type of customers, vehicle types and wheel programs, the Company may be required to reduce its wheel prices to open a larger addressable market. It
may not be able to do so easily and its gross margins and future profitability may decline, which may have a material adverse impact on the Company’s financial performance and prospects.
Finally, the recent departure of the long-standing CEO may impact relationships with one or more customers which may impact the ability to win new programs or otherwise result in
a disruption to or deterioration of relationship with one or more customer or potential customer.
The Company’s OEM customer relationships may deteriorate due to financial stress from general business conditions. In response to the Company seeking
improved trading conditions, including non-standard terms, changes to terms already agreed, or advanced payment from OEM customers, this may cause such customers to designate the Company a “distressed supplier,” which may have short and long term
impact on continued business with the OEMs, the terms upon which the OEMs are willing to continue engaging the Company, and the OEMs’ motivation to encourage competitors to the Company.
The Company’s relationship with its OEM customers is governed by contract which is generally based on the standard contracts of the customer. In order to assist the Company’s
cash and/or profitability position, the Company has requested and may request in future price increases, and/or non-standard contractual terms or changes of already agreed contractual terms, shorter payment terms or advance payments. As a result of
such requests, the Company’s OEM customers may qualify the Company as a “distressed supplier,” that is, a supplier facing financial or operational difficulties. The Company has had and continues to have negotiations with customers arising from
certain price increases and other “non-standard” terms that it has proposed. This may result in a deterioration of the business relationship and may create the risk that those OEM customers reduce their demand for the Company’s products, which
would cause the Company’s revenue, profitability and/or market share to decline. If any of the Company’s customers agree to requested variations or new trading terms, the varied or new terms may only apply for a limited period of time.
The Company’s estimates of the size of the addressable market may be incorrect.
The addressable carbon fiber wheel market and demand for carbon fiber automotive wheels may be smaller than the Company anticipates. This may occur if the benefits of carbon fiber wheels are not
perceived or well received in the industry, if the cost of carbon fiber wheels remains too high, if alternative products are brought to market, if market and industry trends cause a decline in demand for lightweight, high-performance carbon
fiber wheels. The addressable market and demand for carbon fiber automotive wheels may also be lower than anticipated due to changes in government policy, such as the introduction of new or increased tariffs which apply to the importation of the
Company’s wheels into the US or other countries and/or any delay or reduction in the uptake of electric vehicles associated with the removal or modification of government incentives or other forms of support for or relating to electric vehicles,
including in the US.
If the size of the market in which the Company operates is smaller than anticipated or demand for carbon fiber wheels is lower than anticipated, the Company’s products may be
limited to high end performance and luxury vehicles. This may restrict the Company’s ability to achieve its growth objectives which, in turn, may adversely impact its prospects. Additionally, the Company also intends to pursue growth opportunities
in adjacent markets, including the aerospace industry, and the industrial, freight and logistics market. The barriers to entry in these markets may be higher than anticipated, the length of time taken to enter these markets may be longer than
anticipated and there is no guarantee the Company’s products will be accepted in these markets to the extent the Company anticipates, or at all, and this may impact the Company’s ability to diversify into adjacent markets.
The Company may forego business or lose certain customer relationships as a result of not having the production capacity to meet customer demand, or not
having the funds to expand production capacity to meet customer demand, the Company may be liable to its customers if it cannot meet minimum capacity obligations.
The Company may not be able to meet customer demand for its wheels, whether such demand remains at current levels or increases, due to a variety of factors, including due to
financial and operational challenges outlined in this “Risk Factors” section. In such circumstances the Company will forego revenue and market share which it otherwise may have been able to capture. This may
further delay the Company reaching profitability and becoming cash flow positive, or otherwise reduce the Company’s profitability and financial performance. If the Company does not meet contractual minimum quantities which the Company commits to in
its contracts with customers (an obligation to have capacity to supply a specified minimum quantity of wheels for a given time period), it may become liable for damages towards its customers. This may also impact the Company’s cash flow and
profitability and in turn its financial performance and position.
The Company’s forecasts are based upon certain assumptions, including assumptions with respect to the ability to win new customer programs and the timing,
size and profitability of such programs, the timing of commencement of production of awarded programs, the timing and quantity of orders under awarded programs, and recognition of revenue, which assumptions may not be realized.
The Company’s forecasts are predicated on various assumptions relating to demand for its wheels. Under the Company’s current OEM supply contracts, which are typical of the
industry, customers are not committed to purchase a minimum number of wheels and therefore there is no guarantee that the Company will secure the sales volume it anticipates from its existing customer contracts. This may occur for reasons outside
the Company’s control, including if demand for the OEM’s vehicle on which the Company’s wheels are included is lower than expected, or where the Company’s wheels are an option on the relevant vehicle, the frequency with which consumers elect to
purchase the option is lower than anticipated by the Company. There is also no guarantee that customer programs will commence at the expected time or that the ramp in volumes will be as expected.
Additionally, the Company forecasts that it will win new customer program awards with customers and potential new customers. Discussions with OEMs for future programs (beyond the four existing awarded
programs that are not yet in production) are not yet at, or may be part way through, the RFQ stage. Failure to convert this pipeline of potential programs into additional contracts, delay in timing of new programs, or award of programs at lower
quantities or lower margins than expected, or any other failure to sell the volume of wheels, at the targeted price and margin that the Company anticipates, will result in the Company failing to meet its mid-to-long term growth targets, which
will adversely impact the Company’s performance and prospects.
The Company may fail to meet forecasts.
The forward-looking statements, opinions and estimates provided in this document, including the 12.5 Month Cash Flow Projections included in Item 5. Operating and Financial Review and Prospects of
this Report, rely on various estimates, contingencies and assumptions. Various factors, both known and unknown, may impact the Company’s performance and may cause actual results to vary significantly from expected results. Accordingly, our
future financial condition and results of operations may differ materially from our projections. Our failure to achieve our projected results could harm the trading price of the Company’s securities and its financial position. The Company
does not have or assume any duty to update the 12.5 Month Cash Flow Projections included in Item 5. Operating and Financial Review and Prospects of this Report.
Having been selling wheels to OEMs since 2015 on a small number of programs to date, the Company has a relatively limited operating history and has not yet reached cash flow breakeven from operations
or become profitable, and, as such, its operating history does not provide a meaningful basis for investors to evaluate the business or its financial performance and future prospects. Accordingly, investors should consider the Company’s business
and prospects in light of the risks, uncertainties, expenses and challenges that an early-stage business may face. The Company intends to further industrialize its operations and achieve scale in its wheel sales to achieve a material reduction in
its unit costs of production. As such, the Company’s ability to achieve its anticipated growth is dependent to a significant degree on the successful implementation of its industrialization plans and growth strategy, including designing,
developing, constructing, establishing and commissioning future manufacturing facilities in one or more low-cost jurisdictions. There is a risk that these plans may not be successful, or may take longer or cost more than anticipated, or not
receive the required funding.
There can be no guarantee that the Company will achieve its stated objectives or that any forward-looking statement or forecast will be realized.
The Company may not be able to reduce supply chain costs or production costs as quickly as expected or to the same extent as expected, resulting in higher
cost per wheel and lower margins than expected.
The Company is not yet profitable and expects to improve margins by significantly reducing labor costs per wheel and materials costs on a per wheel basis both in the near term
and in the longer term.
The Company expects to reduce materials costs by reusing and reducing cut carbon fiber waste, negotiating planned improved prices with certain suppliers as a result of volume
increases, substituting certain materials with lower cost materials, sourcing certain materials from lower cost providers, shifting its strategy from being a spot buyer to a long term contracted buyer for certain key materials, and consolidating
consumables purchases from many suppliers to a smaller number of suppliers, and implementing production processes and designs which utilize less material and production consumables. The Company expects to reduce labor costs by creating a fixed
labor operating leverage that drives efficiency as volumes scale, processes via robotics and conveyor systems of the Mega-line to replace human labor, and creating further labor efficiencies through planned cycle times and lean process
improvements.
However, there is a risk that these measures cannot be applied or realized or that these measures do not result in the expected savings. For example, the Company may not find
suitable uses for cut fiber waste or the price reduction does not eventuate or cannot be negotiated with the suppliers as expected, or the automation process does not progress or show the results as expected.
The Company is exposed to changes in prices of key inputs which are sourced from Europe, Asia, North America, and Australia including raw materials, energy and labor costs,
including those related to inflation, international conflicts (such as the Ukraine-Russia or Israel-Hamas and Israel-Hezbollah conflicts), and supply chain disruptions related to pandemics, strikes or work stoppages.
Any increase in the cost of freight, labor, carbon fiber, resins, energy costs or other key manufacturing inputs will increase the costs incurred by the Company in production
of its wheels which could reduce the Company’s future profitability, delay the Company from becoming profitable or it may otherwise have a material adverse effect on the Company’s financial performance and position.
The Company is subject to fluctuations in financial markets and exchange rates.
The financial information in the Company’s financial statements for financial year 30 June 2023 is presented in Euros. Subsequent to the Business Combination the Company incurs the majority of its
costs in Australian Dollars. Similarly, subsequent to the Business Combination a substantial amount of the Company’s revenues from wheel sales are generated in currencies other than Australian Dollars and a number of suppliers are paid in
currency other than Australian Dollars.
Although we may enter into certain hedging arrangements with respect to fluctuations in currency exchange rates and these foreign exchange exposures will also be reduced by the
natural hedging that arises from the purchase of raw materials and manufacturing equipment also denominated in foreign currencies, the Company is subject to adverse exchange rate movements, particularly, adverse movements in the USD:AUD exchange
rate and the EUR:AUD exchange rate. This risk is expected to become more significant in the future (as foreign denominated revenue is anticipated to grow as the vast majority of our planned growth in the near term is expected to come from customers
that are located in the U.S. and such foreign denominated revenue is expected to increase in parallel to our overall revenue growth). Furthermore, a significant proportion of the Company’s liabilities are denominated in foreign currency.
The Company may not have the ability to enter into foreign exchange hedging contracts with financial institutions or may not be able to enter into these contracts on favorable
terms. As such, adverse movements in exchange rates mentioned above, may result in an increase in cost or materials and/or a reduction in revenue, which may materially impact the Company’s financial condition and liquidity position.
The introduction of tariffs may negatively impact the Company.
The Company exports all of its products overseas, and the recent increases in tariffs by the United States federal administration (including a 10% tariff on goods imported to the
United States from Australia, and a 25% tariff covering certain automotive parts (which is understood to take precedence over the 10% tariff on Australian-originated goods)) could impact the Company’s ability to sell its products, the price it
receives for them, or its margins, and this could adversely impact its profitability, financial performance and position. The increase in tariffs also results in an increase in the cost of shipping certain components directly from China to the
United States, which the Company may not be able to pass on to its United States based customers.
The increase in tariffs may also impact consumer demand for new automotive vehicles generally as a result of increased costs, or the vehicle programs on which the Company’s wheels are sold, regardless
of the price of the Company’s wheels. The increase in tariffs and the uncertainties associated with them may cause disruption to the US automotive industry, which may involve disruption to supply chains and delays to new vehicle launches. For example, the Company has experienced delays and other obstacles in the delivery of its carbon fiber wheels as a result of increased customs regulation and vigorous enforcement of technical requirements and may
encounter additional difficulties in the future. Such outcomes may adversely impact the Company’s profitability, financial performance and position.
Historically, tariffs have led to increased trade and political tensions, between not only the United States, and China, but also between the United States and other countries in the international
community. In response to tariffs, other countries have implemented retaliatory tariffs on goods from the United States. Any additional or retaliatory tariffs, as well as any tariffs that apply to the automotive industry which may also result in
a reduction in consumer demand due to higher prices being charged to consumers by OEMs, and/or reduced appetite from OEM customers for the Company’s wheels due to lower margins, and/or further disruption to the United States automotive industry,
all of which could negatively impact the Company.
Changes in government incentives or other forms of support for or relating to electric vehicles may negatively impact the Company.
Following the change in the federal administration of the United States in January 2025 there is a risk that the United States may remove or modify government incentives or other forms of support for
or relating to electric vehicles. Such a change may result in higher prices for electric vehicles, lower consumer demand for electric vehicles, delays in commencement of existing wheel programs for electric vehicles that the Company expects to
commence, and/or a reduction in OEM demand for future vehicle programs utilizing carbon fiber wheels. Such changes would be expected to be most relevant in the United States, which is a key market for the Company’s products, and would adversely
impact the Company’s financial impact and prospects.
Changes in regulations and policies may negatively impact the Company.
Government legislation and policies are subject to review and change from time to time. The Company’s operations may be affected by the requirement to comply with new legal and
regulatory regimes and also by the introduction of new or changes to international, federal, state or local government laws, regulations or policies which impact on the Company’s ability to operate, or sell products in particular markets.
For example, it has been suggested that the European Union may ban the use of carbon fiber in motor vehicles, and while such proposal has been withdrawn, there is a risk that the European Union or
other government may consider such a ban in future. Such a ban would have an adverse impact on the Company’s profitability, financial performance and position, and prospects.
New legislation or regulations may also result in additional costs being incurred in achieving compliance with such legislation or regulations. Failure to comply with such
legislation or regulations may result in fines, penalties and other expenditure and may also result in reputational damage for the Company.
Working capital financing may not be available, or may cost more, to fund the expected growth in working capital requirements of the Company’s business.
The Company expects to fund the working capital requirements associated with the growth in project revenues, in part, through securing increased working capital facilities
including certain advanced payment arrangements for the Company’s wheels, although there is no guarantee such advance payment arrangements will continue. The extent and cost of working capital financing available is subject to and may be impacted
by factors including the terms of its customer contracts, approvals from customers, approvals under the OIC Financing, the New Debt Program, any other debt provider following the refinancing or repayment of the New Debt Program, the amount of
security available for debt providers and broader debt market conditions (including interest rates).
The Company plans to continue to make investments to support its growth and may require additional funds to do so, including in order to develop new products, enhance
technology, scale and improve operating infrastructure, or acquire complementary businesses and technologies. To allow the Company to fund its operations or realize its envisaged growth, the Company may need to secure further working capital
financing. In addition, the ability to put in place working capital facilities, if such facilities are available to the Company (which is not guaranteed) is subject to and limited by restrictions under the OIC Financing and the New Debt Program and
the Company may experience difficulties in securing this or it may be more expensive than anticipated.
Any inability to raise funds when required, or on favorable terms, may have a material adverse effect on the continued development or growth prospects.
Non-compliance with applicable laws, regulations and OEM standards, including environmental laws and regulations or the cost of compliance therewith may
adversely affect the Company.
The Company is exposed to risks arising from failure or inability to comply with applicable laws, regulations and OEM standards and conditions, including environmental laws and
regulations, that apply in Australia and the international jurisdictions in which the Company operates and sells its wheels. As a result, the Company may be exposed to fines, litigation, or compensation to customers, regulators or other
stakeholders. This may adversely impact the Company’s reputation and financial performance and position.
To the extent that the Company’s plans involve engagement with customers or industry participants in the defense sector, such as the Australian Defence Force or other military
partners, suppliers or customers, and involvement in the defense supply chain, the Company will be required to comply with additional requirements and obligations in relation to security and export control. These requirements may require the
Company to incur expenditure in order to comply, and may cause delays in meeting defense program requirements.
Regulatory and OEM compliance costs may adversely affect the Company’s cash position.
We face additional business, political, regulatory, operational, financial and economic risks as part of our operation in international markets, which could
increase our costs or otherwise limit our growth.
Operating internationally, including by conducting manufacturing in locations with lower labor costs, and continuing to expand our business in new geographies is important to
our continued success and growth. As a result of our international operations and sales efforts, we face numerous challenges and risks that could harm our international operations, delay new product releases, increase our operating costs, and
hinder our ability to grow and detect underlying trends in our operations and business, and consequently adversely impact our business, financial condition, and results of operations. Such risks include, but are not limited to, the following:
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geopolitical and economic instability in and impacting the localities where we have foreign operations;
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rising inflation impacting the stability of our workforce and foreign operations;
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military conflicts impacting the localities where we have foreign operations;
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limited protection for, and vulnerability to unauthorized access to, reproduction, dissemination or theft of, our intellectual property rights, including our trade secrets;
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compliance with local laws and regulations, and unanticipated changes in local laws and regulations, including laws limiting the use of carbon fiber, environmental laws, and tax laws and
regulations;
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trade and foreign exchange restrictions and higher tariffs;
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the complexity of managing international trade sanctions and export restrictions from the jurisdictions in which we have foreign operations;
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fluctuations in foreign currency exchange rates which may increase our expenses for employee compensation and other operating expenses that are paid in currencies other than Australian dollars;
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restrictions imposed by the United States government against other countries, or foreign governments’ restrictions imposed on the United States, impacting our ability to do business with certain companies or
in certain countries and the complexity of complying with those restrictions;
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power outages, natural disasters, and other local events that could affect the availability of the internet and the consequences of disruptions, such as large-scale outages or interruptions of service from
utilities or telecommunications providers;
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difficulties in staffing international operations;
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changes in immigration policies which may impact our ability to hire personnel;
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differing employment practices, laws, and labor relations; and
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regional health issues and the impact of public health epidemics and pandemics on employees and the global economy.
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Economic developments such as inflation or raising interest rates may adversely affect the Company’s operations and profitability.
The Company’s labor costs, raw material and services costs, and other operating costs are dependent on the general economic market situation including inflation and raising
interest rates. As described under the risk factor above titled “— The margin received by the Company for its wheels may be lower than expected. Similarly, the Company may not recover engineering and development or
tooling costs from its customers to the extent expected.” The Company may not be able to pass through all of its incurred costs for engineering, development or tooling or an increase of such costs to its customers which may impact the
Company’s ability to generate revenue. Failure to generate sufficient revenue may in turn impact the Company’s financial performance and position.
Not being able to pass through costs to the Company’s customers may also lead to the Company needing to raise more funding which, as shown under the risk factors above titled “—Working capital financing may not be available, or may cost more, to fund the expected growth in working capital requirements of the Company’s business”, and “—The Company is
not yet profitable or cash flow positive. The Company will need to raise additional capital to continue operating, and it may not be able to do so”, may not be available or not available on acceptable terms which also may have a material
adverse effect on the continued development or growth and may impact the Company’s financial performance and prospects.
Research and development work may cost more than expected or take longer than expected or not deliver the expected results.
The Company strongly invests in research and development work to improve its product technology and production efficiency, to bring its production processes to full
industrialization, expand its production capacity, and to further develop an increased number of customer programs.
The cost of such research and development work has in the past been and may be higher than expected, or results have in the past been and may be delivered later than expected.
Research and development work may result in no benefit at all. These outcomes may adversely affect the Company’s ability to move programs from the development phase into a supply phase and may diminish the Company’s prospects of securing new
programs with existing and new customers. It may also adversely impact the Company’s product technology and innovation pipeline, its plans to improve production efficiency and reduce the cost of producing wheels, and its industrialization and/or
capacity expansion plans. This may impact the Company’s ability to achieve expected levels of sales and profitability and therefore its financial performance and growth prospects.
The Company may be unable to obtain tax incentives or realize the benefit of accumulated tax losses in the future.
If the Company is not able to obtain sufficient short-term financing to pay its expenses or if the Company does not otherwise reach profitability, it will not be able to realize the benefit of
accumulated tax losses. As of June 30, 2024, Carbon Revolution had income tax loss credits of A$66.8 million and R&D tax credits of A$34.9 million (as of June 30, 2023 Carbon Revolution PL had income tax loss credits of A$51.8 million and
R&D tax credits of A$27.9 million, and as of June 30, 2022 Carbon Revolution PL had income tax loss credits of A$38.7 million and R&D tax credits of A$23.0 million) for which no deferred tax asset is recognized on the statement of
financial position as they are currently not considered probable of realization. Other existing or future tax legislation may adversely impact the Company’s ability to realize the benefit of accumulated tax losses.
The Company may be or become a PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders.
If the Company is, or the Company or any of its predecessors has been, during any taxable year in which a U.S. Holder holds or has held an interest in the Company (or any such
predecessor), treated as a passive foreign investment company (“PFIC”) for any such taxable year, or portion thereof, such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting
requirements. See “Item 10. Additional Information—Taxation— Material U.S. Federal Tax Considerations—Consequences to U.S. Holders—Tax Consequences of Ownership and Disposition of Ordinary Shares and Public
Warrants—Passive Foreign Investment Company Rules” for a more detailed discussion with respect to the Company’s PFIC status. Prospective U.S. Holders of Ordinary Shares or Public Warrants are urged to consult their tax advisors regarding
the possible application of the PFIC rules to them.
The Company has received government grant payments that may be subject to clawback, and expects to receive a future government grant payment which may not
materialize.
The Company is a recipient of grant funding under various grants that include obligations to repay grant funding received in certain circumstances, including where the Company
is in breach of certain obligations under the relevant agreements, such as, where applicable, by giving up ownership of assets purchased with grant funds without consent, using the grant funding for unauthorized expenditure, or failing to comply
with budget, timeline, reporting or other requirements. If the Company was required to repay any such funding, it may have a negative impact on the Company’s available funds, and may require the Company to delay or cancel planned investments for
increasing its production capacity, which could have a material and adverse impact on the Company’s cash flow and financial condition. Such circumstances may also constitute a default under the New Debt Program and/or the OIC Financing.
The Subsidiaries of the Company, which became part of the Group in November 2023, (the “Subsidiaries”) have received all A$10 million in grant payments under a Victorian
Government Grant of A$10 million. The final installment of A$2 million was received in December 2022 in advance of the Company achieving certain milestones relating to capital expenditures and people employed in FY23, FY24 and FY25. There is a risk
that the Company does not achieve the people employed milestone at the end of FY25.
In December 2022, a payment of A$9 million was received from the Australian Federal Government for the Manufacturing Integration Stream Grant (“MMI grant”) for a project entitled “A sustainable and
efficient wheel supply to the global electric vehicle market”, a key part of which is supporting the Company to scale up its production capacity. A further A$2.5 million payment under this grant was paid in November 2024 and a further A$0.5
million is expected to be paid after March 31, 2025. There is a risk that following the provision of its final report, it is determined that the Company does not achieve the final project milestones as at March 31, 2025.
Under the relevant grant agreements, the government has a right to require all or part of a grant to be repaid in certain circumstances (which in some cases vary between the
different agreements), including where the Company does not achieve a project milestone or otherwise defaults under the agreement (and, if applicable under the relevant agreement, where a remediable breach is not remedied), where the government
terminates the agreement for cause (such as where the Company breaches the agreement, or provides misleading information, becomes bankrupt or insolvent, enters into a scheme of arrangement with creditors, or comes under any form of external
administration), where the grant agreement is canceled or reduced in scope due to a change in government policy, or where the Company undergoes a change in control which the government reasonably believes will negatively affect the Company’s
ability to comply with the agreement.
Any failure by the Company to comply with relevant requirements under the MMI grant agreement, may also impact the Company’s eligibility for the expected future grant
installment under that agreement. If existing funding is clawed back, it may require the Company to divert amounts intended for other expenditure, including to support increasing its production capacity. If that occurred, the Company’s cash flow
and financial condition may be materially and adversely affected.
Known and unknown legal proceedings, regulatory proceedings, investigations or claims against the Company may be costly and time-consuming to defend and may
harm its reputation and damage its business regardless of the outcome.
The Company may be involved in disputes or litigation with third parties including suppliers, customers, employees, former employees and government bodies in the ordinary
course of business.
The Subsidiaries have in the past received claims, allegations or suggestions from customers or suppliers that they have or may have been in breach of a contractual or other
obligation or otherwise owe such third parties money. Some of such issues remain unresolved and may result in contractual disputes, litigation or the Company or Subsidiaries agreeing to settlement terms involving the Company or Subsidiaries paying
a settlement sum to one or more such third parties and may also result in a deterioration of the relationship with any such third party which may have a material adverse impact on the Company’s financial performance and condition.
Litigation proceedings may be costly, may consume the attention and resources of management and other personnel, may impact relationships with the relevant counterparty, and
may impact the Company’s reputation, and therefore may have a material adverse effect on the Company’s business, cash flow, and financial position.
An adverse finding in a litigation may also result in the Company being required to pay the legal costs of the other party and damages or other amounts awarded in favor of the
other party.
Insurance might not cover any or all of the costs of the litigation, or might not continue to be available at terms acceptable to the Company.
The Company and Carbon Revolution PL, a subsidiary of the Company, have identified material weaknesses in their internal control over financial reporting.
If the Company and Carbon Revolution PL are unable to remediate these material weaknesses in their financial statements, or if the Company identifies material weaknesses in the future or otherwise fails to maintain an effective system of internal
control over financial reporting, this may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations.
As a Nasdaq-listed company, the Company is required to provide management’s attestation on internal control over financial reporting. Management may not be able to maintain
controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements. If the Company is not able to maintain the additional requirements of Section 404(a) of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) with adequate compliance, it may not be able to assess whether its internal control over financial reporting is effective, which may subject it to adverse regulatory consequences and could harm investor confidence.
Carbon Revolution PL is a wholly owned subsidiary of the Company and the Company will be required to consolidate the financial statements of Carbon Revolution PL and its subsidiaries with those of the
Company in the next reporting period. In connection with the preparation and audit of the Company’s financial statements as of June 30, 2023 and for the year ended June 30, 2023, and for Carbon Revolution PL’s financial statements as of June 30,
2023 and June 30, 2022 and for the years ended June 30, 2023 and June 30, 2022, material weaknesses were identified in internal control over financial reporting. Efforts to remediate such weaknesses remain ongoing as of the date of the Report.
The audit of Carbon Revolution PL’s 2022 and 2021 financial statements resulted in restatements of the financial statements, including an adjustment to intangible assets, the reclassification of a supplier finance arrangement from trade payables
to borrowings, and a reclassification of contract assets and liabilities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a
material misstatement of a company’s annual or interim financial statements will not be prevented or detected.
The material weaknesses referenced above that were identified in each of the Company’s and Carbon Revolution PL’s financial statements are described below:
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Lack of appropriately designed, implemented and documented procedures and controls at both entity- and process-level to allow for either the Company or Carbon Revolution PL to achieve complete, accurate and
timely financial reporting. This is pervasive across the entity-level and each of the key business processes, including controls over the preparation and review of account reconciliations and journal entries, and controls over information
technology to ensure access to financial data is adequately restricted to appropriate personnel.
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Segregation of duties has not been sufficiently established across the key business and financial processes. Given the size, nature of the organization and the current structure of the finance function, a
lack of segregation of duties applied to the key business and financial processes across the organization has been identified. A consequence of the lack of segregation of duties is the heightened risk of fraud or material misstatement when
no appropriate mitigating controls are in place.
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Lack of personnel with appropriate knowledge and experience relating to SEC reporting requirements to enable the entity to design and maintain an effective financial reporting process. A lack of knowledge and
experience in these areas may lead to the Company being in breach of SEC financial reporting and other related requirements, especially given that the current finance function has not been designed to include sufficient accounting and
financial reporting personnel with the requisite knowledge and experience in the application of SEC financial reporting rules and regulations.
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The Company and Carbon Revolution PL is in the process of preparing a plan to remediate these material weaknesses that were identified in the conduct of the Company’s and Carbon Revolution PL’s audit.
These remediation measures are ongoing and may include hiring additional accounting and financial reporting personnel and implementing additional policies, procedures and controls.
In order to maintain and improve the effectiveness of its internal control over financial reporting, the Company will expend and anticipates that it will continue to expend,
significant resources, including accounting-related costs and significant management oversight. The Company’s independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over
financial reporting until after it is no longer an emerging growth company. At such time, the Company’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which the
Company’s internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could adversely affect the business and operating results
and could cause a decline in the price of the Ordinary Shares. These material weaknesses will not be considered remediated until the mitigating controls have operated for the required period of time and until the operating effectiveness of the
controls has been validated, through testing, by management.
The Company’s business activities may be subject to the Foreign Corrupt Practices Act of 1977 (“FCPA”) and similar anti-bribery and anti-corruption laws.
The Company’s business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which it operates or
has customers, including the UK Bribery Act 2010. The FCPA generally prohibits offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence
official action, or breach the official’s duties or gain an improper advantage, in each case, to assist in obtaining, retaining or directing any business to, for or with any person. The FCPA also requires public companies with securities listed in
the United States to make and keep books and records that accurately and fairly reflect the transactions of the corporation, and to devise and maintain an adequate system of internal accounting controls. The Company’s business involves interactions
with public officials, including officials of non-U.S. governments, including with the Australian Defence Force. Despite the Company taking reasonable steps to prevent bribery and corruption within its business, there is no certainty that all of
its employees, agents, contractors or collaborators, or those of its affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could
result in fines, criminal sanctions against the Company, its officers or employees, implementation of compliance programs, and prohibitions on the conduct of its business (such as being suspended or debarred from contracting with the U.S. Federal
Government). Any such violations could include prohibitions on its ability to offer its products in one or more countries and could materially damage its reputation, brand, international expansion efforts, ability to attract and retain employees,
and business, prospects, operating results and financial condition.
The Company’s international operations are subject to laws and regulations relating to export controls and economic sanctions that could impair its ability
to compete in international markets. Non-compliance could also have an adverse effect on its business.
The Company’s products and services are, or in the future may be, subject to the U.S. Export Administration Regulations (“EAR”), the International Traffic In Arms Regulations
(“ITAR”), and similar foreign export control laws. As such, an export license or other authorization may be required to export, re-export, transfer, or disclose its technology, products and services to certain persons, countries or end-users, or
for certain end-uses. The Company may also need to monitor changes in export control laws and their applicability to its products and services. For example, to the extent its products or services are subject to the EAR or the ITAR, it may be
required to obtain licenses, clearances, registrations, or authorizations necessary for its business. If the Company is not authorized to export its products or services, or if the clearance process is burdensome, its ability to generate revenue
could be adversely affected and its operating costs could increase.
The Company must also comply with all applicable economic sanctions, laws and regulations of the United States and other countries, such as laws administered by the U.S.
Department of the Treasury’s Office of Foreign Assets Control, which restrict dealings with specified countries, regions, governments, individuals, and entities.
Complying with export control and economic sanction laws may be time consuming and may result in the delay or loss of sales opportunities or a diminution of profits. Although
the Company takes precautions to prevent violations of applicable export control and economic sanction laws, it cannot guarantee that these precautions will be effective. Violations of these laws could result in significant criminal or civil fines,
penalties, denial of export privileges, or other repercussions, including reputational harm, which could have a material adverse effect on its business, financial condition, and operating results. Investigation of any potential violations of export
control or economic sanction laws could also be costly and time-consuming, even if it is ultimately determined that the Company did not violate such laws.
Failure to comply with laws, regulations, requirements, or expectations relating to privacy or the protection or transfer of data relating to individuals
could adversely affect our business.
The Company may face legal, reputational, and financial risk if it fails to comply with laws, regulations, requirements, or expectations relating to privacy or data protection
including in relation to the protection or transfer of information or data about or relating to individuals. Any such failure could result in complaints or similar processes, regulatory investigations or inquiries, other regulatory actions,
contractual breaches, litigation, adverse administrative determinations or court orders or rulings including fines, loss of customers or adversely affected customer relationships, and negative publicity and associated reputational damage. All of
the foregoing could adversely affect the Company’s business and prospects.
Risks Related to Irish Law
The Company is incorporated in Ireland; Irish law differs from the laws in effect in the United States and accordingly the rights afforded to shareholders
under Irish law may be different to those afforded to shareholders under United States law.
The Company is an Irish incorporated public limited company. There is some uncertainty as to whether the courts of
Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against us or those persons based
on those laws. The U.S. and Ireland do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters and, accordingly, common law rules apply in
determining whether a judgment obtained in a U.S. court is enforceable in Ireland. Although there are processes under Irish law for enforcing a judgment of a U.S. court, including seeking summary judgment in a new action in Ireland, those
processes are subject to certain established principles and conditions, and there can be no assurance that an Irish court would enforce a judgment of a U.S. court in this way, and thereby impose civil liability on us or our directors or officers.
As an Irish company, the Company is governed by the Irish Companies Act 2014 (the “ICA”), which differs in some material respects from laws generally applicable to U.S.
corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the
company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly,
holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S.
As an Irish public limited company, certain decisions to change the capital structure of the Company will require the approval of the Company shareholders,
which may limit the Company’s flexibility with respect to managing its capital structure.
The Company is an Irish incorporated public limited company. As an Irish incorporated public limited company, certain capital structure decisions regarding the Company will
require the approval of the Company’s shareholders, which may limit our flexibility to manage our capital structure. Under Irish law, the directors of a company may only allot and issue “relevant securities” (comprising, subject to certain
exceptions, new shares and rights to subscribe for, or convert any security into, new shares) once generally or specifically authorized to do so by its constitution or by a resolution approved by a simple majority of the votes cast at a general
meeting of its shareholders at which a quorum is present, referred to under Irish law as an “ordinary resolution.” A general authorization may be granted in respect of up to the entirety of a company’s authorized but unissued share capital and for
a maximum period of five years, at which point it must be renewed by another ordinary resolution. The Company Amended and Restated Memorandum and Articles of Association authorize the Company Board to allot and issue new shares and rights to
subscribe for, or convert any security into, new shares in the capital of the Company up to the maximum of the Company’s authorized but unissued share capital for a period of five years from the date of adoption. This authorization will need to be
renewed by ordinary resolution upon its expiration and at periodic intervals thereafter. While an allotment authority may be given for up to five years at each renewal, governance considerations may result in renewals for shorter periods or in
respect of less than the maximum permitted number of relevant securities being sought or approved. Any increase in the Company’s authorized share capital also requires approval by an ordinary resolution.
Subject to certain exceptions, Irish law also provides shareholders with statutory pre-emption rights when “equity securities” (comprising, subject to certain exceptions, new
shares, and rights to subscribe for, or convert any securities into, new shares) are issued for cash. However, it is possible for such statutory pre-emption rights to be generally or specifically disapplied in a company’s constitution or by a
resolution approved by not less than 75% of the votes cast at a general meeting of its shareholders at which a quorum is present, referred to under Irish law as a “special resolution”. A general disapplication of pre-emption rights may be given in
respect of up to the entirety of a company’s authorized but unissued share capital and for a maximum period of five years, at which point it must be renewed by another special resolution. The Company Amended and Restated Memorandum and Articles of
Association disapply statutory pre-emption rights up to the maximum of the authorized but unissued share capital for a period of five years from the date of adoption. The disapplication will need to be renewed by special resolution upon its
expiration and at periodic intervals thereafter. While a disapplication of statutory pre-emption rights may be given for up to five years at each renewal, governance considerations may result in renewals for shorter periods or in respect of less
than the maximum permitted number of equity securities being sought or approved.
Any attempted takeover of the Company will be subject to the Irish Takeover Rules and will be under the jurisdiction of the Irish Takeover Panel.
The Company will be subject to the Irish Takeover Rules, which regulate the conduct of takeovers of, and certain other relevant transactions affecting, Irish public limited
companies listed on certain stock exchanges, including Nasdaq. The Irish Takeover Rules are administered by the Irish Takeover Panel, which has supervisory jurisdiction over such transactions. Among other matters, the Irish Takeover Rules operate
to ensure that no offer is frustrated or unfairly prejudiced and, in situations involving multiple bidders, that there is a level playing field. For example, pursuant to the Irish Takeover Rules, the Company Board will not be permitted, without
shareholder approval, to take certain actions which might frustrate an offer for the Ordinary Shares once the Company Board has received an approach that might lead to an offer or has reason to believe that an offer is, or may be, imminent.
Under the Irish Takeover Rules, if an acquisition of the Ordinary Shares were to increase the aggregate holdings of the acquirer (together with its concert parties) to 30% or
more of the voting rights of the Company, such acquirer and, in certain circumstances, its concert parties would be required (except with the consent of the Irish Takeover Panel) to make an offer for the outstanding the Ordinary Shares at a price
not less than the highest price paid by such acquirer or its concert parties for the Ordinary Shares during the previous 12 months. This requirement would also be triggered by the acquisition of the Ordinary Shares by any person holding (together
with its concert parties) between 30% and 50% of the voting rights of the Company if the effect of such acquisition were to increase that person’s voting rights by 0.05% within a 12-month period.
Under the Irish Takeover Rules, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of the Company may be required to make a
mandatory cash offer for the remaining shares of the Company.
Under the Irish Takeover Rules, in certain circumstances, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of the Company may be required to
make a mandatory cash offer for the remaining shares of the Company at a price not less than the highest price paid for the shares by that person or its concert parties during the previous 12 months. Save with the consent of the Irish Takeover
Panel, this mandatory offer requirement is triggered: (i) if an acquisition of shares would result in a person or persons acting in concert holding shares representing 30% or more of the voting rights of the Company; and (ii) where a person, or
persons acting in concert, already hold(s) shares representing 30% or more of the voting rights of the Company, if an acquisition of shares would result in the percentage of the voting rights of the Company held by such person, or persons acting in
concert, increasing by more than 0.05% within a 12-month period. In the case of an issuance of new shares, the Irish Takeover Panel will typically waive the mandatory offer requirement in circumstances where the issuance has been approved in
advance by simple majority vote given at a general meeting of the independent (i.e., not interested) Company shareholders convened in accordance with the requirements (including as to disclosure) of the Irish Takeover Rules. The mandatory offer
requirements do not apply to a single holder, holding shares representing more than 50% of the voting rights of the Company.
Provisions in the Company Amended and Restated Memorandum and Articles of Association enable a person who would otherwise incur a mandatory offer obligation under the Irish
Takeover Rules by the acquisition of the Ordinary Shares to avoid that obligation by requesting that the Company redesignate some or all of its Ordinary Shares as Restricted Voting Ordinary Shares having no right to vote at general meetings of the
Company but otherwise ranking pari passu with the other Ordinary Shares.
The Company’s staggered board will limit shareholders’ ability to influence matters of corporate governance and may deter others from pursuing change of
control transactions.
The Company Amended and Restated Memorandum and Articles of Association provide that the Company Board has three classes of directors with the directors of each class serving
staggered three-year terms. In addition, from January 2, 2024 and for so long as any Class A Preferred Shares remain outstanding, the Class A Preferred Majority is entitled from time to time to appoint two Class A Preferred Directors and to remove
and/or replace such Class A Preferred Directors. The Company’s staggered board of directors and the rights of the Class A Preferred Majority may limit your ability to influence corporate matters and could also discourage others from pursuing any
potential merger, takeover, or other change of control transactions, which could have the effect of depriving the holders of the Ordinary Shares and the Public Warrants of the opportunity to sell their Ordinary Shares at a premium over the
prevailing market price. Additionally, the Company’s staggered board of directors and the rights of the Class A Preferred Majority may discourage proxy contests for the election of directors and purchases of substantial blocks of Ordinary Shares by
making it more difficult for a potential acquirer to gain control of or influence with the Company Board.
Provisions in the Company Amended and Restated Memorandum and Articles of Association (including anti-takeover provisions) and under Irish law could make an
acquisition of the Company more difficult, may limit attempts by the Company shareholders to replace or remove the Company directors, may limit shareholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company
directors, officers, or employees, and may impact the market price of the Ordinary Shares and/or the Company warrants.
Provisions in the Company Amended and Restated Memorandum and Articles of Association may have the effect of delaying or preventing a change of control or changes in the
Company’s management. The Company Amended and Restated Memorandum and Articles of Association includes provisions that:
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require that the Company Board be classified into three classes of directors with staggered three-year terms;
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permit the Company Board to fill any vacancies; and
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prohibit shareholder action by written consent without unanimous approval of all holders of the Ordinary Shares.
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The Company Amended and Restated Memorandum and Articles of Association contain provisions that may delay or prevent a change of control, discourage bids at a premium over the
market price of the Ordinary Shares, adversely affect the market price of the Ordinary Shares, and adversely affect the voting and other rights of shareholders of the Company. These provisions include: (i) permitting the Company Board to issue
preference shares without the approval of the Company’s shareholders, with such rights, preferences and privileges as they may designate; and (ii) allowing the Company Board to adopt a shareholder rights plan upon such terms and conditions as it
deems expedient in the interests of the Company.
The Company Amended and Restated Memorandum and Articles of Association provides that unless the Company consents in writing to the selection of an alternative forum, the
federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Exchange Act or the Securities Act (the
“Federal Forum Provision”). Further, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. The Company’s decision to adopt the Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that
federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by the
Company’s shareholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and
regulations thereunder and the Company Amended and Restated Memorandum and Articles of Association confirms that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause
of action arising under the Exchange Act. Accordingly, actions by the Company’s shareholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of the Company’s securities shall be deemed to have notice of and consented to the
Company’s exclusive forum provisions, including the Federal Forum Provision. Additionally, the Company’s shareholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. These provisions may lead to
the Company’s shareholders incurring increased costs if they were to bring a claim against the Company, and may limit the Company’s shareholders’ ability to bring a claim in a judicial forum they find favorable for disputes with the Company or the
Company’s directors, officers, or other employees or agents, which may discourage lawsuits against the Company and the Company’s directors, officers and other employees and agents. Alternatively, if a court were to find the choice of forum
provision contained in the Company Amended and Restated Memorandum and Articles of Association to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions,
which may have an adverse effect on the Company’s business, financial condition and results of operations.
As a matter of Irish law, the Company’s shareholders are bound by the provisions of the Company Amended and Restated Memorandum and Articles of Association. An Irish court
would be expected to recognize the exclusive jurisdiction of the federal district courts of the United States of America in respect of causes of action arising under the Exchange Act or the Securities Act.
Irish law requires the Company to have available “distributable profits” to pay dividends to shareholders and generally to make share repurchases and
redemptions.
Under Irish law, the Company may only pay dividends and make other distributions (and, generally, make share repurchases and redemptions) out of “distributable profits” shown
on its unconsolidated financial statements prepared in accordance with the ICA and filed with the Irish Companies Registration Office. Distributable profits are the accumulated realized profits of the Company that have not previously been utilized
in a distribution or capitalization less accumulated realized losses that have not previously been written off in a reduction or reorganization of capital, and include reserves created by way of a reduction of capital. In addition, no dividend may
be paid or other distribution, share repurchase or redemption made by the Company unless the net assets of the Company are equal to, or exceed, the aggregate of the Company’s called up share capital plus its undistributable reserves and the
dividend or other distribution, share repurchase or redemption does not reduce the Company’s net assets below such aggregate. Undistributable reserves include the undenominated capital, the capital redemption reserve fund, and the amount by which
the Company accumulated unrealized profits that have not previously been utilized by any capitalization exceed the Company’s accumulated unrealized losses that have not previously been written off in a reduction or reorganization of capital.
Following the Initial Closing, the Company implemented a share capital reduction intended to create a level of distributable profits which are available to cover, in part, the amount of any cash dividend or redemption amount payable to the holders
of the Preferred Shares. The funds included in the Company’s reserves will be permitted to be used for paying dividends and redeeming the Preferred Shares, which may reduce the Company’s funds available to fund operations and the Company’s growth
without any amounts expended in such dividends or redemptions being paid to holders of Ordinary Shares.
In certain limited circumstances, dividends paid by the Company may be subject to Irish dividend withholding tax.
The Company currently does not expect to pay any cash dividends on the Ordinary Shares. If the Company were to declare and pay dividends, in certain limited circumstances, dividend withholding tax
(currently at a rate of 25%) may arise in respect of dividends paid on the Ordinary Shares or on the preferred shares issued by the Company. A number of exemptions from dividend withholding tax exist such that shareholders resident in the U.S.
and other exempt countries may be entitled to exemptions from dividend withholding tax.
The Irish Revenue Commissioners have confirmed that shareholders resident in the U.S. that hold Ordinary Shares through the Depository Trust Company (“DTC”) will not be subject to dividend withholding
tax, provided the addresses of the beneficial owners of such Ordinary Shares in the records of the brokers holding such Ordinary Shares are recorded as being in the U.S. (and such brokers have further transmitted the relevant information to a
qualifying intermediary appointed by the Company). However, other holders of Ordinary Shares or holders of preferred shares may be subject to dividend withholding tax, which could adversely affect the price of their Ordinary Shares or preferred
shares (as relevant).
Dividends received by Irish residents and certain other shareholders may be subject to Irish income tax.
Dividends received by Irish residents and certain other shareholders may in certain circumstances be subject to Irish income tax. Shareholders entitled to an exemption from
Irish dividend withholding tax on dividends received from the Company will not be subject to Irish income tax in respect of those dividends unless they have some connection with Ireland other than their shareholding in the Company (for example,
they are resident in Ireland). Shareholders who receive dividends subject to Irish dividend withholding tax will generally have no further liability to Irish income tax on those dividends.
The Ordinary Shares, preferred shares, or warrants issued by the Company received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.
Irish capital acquisitions tax (“CAT”) could apply to a gift or inheritance of the Ordinary Shares or the warrants issued by the Company irrespective of the place of residence, ordinary residence or
domicile of the parties. This is because the Ordinary Shares, preferred shares or warrants issued by the Company will be regarded as property situated in Ireland. The person who receives the gift or inheritance has primary liability for CAT.
Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of €335,000 in respect of taxable gifts or inheritances received from their parents.
It is recommended that each shareholder consult his or her own tax advisor as to the tax consequences of holding Ordinary Shares, preferred shares or warrants issued by the Company in, and receiving
distributions from, the Company.
Certain transfers of Ordinary Shares, preferred shares and warrants issued by the Company may be subject to Irish stamp duty.
A transfer of Ordinary Shares, preferred shares or warrants issued by the Company, other than one effected by means of the transfer of book-entry interests in DTC, may be subject to Irish stamp duty.
The Irish Revenue Commissioners have confirmed that transfers of Ordinary Shares or Public Warrants effected by means of the transfer of book-entry interests in DTC will not be
subject to Irish stamp duty.
However, if you hold your Ordinary Shares or Public Warrants or other shares or warrants issued by the Company directly rather than beneficially through DTC, any transfer of such securities could be
subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paid or the market value of the securities acquired). Payment of Irish stamp duty is generally a legal obligation of the transferee. The potential for stamp duty
could adversely affect the price of your securities.
Investors may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts may be limited,
because the Company is formed under Irish law.
The Company is a company formed under the laws of Ireland, and all or majority of the Company’s assets are and are likely in the future to be located outside of the United States. As a result, it may
be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights against the Company, to effect service of process upon the Company’s directors or officers or to enforce judgements of United States
courts predicated upon civil liabilities and criminal penalties on the Company’s directors under United States laws.
The Company’s corporate affairs are governed by the Company Amended and Restated Memorandum and Articles of Association, the ICA and the common law of Ireland. The rights of
shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of the Company’s directors under Irish law are governed by the ICA and the common law of Ireland. The rights of the Company
shareholders and the fiduciary responsibilities of the Company’s directors under Irish law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, Ireland
has a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law.
Risks Related to Ownership of Our Securities
The market price of securities may be volatile and may fluctuate due to factors beyond our control.
The market price of shares of our securities could be subject to wide fluctuations in response to many risk factors listed in this “Risk Factors” section,
and others beyond our control, including:
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our inability to raise additional capital and the terms on which we raise it;
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our inability to enter into new contracts with customers;
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the timing of our entry into contracts with customers and the size and profitability of such contracts;
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our competitors’ products;
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manufacturing or other issues with respect to our products;
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our inability to adequately protect our proprietary rights, including patents, trademarks and trade secrets;
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regulatory developments, including actions with respect to our products or our competitors’ products;
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actual or anticipated fluctuations in our financial condition and operating results;
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publication of research reports by securities analysts about us or our competitors or our industry;
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our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
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additions and departures of key personnel;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
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sales of our securities by us, our insiders or our other shareholders;
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speculation in the press or investment community;
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announcement or expectation of additional financing efforts;
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changes in market conditions for the stock of companies in our industry; and
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changes in general market and economic conditions.
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In addition, the stock market has historically experienced significant volatility. The volatility of company stocks within our industry often does not relate to the operating
performance of the companies represented by the stock. As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our product candidates, or to a lesser extent, our markets. In
the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. Securities litigation could result in substantial costs and divert our management’s attention and
resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
The Public Warrants and Founder Warrants may never be in the money and may expire worthless.
The exercise price for our Public Warrants and Founder Warrants is $11.50 for one-tenth of an Ordinary Share. Our Public Warrants and Founder Warrants may never be in the money
prior to their expiration, and as such, the warrants may expire worthless.
Warrant holders will have no rights as ordinary shareholders until they acquire our Ordinary Shares.
Until warrant holders acquire our Ordinary Shares upon exercise of such warrants, they will have no rights with respect to our Ordinary Shares issuable upon exercise of such
warrants, including the right to vote or respond to tender offers. Upon exercise of the warrants, holders will be entitled to exercise the rights of an ordinary shareholder only as to matters for which the record date occurs after the exercise
date.
Our operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause the price
of our securities to fluctuate or decline.
If our operating results fall below the expectations of investors or securities analysts, the price of our securities could decline substantially. Furthermore, any fluctuations
in our operating results may, in turn, cause the price of our securities to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our
future performance.
If securities or industry analysts do not continue to publish research, or publish inaccurate or unfavorable research, about our business, the price of our
securities and our trading volume could decline.
The trading market for our securities depends, in part, on the research and reports that securities or industry analyst or analysts may publish about us or our business. If one
or more of the analysts who may in future cover us downgrade our securities or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. In addition, if our operating results fail to meet the
forecast of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price
and trading volume of our securities to decline.
The issuance of Ordinary Shares in connection with the exercise of our outstanding warrants will dilute the ownership interest of the holders of our
Ordinary Shares and may materially affect the trading price of our Ordinary Shares.
As of April 24, 2025, we had outstanding 7,102,890 Public Warrants and 5,107,842 Founder Warrants, each exercisable for one-tenth of one Ordinary Shares at an exercise price of $11.50 for one-tenth
of an Ordinary Share. We also have certain OIC Warrants outstanding that are exercisable for $0.01 per Ordinary Share (adjusted from time to time in accordance with the terms of the OIC Warrants). See Item 10
Additional Information—Memorandum and Articles of Association—Warrants—OIC Warrants for more information. To the extent that warrant holders elect to exercise their warrants, substantial amounts of our Ordinary Shares may be issued in
the future. We cannot quantify the number of Ordinary Shares that will be issued in connection with the exercise, if any. However, the issuance of Ordinary Shares pursuant to such exercise could result in substantial dilution of the ownership
interests of holders of our Ordinary Shares and could materially affect the trading price of our Ordinary Shares.
We have never paid dividends and do not expect to pay any dividends in the foreseeable future.
We have not paid any cash dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend to reinvest any
earnings in our business and do not anticipate declaring or paying any cash dividends until we have an established revenue stream to support continuing dividends. Certain agreements to which we are a party, including the New Debt Program and the
OIC Financing restrict our ability to pay dividends. Further, since we are a holding company, our ability to pay dividends will be dependent upon the financial condition, liquidity and results of operations of, and our receipt of dividends, loans
or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business
considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us. Accordingly, investors in our securities cannot rely on dividend income, and any returns on an investment in our
securities will likely depend entirely upon any future appreciation in the price of such securities.
We are a foreign private issuer, and, as a result, we are not subject to certain rules and obligations that are applicable to a U.S. domestic public company
and are not subject to certain Nasdaq corporate governance listing standards that are applicable to a Nasdaq-listed U.S. domestic public company. Nevertheless, we are required to comply with the quantitative continued listing requirements to remain
listed on Nasdaq and cannot assure you that we will be able to do so.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act we are exempt
from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities, and liability for insiders who profit from trades made in a short period of time; and (iii) the
rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In
addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers are required to file their annual report on Form 10-K in less time.
Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information.
Furthermore, we have elected to comply with our home country requirements in lieu of Nasdaq shareholder approval requirements relating to issuance of our Ordinary Shares and,
in the future, may elect to rely upon other exemptions from other Nasdaq governance requirements. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are not foreign private issuers.
We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur
significant legal, accounting and other expenses.
We are a foreign private issuer, and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act
applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our Ordinary Shares must be either directly or indirectly owned of record by non-residents of the United States or
(b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50% of our assets cannot be located in the United States and (iii) our business must be administered principally outside the
United States. As of the date of this Annual Report, a majority of our directors are United States citizens or residents. Accordingly, unless a majority of our Ordinary Shares are either directly or indirectly owned of record by non-residents of
the United States as of December 31, 2025, we expect to cease qualifying as a foreign private issuer for the fiscal year ending June 30, 2026 and for all periods thereafter. If we lose this status, we would be required to comply with the Exchange
Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We would also no longer have the ability to elect in the future to rely upon any home
country exceptions from Nasdaq requirements applicable to foreign private issuers. In particular, our inability to rely upon the home country exception for foreign private issuers from the requirement to obtain shareholder approval to issue more
than 19.99% of the number of our Ordinary Shares then outstanding at a discount to the market price other than in a public offering in the future could severely limit our ability to raise capital and result in the imposition by investors of
stringent restrictions on our operations or financing activities or expensive penalties until we obtain such shareholder approval. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting
requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial
compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it may be more difficult and expensive for us to
obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain
qualified members of the Company Board.
In addition, regardless of whether we qualify as a foreign private issuer, we will be required to satisfy the continuing listing requirements for listing on Nasdaq. Such
requirements include maintaining either minimum net income, market capitalization or shareholders’ equity, as well as other requirements as to the number of publicly held shares. Based upon our current trading price and financial statements as of
June 30, 2024, we are not in compliance with any of the net income, market capitalization or shareholders’ equity requirements. As a result, we expect to receive a notice of non-compliance from Nasdaq. Within four business days of such notice, we
will report the receipt thereof. If our shares were to be delisted, it would have a material adverse effect on our share price, our ability to raise capital and, as a result, our business, liquidity and results of operations.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies make our Ordinary
Shares less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various
reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation.
We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Ordinary
Shares held by non-affiliates equals or exceeds $700 million as of the end of our second fiscal quarter before that time or if we have total annual gross revenues of $1.235 billion or more during any fiscal year before that time, in which cases we
would no longer be an emerging growth company as of the following fiscal year end; or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company
immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if
investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the price of our
securities may be more volatile. When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort towards ensuring compliance with them, and we cannot predict or estimate the amount or timing of
such additional costs.
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History and Development of the Company
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The legal name of the Company is Carbon Revolution Public Limited Company (formerly known as Poppetell Limited). The Company was incorporated in Ireland as a public limited
company on July 5, 2017 under the name ‘‘Poppetell Limited’’ and changed its name on December 6, 2022 to ‘‘Carbon Revolution Limited’’ for the purpose of effecting the Business Combination. The Company was re-registered as a public limited company
on May 29, 2023, upon which its name changed to ‘‘Carbon Revolution Public Limited Company’’. The Company’s registered office is 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland, +353-1-920-1000.
On November 3, 2023, the Company consummated the business combination pursuant to the terms of the BCA, dated November 29, 2022, as amended or supplemented from time to time, pursuant to which, among
other things, Twin Ridge merged with and into MergerSub, with MergerSub surviving as a wholly-owned subsidiary of the Company, with shareholders of Twin Ridge receiving Ordinary Shares, in exchange for their existing Twin Ridge ordinary shares
and existing Twin Ridge warrant holders having their warrants automatically exchanged by assumption by the Company of the obligations under such warrants, including to become exercisable in respect of Ordinary Shares instead of Twin Ridge
ordinary shares. Prior to the Business Combination, we did not conduct any material activities other than those incident to our formation and certain matters related to the Business Combination, such as the making of certain required securities
law filings and the establishment of subsidiaries to effect the Business Combination. Upon the closing of the Business Combination, Carbon Revolution PL became the direct, wholly owned subsidiary of the Company. The Company holds all material
assets and conducts all business activities and operations through Carbon Revolution PL and its subsidiaries. In addition, Twin Ridge, Carbon Revolution PL and the Company implemented a scheme of arrangement under Part 5.1 of the Corporations Act
2001 (Cth) and a capital reduction under Part 2J.1 of the Corporations Act 2001 (Cth) in accordance with the Scheme Implementation Deed, dated as of November 30, 2022, as amended or supplemented from time to time, which resulted in all shares of
Carbon Revolution PL being canceled in return for consideration, with Carbon Revolution PL issuing one share to the Company (resulting in Carbon Revolution PL becoming a wholly-owned subsidiary of the Company) and the Company issuing Ordinary
Shares to the shareholders of Carbon Revolution PL. In addition, the Company undertook a capital reduction under Irish law immediately after the issuance of ordinary shares to consummate the Transaction and issuance of preference shares to Orion
Infrastructure Capital (“OIC”). The capital reduction was undertaken for no consideration to shareholders.
The Company is currently driving the industrialization of its production processes, and has completed the initial phase of a new Mega-line. The initial phase of the Mega-line project plus associated
investments across the facility, constitute a staged expansion program to support expected future production requirements for awarded programs. This staged expansion program is planned to complete progressively through 2025 and early 2026 to
support projected volumes for awarded programs.
The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and information statements, and other information that the Company files with or
furnishes electronically to the SEC. These reports and other information are also available on the Company’s website at https://www.carbonrev.com/. The information contained on the Company’s website does not form a part of, and is not incorporated
by reference into, this Report.
| B. |
Business Overview
|
The Company
The Company had no operations prior to entering into the Scheme Implementation Deed and BCA. The Company’s sole purpose was to become a holding company following the Business Combination. Upon the
closing of the Business Combination, the Company became the direct parent of, and conducts its business through, its wholly-owned subsidiary, Carbon Revolution PL (previously Carbon Revolution Limited, an Australian public company listed on the
Australian Securities Exchange), and its wholly-owned subsidiary, Carbon Revolution Operations. Carbon Revolution PLC, while incorporated in Ireland, is an early stage technology company manufacturing advanced carbon fiber wheels for the global
automotive industry.
Carbon Revolution is a manufacturer of carbon fiber wheels. Carbon Revolution’s primary focus has been the manufacture of carbon fiber wheels for automobiles, and the business model
has focused on generating revenue via sales to original equipment vehicle manufacturer (“OEMs”). Established in 2007, Carbon Revolution is the first company globally to successfully develop and manufacture single-piece carbon fiber wheels to OEM
quality standards, with commercial adoption with several major OEMs and across numerous vehicle platforms to date. Carbon Revolution has also generated revenue via the sale of wheels in the aftersales and aftermarket channels.
Since its first OEM program for the Ford Shelby Mustang GT350R commenced production in 2015, we have been awarded a further 17 programs with six OEMs, and progressively increased production capacity
to address increasing OEM demand. We have penetrated the performance and premium end of the market with production programs to date including programs with Ford (GT and Mustang Shelby GT350R and GT500 and Mustang Dark Horse), Ferrari (including
the 488 Pista/ F8 Tributo & F8 Spider, SF90 Stradale, 812 Competizione, 296 GTB and GTS), General Motors (Chevrolet Corvette Z06/Z07 and E-Ray and Corvette ZR1), and Renault (Megane RS Trophy R). Jaguar Land Rover has now launched its Range
Rover Sport SV, the first SUV wheel program launch for Carbon Revolution. Recently Lamborghini launched the Temerario featuring Carbon Revolution’s carbon fiber wheels - Carbon Revolution’s first program for the major German OEM, Volkswagen
Group.
The Company is currently supplying wheels to global OEMs for luxury and high-performance vehicles and SUVs across both internal combustion engine and electric vehicle (“EV”)
drivetrains under contract for its OEM customers.
As of April 24, 2025, the Company has eleven active awarded programs with five global OEMs (seven of which programs are currently in production and four of which are in the development phase). In
addition to this, the Company has seven programs in aftersales, making a total lifetime 18 awarded programs across 6 global OEMs. Customer launches of new programs have occurred since the end of the 2024 financial year, including the launch of
the Chevrolet Corvette ZR1 in July 2024 and the Lamborghini Temerario reveal occurring in August 2024. These launches commenced what the Company expects will be an exciting period of new customer program launches.
The Company aims to leverage its technology into adjacent industries, potentially including the motorcycle, aerospace, and transportation sectors. Refer to “Item 4. Information on the Company—B. Business Overview—Business Model and Strategic Priorities—Future Expansion Opportunities” in this Report.
Technology
The Company designs and manufactures technically advanced, high-performing, lightweight carbon fiber wheels. These wheels deliver a weight saving of up to 40%-50% compared to
comparable aluminum wheels, which could deliver an up to 5%-10% increase in range for an EV, if associated weight reduction were to be reinvested in battery mass (with the top end of range assuming further benefits derived from additional
aerodynamic, NVH, and structural enhancements).
The Company’s products and manufacturing processes are protected by an extensive IP portfolio, including trade secrets and as of April 24, 2025 94 granted patents, and 28 pending patents (including one pending
international (PCT) patent application) across 15 patent families in key jurisdictions around the world.
Carbon Fiber
Carbon fiber is one of the strongest and lightest materials on earth. Carbon fiber composites are made when dry carbon fabric or fibers are permeated with a synthetic resin
which then cures to form a rigid polymer that locks into place the fibers and allows the mechanical properties of them to be exploited. A composite structure is typically made up of many layers of carbon fiber, the strength of which is affected by
their orientation and many other composite design variables. The resulting strength and stiffness of a composite part can be controlled during the design and manufacturing process of the composite fiber layup.
This also makes the design and construction of structural components highly technically challenging as there are so many variables and complexities to consider in both design
and manufacturing, particularly the design and manufacturing of a safety critical part that experiences the forces and environments experienced by a wheel.
We have spent over 15 years devoted to solving these challenges and to developing and commercializing this technology.
Product Engineering
The Company’s engineering team has many years of experience with composite technology, with years of experience in automotive and aerospace design. The Company’s product
engineers employ cutting-edge computer modeling tools to optimize the composite structures to very precise specifications, seeking to develop wheels that improve vehicle performance and efficiency.
The Company has developed a suite of virtual engineering techniques using computational methods to design its wheels. These methods simulate and analyze the structural
performance of wheel designs and enable the Company to build and test designs in a virtual environment. These advanced tools allow the team to simulate demanding on-vehicle conditions, encompassing lifetime fatigue, race conditions and impact
events, with the goal of improving wheel design and accelerating the testing and validation process prior to physical prototypes being built. Once testing and virtual validation goals are achieved, outputs for manufacturing are created including
drawings, specifications, reports and programs to allow prototypes to be built and their performance verified.
Smart Factory
The Company’s principal operations, which include its corporate office and 10,000m2 purpose-built
facility, are located in Geelong, approximately 47 miles southwest of Melbourne, Australia. This facility is IATF16949 and ISO9001/14001 certified, allowing the Company to be a tier-one supplier to the world’s leading automotive manufacturers.
At the heart of the Company’s production system is an advanced quality tracking system. Each wheel is tracked and data collected throughout the manufacturing process to assess
conformance with customer requirements.
Manufacturing
Raw Material
Carbon fiber is sixteen times the tensile strength of aluminum, and it provides a 44% weight saving over aluminum when in composite form. We believe that this distinctive
combination of strength and light weight has reshaped the world of aerospace and motorsport over the last decade. Carbon fiber is now being used throughout the automotive industry to dramatically improve vehicle efficiency, comfort, and control.
The Company’s trade secrets include its ‘dry fiber’ manufacturing processes, which allow full control of fiber placement and material properties, to create a wheel which is much lighter than the comparable aluminum wheel.
The Company contracts with various suppliers for raw materials that are integral to its finished products. The Company sources its principal commodities such as carbon fiber,
carbon fiber fabrics, resins, paints and aluminum hardware from various countries around the world, including Australia, France, the United Kingdom, Germany and the United States. The Company works closely with its various suppliers to assess
availability and manage inventory. The Company is not substantially dependent on any single supplier. Although the Company has encountered inflationary and demand-related pressures on the prices of such raw materials from time to time, the
fluctuations in such prices have not been more volatile than prevailing overall macroeconomic conditions.
Fabrication
The Company’s confidential manufacturing processes shape and form the carbon fiber into the complex internal structure of the wheel. Automated operations result in high-volume
and precision fabrication of the carbon fiber preforms. Then, the preformed carbon fiber components are quality checked and assembled into the tool in preparation for resin infusion.
Infusion/Injection
Once the resin is injected into the preformed carbon fiber components, checks and measurements are made before the wheel can be removed from the tool. Advanced measuring
instruments control temperature, pressure and other processing parameters. The one-piece carbon fiber wheel then emerges from the tooling, ready for post cure and then final machining, finishing and quality checks.
Finishing
To achieve our customer’s aesthetic requirements, molded wheels then progress through the Company’s patent-pending Diamond Weave Technology™, which creates a beautiful carbon
fiber surface finish appearance on the visible surface of the wheel face.
Quality
The machined wheel is coated, assembled and prepared for shipping and final inspections are completed. Every wheel must pass a three-dimensional CT X-Ray scan and leak tests to
ensure integrity of the parts. Additionally, key wheel dimensions are measured and a visual inspection is undertaken to ensure finished wheels meet specifications. The quality assessment process is highly repeatable and controllable, ensuring the
Company consistently delivers high-quality products to its customers.
Thermal Barrier Coating
To shield the wheel from the extreme brake temperatures generated during track use, the Company has developed its own thermal barrier coating (“TBC”) technology using a
confidential process to give its TBC wheels increased thermal resistance to heat from the brake system.
Testing
The Company conducts various testing procedures during the development of its wheels to assess their strength and durability for extended use in all conditions, on the road and
on the track. Testing and validation requirements are developed in conjunction with each customer and undertaken in-house, by our global testing partners and/or by our customers.
Impact Testing
Company wheels are engineered to withstand impacts. Impact laboratory tests simulate impacts from potholes and curbs, using a calibrated striker to verify the strength of the
wheel design and quality of manufacturing.
Fatigue Testing
To ensure the durability of the Company’s wheels, the Company uses the most advanced wheel testing methods. It utilizes a biaxial fatigue test that simulates the dynamic
environment of cornering fatigue on a vehicle by applying concurrent vertical and lateral loads to the wheel and tire assembly.
Vehicle Testing
Laboratories are able to provide a controlled environment to create repeatable tests, but real-world situations provide final validation of the ability of the Company’s wheels
to perform in unpredictable conditions. In developing its technology, the Company conducts vehicle testing for potholes and curb strikes, as well as extended durability testing on tracks and roads around the world. OEM partners also conduct
extensive on-vehicle validation prior to the relevant vehicle (with Company wheels) entering full production.
Benefits of Carbon Fiber Wheels for Automobiles
Consumers can now experience a one-piece carbon fiber wheel that utilizes lightweight aerospace grade technology. The Company’s wheels are up to 40% - 50% lighter than the
comparable aluminum wheels resulting in significant improvements to unsprung mass and range benefits to electric vehicles. The unsprung mass is the portion of the vehicle’s mass that is not supported by the suspension springs, but is connected
directly to the road. This includes 100% of the tire, wheel, hubs, bearings, brake rotors and calipers, and knuckle. Since the suspension system bridges between unsprung and sprung mass, only 50% of the suspension is usually considered unsprung.
This step change reduction in rotating unsprung mass delivers a number of important performance and efficiency enhancements and other benefits.
Increased Performance & Efficiency
Reducing mass from the vehicle’s wheels reduces its unsprung mass.
Furthermore, reducing wheel mass reduces rotational mass. A lighter wheel is easier to move and easier to stop when moving. This reduction in wheel mass vastly improves a
vehicle’s efficiency, increasing performance and reducing energy consumption.
Range And Fuel Economy
Improving wheel efficiency reduces the amount of energy required to accelerate. This reduces fuel consumption and increases range for both internal combustion engine (“ICE”)
vehicles and for EVs. For an EV, this improved efficiency can deliver an up to 5%-10% increase in vehicle range if the associated weight reduction were to be reinvested in battery mass, based on current battery technology. The top end of the range
assumes further benefits are derived from additional aerodynamic, road noise and structural enhancements.
Acceleration & Braking
Making a wheel lighter reduces its inertia, making it easier to input a force to that wheel. This includes acceleration, deceleration and cornering. On the road, this means
faster acceleration and reduced stopping times. On the track, this means improved lap times.
Better Cornering
The Company’s lightweight wheels make a noticeable difference, whether on track or in everyday driving.
Reducing unsprung mass allows the suspension springs and shock absorbers to more precisely control the wheel/tire motion, keeping the tire in better contact with the road,
resulting in sharper steering and handling. Mechanical grip is improved as the wheel is in better contact with the road, making it easier to track around corners and put down power.
These benefits can result in better lap times and an improved driving experience.
Strength
Modern vehicles are heavy, particularly EVs, as they carry a large number of batteries. This added weight must be borne by the vehicle’s wheels. Carbon fiber reinforced
polymers can be developed to be much stronger than aluminum for a given weight of material, allowing the Company to make lightweight wheels that meets OEM requirements while being significantly lighter. The Company has also completed the
virtual validation of a prototype wheel design for a CH-47 Chinook helicopter.
Aerodynamics
Carbon fiber composite manufacturing processes allow the creation of high-performance thin wall structures because the raw materials typically start life in sheet or roll
forms and are laid up onto hard tooling where they are required. This is a contrast to aluminum casting processes where very hot liquid aluminum is poured into a mold to fill a cavity, as the metal cools it solidifies. This process is
restricted by requiring all areas of the casting to have a minimum thickness requirement to ensure the metal does not cool too fast and solidify before the cavity is full. While aerodynamic designs may be possible with metal wheels, the added
weight of the larger surface area required to create an aerodynamic form reduces the efficiency benefit. Carbon fiber allows the design of highly efficient thin aerodynamic structures in the wheel without significant weight penalty.
Larger Wheels
The automotive market continues to move towards larger wheels. However, the weight of increasingly large steel and aluminum wheels creates additional challenges for EV
manufacturers. EVs are already heavier than equivalent ICE vehicles due to the weight of batteries, and additional weight on a vehicle reduces its range. As the size of these wheels increase, it becomes increasingly challenging to incorporate
them into vehicles with EV batteries, given the combined weight. The additional weight of the larger wheels also increases the strain on vehicle suspension, challenges vehicle performance and makes it harder for manufacturers to meet
performance targets for the vehicles.
The Company is well progressed with the development of a 24-inch carbon fiber wheel, which is as strong as an aluminum wheel of the same size but weighs the same as an
18-inch aluminum wheel – around 40-50% lighter. At that wheel size, weight savings can be more than 100 lbs. across four wheels.
Noise, Vibration and Harshness (“NVH”)
Carbon fiber wheels can reduce road noise compared to aluminum wheels. Compared to metal wheels, the low density, high stiffness and highly damped nature of carbon fiber
composite wheels reduce the transmission of road noise into the cabin.
Unlike metals, carbon fiber is an anisotropic material, which means the wheel design can be tailored to maximize stiffness in a certain direction that is most critical for modal performance or
to avoid certain resonant frequencies, which coincide with other frequencies in the vehicle and can be an annoyance for vehicle occupants. Road noise reduction is particularly important in EVs, where near silent powertrains make road noise more
apparent to occupants. While strategies to reduce sound (such as insulation around the cabin) typically result in adding weight to a vehicle, carbon fiber wheels can reduce noise transmission, thereby providing further weight saving
opportunities for EV manufacturers.
Durability
After more than a decade of research and development, the Company’s wheels have been designed to meet all OEM durability requirements while delivering significant weight
savings.
Design Freedom and Flexibility
Another benefit of the Company’s carbon fiber wheel technology is the appearance of the carbon fiber weave through the surface coatings on the wheel. The Company can offer
design freedom and flexibility in this respect to customers, as well as a diverse range of different colors and patterns that can be incorporated into the wheel by leveraging the Company’s patent-pending Diamond Weave TechnologyTM.
Business Model and Strategic Priorities
The Company primarily generates revenue through the sale of carbon fiber automotive wheels to global OEMs. The Company also generates revenue through the provision of
associated engineering services and customer owned tooling related to the development of those wheel sales to global OEMs. As those services and tooling requirements are specific to each individual program, the related revenue streams are
volatile. Recovery for these engineering services and tooling are agreed as part of the overall commercial agreement for each wheel program and vary from program to program. The sale of Company wheels takes place under supply contracts with
OEMs. Carbon Revolution has also generated a small amount of revenue via the sale of non-OEM wheels in the aftermarket channel.
Although the OEM agreements are each on different terms (particularly when the contract is with a different OEM), typically, a vehicle program commences with the Company
and the OEM agreeing an advanced wheel design (often delivered under a detailed design and engineering agreement) and a formal request for quotation process (which typically includes forecast program volume requirements by the OEM), following
which the Company and the relevant OEM enter into a supply agreement (award).
The supply agreement (award) typically sets out the pathway forward, including timeline for expected program lifecycle, daily or weekly production capacity requirement of
the Company, the OEM engineering and tooling contribution and wheel pricing.
The supply contracts are typical automotive industry supply agreements that are entered into prior to the commencement of production of a particular vehicle program. A
wheel program typically lasts for around 3 to 7 years. For each of the vehicle programs for which the Company has a supply contract, the supply contract imposes on the Company an obligation to have capacity to produce and supply, if requested,
a stated minimum number of wheels (the required daily or weekly production requirement referred to above) for the OEM over a specified period (given the OEM wishes to have contractual certainty that there will be enough wheels available for its
vehicle production program). The production capacity obligation is not a commitment on the OEM to purchase any wheels. Typically, OEMs also provide blanket purchase orders and rolling forecast requirements for at least two to three months in
advance of the required production with binding releases typically provided through electronic data interchange on a rolling weekly or monthly basis.
Automotive Market Trends & Growth Focus
The Company has prioritized the automotive new vehicle wheel market, where its lightweight wheels deliver substantial performance and efficiency benefits. Since the first wheel was released to
the OEM market in 2015, performance benefits associated with improving wheel efficiency have become well accepted and have led to adoption in the performance and premium/luxury vehicle categories by six OEMs: Ford, Ferrari, General Motors,
Jaguar Land Rover, Renault and most recently Lamborghini (part of the Volkswagen Group). All of the Company’s 18 awarded programs to date as of April 24, 2025 (including the seven currently in the production phase) were or are for vehicles
in the performance or premium/luxury and SUV vehicle segments of the new vehicle automotive market.
The portfolio of contracted programs not yet in production includes four awarded programs which are in the performance or premium/luxury internal combustion engine vehicle segments and the EV SUV
/ pick-up segment. This demand for the Company’s technology across both the internal combustion engine and EV markets highlights the applicability of the technology to the automotive market, irrespective of drivetrain technology.
The emerging demand from global OEMs in the EV segment demonstrates not only the gains in market share which EVs are experiencing, but, we believe, also that OEMs see our
wheel technology, and particularly the weight savings it offers without sacrificing any other design, performance or safety element, as enabling to range extension. Driving this demand is an increased understanding of the significant benefits
of our lightweight technology which can enable OEM vehicle engineers to deliver an increase in range (without any significant investment in overall vehicle design or manufacturing plant, because the wheels are a “bolt-on” weight-saving
solution), or to include other features or elements to a vehicle without reducing range due to the offset in weight provided by the Company’s wheels.
Additional benefits of carbon fiber wheels are their potential to reduce road noise inside the cabin, which is a significant challenge for EVs, coupled with aerodynamic
improvements.
The Company has been awarded 5 programs since January 2023, including two North American EV SUV programs. This shift towards SUVs and pickups demonstrates the gains in
market share which these vehicle segments are experiencing. It also demonstrates that the Company has started to penetrate beyond the performance and premium/luxury vehicle segments.
The increase in popularity of SUVs and pickups is also coinciding with a move by OEMs towards larger wheel sizes. We believe the weight saving opportunities afforded by
carbon fiber wheels are particularly relevant as the global automotive market increasingly moves towards larger wheel sizes. The additional weight of larger steel and aluminum wheels increases the strain on vehicle suspension, challenges
vehicle performance and makes it harder for manufacturers to meet performance targets for the vehicles. The weight of increasingly large steel and aluminum wheels creates additional challenges for EV manufacturers. EVs are already heavier than
equivalent ICE vehicles due to the weight of batteries, and additional weight on a vehicle reduces its range. As the size of these wheels increase, it becomes increasingly challenging to incorporate them into vehicles with EV batteries, given
the combined weight.
The Company is well progressed with the development of a 24-inch carbon fiber wheel, which is as strong as an aluminum wheel of the same size but weighs the same as an
18-inch cast aluminum wheel – around 40% - 50% lighter than an equivalent 24-inch aluminum wheel. At that wheel size, weight savings can be more than 100 lbs. across four wheels.
The Company’s growth focus includes achieving expected volumes on existing programs, bringing awarded programs to production, securing additional programs to fill the capacity in the Australian
facility and securing higher volume OEM wheel programs with intended production at a potential new manufacturing facility (or facilities) closer to OEM customers as the Company penetrates beyond the performance and premium/luxury vehicle
segments given the relevance of our weight saving benefits for EVs and larger formats such as SUVs and light trucks, and continuing to service and expand within the performance and premium/luxury vehicle segments.
Production Progress
Wheel production involves a complex series of primarily bespoke productive assets that perform discrete processes with specialized tooling to support those assets. The
actual productive capacity of the plant is a function of equipment capacity, product mix and tooling investment, with different products requiring different production times arising from features such as size, styling, material requirements and
other characteristics.
The Company is driving the industrialization of its production processes and has commissioned the first phase of its first Mega-line at the Australian production facility. The
Company’s Mega-line represents industrialized and highly automated advanced manufacturing cells. Wheel production began off the line in early 2023 and commissioning of the first phase was completed early in the calendar year (“CY”) 2024,
including commissioning of two new mold stations and an associated resin delivery unit. Production on the Mega-line of the third generation rim layup machine (ARL3) also began in mid-2023. Mega-line and associated capacity expansion equipment
expenditures to date exceed A$41 million.
The Company continues to invest to add incremental production capacity to facilitate expected volumes from awarded programs as they enter production, with this additional capacity being
progressively added through 2025 to early 2026.
The Mega-line can be replicated at other production locations. In the longer term, the Company plans to secure higher volume OEM wheel programs with intended production at
a potential new manufacturing facility (or facilities) closer to OEM customers with potential for higher volume and lower cost manufacturing, to enable the Company to deliver large volume programs to a broader cross-section of the market.
Future Expansion Opportunities
In addition to seeking to further penetrate the global automotive market via sales to automotive OEMs, the Company aims to leverage its technology into adjacent channels
and sectors, such as the automotive aftermarket, and the motorcycle, aerospace and transportation sectors.
The Australian Defence Force has already accepted virtual validation of the wheel designed by the Company for the Boeing CH-47 Chinook helicopter, which would be the
Company’s first entry to the aerospace market. It is expected that this wheel design would offer a 35% weight saving compared to the existing metal wheels and would, if further developed through to a fully validated and accepted product, enable
retrofitting of the carbon fiber wheel to existing hardware, opening an opportunity on the global fleet of CH-47 helicopters.
The Company is committed to investing in, improving and growing its operations to further its position at the forefront of carbon fiber wheel design and development into
the future, and maximizing value and sustainable returns for shareholders.
Research and Development
As an advanced manufacturing business, research and development are at the core of the Company’s business model. The Company (and prior to the Company, Carbon Revolution PL and its subsidiaries)
has spent over 15 years developing proprietary technology across its advanced products, and manufacturing processes. In FY24, the Company continued to invest strongly in the research and development required to improve the product technology,
bring its production processes to full industrialization and develop an increased number of customer programs. R&D expenses for the financial year ending June 30, 2024 were A$36.1 million (including
impairment of intangible assets of A$18.9 million). Research and development activities are carried out by approximately 44 in-house technicians, engineers and researchers, of which 9 have PhDs as at April 24, 2025. The Company also works
with leading universities, including Deakin University, and other research organizations in developing its technology.
Intellectual Property
The ability of the Company to protect its advanced lightweight carbon fiber technology is critical to the Company maintaining its competitive advantage in the automotive
wheel market. The Company engages specialist service providers to help the Company protect the intellectual property it owns and develops in key jurisdictions around the world.
As of April 24, 2025, the Company holds 94 granted patents and 28 pending patents (including one pending international (PCT) patent application) across 15 patent families and
key jurisdictions around the world.
Competition
The Company believes that it is well positioned in the market and it is the only company globally to have successfully developed and manufactured single piece carbon fiber automotive wheels to
OEM quality standards with commercial adoption across several major OEM models. Since commencing commercial production in 2015, the Company has sold over 100,000 automotive wheels to six global OEMs across the fourteen programs which have
been in commercial production to date (seven of which remain in the production phase ), with a further four programs awarded and yet to enter production.
Beyond the Company, there are only a limited number of competitors currently able to manufacture a carbon fiber automotive wheel. The Company believes this is because
carbon fiber wheel technology is difficult to engineer and manufacture to OEM performance and quality specifications in a repeatable way.
Current competitors with publicly disclosed automotive wheel programs include:
| • |
Action Composites (“Action”): Action (formerly Thyssenkrupp Carbon Components) has developed carbon fiber wheels for Porsche using a braided rim technology. These wheels are reportedly 20% lighter
than Porsche’s regular aluminum wheels for the vehicle;
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| • |
Blackstone Tek (“BST”): BST produces single piece carbon fiber wheels for the motorcycle and automotive aftermarkets. BST’s website states that BST has built wheels for niche manufacturers such as
the Delage, the Ariel Atom, the Donkervoort and the Vuhl. BST has also launched aftermarket wheels for the Porsche GT2 RS and GT3 RS, and the Ford F-150 Truck;
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| • |
Bucci Composites (“Bucci”): Bucci has developed a low volume 22-inch single piece carbon fiber wheel for the Bentley Bentayga Mulliner and a 20-inch aftermarket carbon fiber automotive wheel. Bucci
recently announced the introduction of a 20-inch center lock version of its carbon fiber wheel, designed for the high-performance market;
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| • |
Carbon ThreeSixty (“Carbon360”): Carbon360 in 2023 developed a prototype composite wheel aimed at the BEV market, offering a 30% weight reduction and up to 5% range extension.
Carbon360 is also undertaking a UK Research and Innovation grant funded project to develop a carbon fiber wheel for rotorcraft. Carbon360 recently launched new aftermarket Carbon Fiber barrels in sizes from 15” through to 23”;
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| • |
Duqueine Group (“Duqueine”): Duqueine has developed a single piece carbon fiber wheel for the Alpine A110R;
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| • |
Dymag Group Limited (“Dymag”): Dymag sells carbon fiber motorcycle wheels and two piece (hybrid) carbon fiber wheels for the automotive aftermarket and niche vehicle manufacturers,
and has recently developed a prototype 21-inch carbon fiber hybrid wheel in collaboration with Hankuk Carbon and Hyundai. Dymag’s website states that it offers a range of 18-to-23-inch carbon hybrid wheels, and is working on 24-inch
and 25-inch examples, and that it is in advanced stages with multiple global OEMs regarding further lightweight wheel supply agreements. In November 2024 announced a new hybrid wheel (Magnesium Centrepiece and Carbon Fiber Rim),
HALO-X Carbon Hybrid Performance Wheel, designed for the Porsche (992/992.1) 911 GT3 RS;
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| • |
ESE Carbon (“ESE”): ESE has developed a single piece carbon fiber wheel and has a focus on the aftermarket;
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| • |
Lacks Enterprises (“Lacks”): Lacks has developed a two-piece wheel with a carbon fiber rim and a forged aluminum face, including for the Dodge Challenger SRT Demon 170; and
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| • |
Mubea Carbo Tech (“Carbo Tech”): Carbo Tech develops wheels made entirely of composite, or of hybrid construction, and has developed carbon fiber wheels for BMW using a carbon-fiber/aluminum hybrid
wheel, with an aluminum hub and spokes and a carbon-fiber rim. The hybrid wheel option for the vehicle such wheels are made for appears to be approximately equivalent in weight to the forged aluminum wheel option that is also offered
for the vehicle. In addition, Carbo Tech’s website refers to a Carbo Tech single piece carbon fiber wheel consisting or a carbon fiber composite “rim bed and rim spider”.
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The Company is also aware of other competitors manufacturing carbon fiber automotive wheels; however, these appear to be at an early stage of development or focused more on
the secondary market after the sale of a vehicle by an OEM to the customer or for low volume programs. The Company will also face competition if it expands its product offerings into new channels and markets.
As the Company continues to scale and industrialize its operations, and potentially expands its manufacturing operations offshore to lower cost jurisdictions in the future,
it expects unit costs of production to fall further. If this occurs, it may permit Company wheels to be adopted across a broader range of vehicles outside the high performance and luxury segments. This is likely to be driven by the value
proposition and trade-offs of Company wheels becoming increasingly attractive to OEM customers and end consumers.
Government Regulation
With entities incorporated in Ireland, The United States and Australia, the Company is directly subject to the legislation and regulations of those three countries, and the
European Union, including legislation and regulations relating to corporations and securities, tax, employment, competition and consumer protection, safety and the environment, and sustainability disclosures.
Safety standards in the manufacture of vehicles and automotive equipment have been established under the National Traffic and Motor Vehicle Safety Act of 1966, as amended.
We believe that we are in material compliance with all federal standards currently applicable to manufacturers of OEM automotive wheels.
Environmental Compliance
Our manufacturing facilities, like other manufacturing companies, are subject to solid waste, water and air pollution control standards mandated by federal, state and local
laws. Violators of these laws are subject to fines, penalties, injunctions, cancelation of license or permit, and remedial action notices. We believe our facilities are in material compliance with all presently applicable standards. We expect
that future environmental compliance expenditures will not have a material effect on our consolidated financial position or results of operations. However, climate change legislation or regulations restricting emission of “greenhouse gases”
could result in increased operating costs. Refer to “Item 3.D Key Information—Risk Factors—The Company’s business may be impacted by climate change, existing or new environmental regulations, and related risks”
in this Report.
| C. |
Organizational Structure
|
Upon the closing of the Business Combination, Carbon Revolution PL became a direct, wholly-owned subsidiary of the Company. The subsidiaries of the Company are listed
below:
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Name
|
Principal
Activities
|
Country of
Incorporation
|
Equity Interest held by
the Company
|
||||
|
Carbon Revolution Pty Ltd
|
Carbon fiber wheels
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Australia
|
100%
|
||||
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Carbon Revolution Operations Pty Ltd
|
Carbon fiber wheels
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Australia
|
100%
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Carbon Revolution Technology Pty Ltd
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N/A
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Australia
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100%
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Carbon Revolution (USA) LLC
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Carbon fiber wheels
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United States
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100%
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Poppettell Merger Sub
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Twin Ridge merged with and into this entity
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Cayman Islands
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100%
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| D. |
Property, Plant and Equipment
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The Company’s principal operations, which include its corporate office and manufacturing facilities, are located in Geelong, which is situated approximately 47 miles from
Melbourne, Australia. The Geelong facility is a purpose-built facility constructed in 2014 by Deakin University, on whose campus the facility sits, and which the Company is progressively fitting out with its carbon fiber wheel manufacturing
equipment and infrastructure. The Company leases the 10,000m2 facility under a lease until November 21, 2028, with two options to renew of five years each. The
Company’s facility and related assets are subject to a lien as collateral under the terms of the New Debt Program. The Company believes that the footprint of its current building is suitable and sufficient to meet its anticipated production
needs for the foreseeable future as it progresses the build out of its capacity through 2025 and early 2026 to support expected volumes from awarded programs.
We are not aware of any environmental issues or other constraints that would materially impact the intended use of our facilities.
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ITEM 4A.
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UNRESOLVED STAFF COMMENTS |
None.
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ITEM 5.
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
| A. |
Operating Results
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The following discussion and analysis provides information which the Company’s management believes is relevant to an assessment and understanding of the
Company’s consolidated results of operations and financial condition. This discussion and analysis should also be read together with Item 4 of this Report and financial statements and notes included in Item 18 of this Report. This discussion
and analysis contains forward-looking statements based upon current expectations that are subject to known and unknown risks, uncertainties and assumptions. Actual results and the timing of events may differ significantly from those expressed
or implied in such forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” under Item 3 of this Report and elsewhere in this Report. You should read the following discussion in
conjunction with the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”.
The financial information reported herein has been derived from the financial statements which have been prepared in accordance with IFRS or the underlying accounting records
of the Company and is presented in Euros unless otherwise stated.
This discussion and analysis focuses on information and key statistics from the audited consolidated financial statements and considers known risks and
uncertainties relating to the automotive sector. This discussion should not be considered all-inclusive, as it excludes possible future changes that may occur in general economic, political, and environmental conditions. Additionally, other
elements may or may not occur which could affect industry conditions and/or the Company in the future.
Company Overview
The Company had no operations prior to entering into the Scheme Implementation Deed and Business Combination Agreement, including on June 30, 2023, the date of the financial statements of the
Company included in this Report. The Company’s sole purpose was to become a holding company following the Business Combination. Upon the closing of the Business Combination, the Company became the direct parent of, and conducts its business
through, Carbon Revolution.
New Debt Program
In May 2023 Carbon Revolution PL entered into a debt program (the “New Debt Program” or “USD term loan”) arranged by PIUS Limited LLC and its affiliates (“PIUS”) under which Carbon Revolution Operations issued
Series 2023-A notes in exchange for US$60 million. UMB Bank, National Association, a trust company (the “Trustee”) acts as trustee and as disbursing agent under the New Debt Program on behalf of the noteholders and Gallaher IP Solutions LLC, a
Delaware limited liability company as successor to Newlight Capital LLC, a North Carolina limited liability company, an affiliate of PIUS and the servicer and collateral agent under the various loan documents (the “Servicer”).
Impact of Business Combination and Related Financing Transactions
Closing of the Business Combination
On November 3, 2023, Twin Ridge, the Company, Carbon Revolution PL and MergerSub, consummated the business combination pursuant to the terms of the BCA, dated November 29,
2022, as amended or supplemented from time to time, pursuant to which, among other things, Twin Ridge merged with and into MergerSub, with MergerSub surviving as a wholly-owned subsidiary of the Company, with shareholders of Twin Ridge
receiving Ordinary Shares, in exchange for their existing Twin Ridge ordinary shares and existing Twin Ridge warrant holders having their warrants automatically exchanged by assumption by the Company of the obligations under such warrants,
including to become exercisable for one-tenth of an Ordinary Share instead of one Twin Ridge ordinary share, in proportion to the exchange ratio. In addition, Twin Ridge, Carbon Revolution PL and the Company implemented a scheme of arrangement
under Part 5.1 of the Corporations Act 2001 (Cth) and a capital reduction under Part 2J.1 of the Corporations Act 2001 (Cth) in accordance with the Scheme Implementation Deed, which resulted in all shares of Carbon Revolution PL being canceled
in return for consideration, with Carbon Revolution PL issuing one share to the Company (resulting in Carbon Revolution PL becoming a wholly-owned subsidiary of the Company) and the Company issuing Ordinary Shares to the shareholders of Carbon
Revolution PL.
The Company had no operations prior to entering into the Scheme Implementation Deed and BCA, including as of June 30, 2023. The Company’s sole purpose was to become a
holding company following the Business Combination. Upon the closing of the Business Combination, the Company became the direct parent of Carbon Revolution PL.
On November 3, 2023, the Company completed the Business Combination and Carbon Revolution PL became a wholly owned subsidiary of the Company. Upon consummation of the Transactions, the Company
became publicly traded on Nasdaq under the ticker symbol “CREV” and Public Warrants trading under the ticker symbol “CREVW.”
Accounting Treatment
The Business Combination was accounted for as a capital reorganization. Under this method of accounting, the Company was treated as the “acquired” company for financial reporting purposes. For
accounting purposes, Carbon Revolution PL is deemed to be the accounting acquirer in the Transaction and, consequently, the Transaction is treated as a capital reorganization. Accordingly, the Business Combination is treated as the equivalent
of Carbon Revolution PL issuing shares at the closing for the net assets of the Company (including the net assets of Twin Ridge) as of the closing date, accompanied by a recapitalization as Carbon Revolution PL was not the legal acquiror.
Carbon Revolution PL is, consequently, deemed to be the accounting predecessor meaning that Carbon Revolution PL’s consolidated assets, liabilities and results of operations will become the historical financial statements of the Company. Under
IFRS2, the difference between the fair value of the Ordinary Shares issued to Twin Ridge shareholders compared to the net liabilities of Twin Ridge is recognized in the profit and loss statement as a listing expense. The shares issued by the
accounting acquirer are recognized at fair value and recorded as consideration for the acquisition of the public shell company, Twin Ridge. The net assets of Twin Ridge are stated at historical cost, with no goodwill or other intangible assets
recorded. This is expected to be consistent with carrying value. The Transaction, which is not within the scope of IFRS 3 since Twin Ridge does not meet the definition of a business in accordance with IFRS 3, is accounted for within the scope
of IFRS 2.
OIC Class A Preferred Shares and OIC Warrants
2 Foreign exchange rate is as of May 23, 2023 at a rate of $1 USD = $1.501 AUD.
Concurrently with the execution of the Business Combination, the Company consummated a securities purchase agreement with OIC Structured Equity Fund I Range, LLC and
affiliated entities (“OIC”) on November 3, 2023, together with a number of related documents, collectively comprising the “OIC Financing”. Pursuant to the original agreement:
| • |
OIC subscribed for and purchased from the Company Class A redeemable preferred shares with a 12% fixed accumulating distribution (the “Preferred Shares”) and warrants (“SEF Warrants”) for aggregate
gross proceeds of US$35 million (equivalent to A$54.7 million) less transaction costs.
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The Class A preference shares are recognized as a financial liability at amortized cost as they must be redeemed by November 2028. The Company may elect to redeem Class A preferred shares
on issue at an earlier date at its discretion subject to a return to the holder the greater of (i) a 1.75x Multiple on Invested Capital (“MOIC”) return on face value, or (ii) a 12% IRR.
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The SEF warrants carry a US$0.01 strike price and entitle OIC to up to a maximum 19.99% of the fully diluted Company shares on issue (subject to, in tranches, certain milestones including the further
issuance of Class A shares below). The warrant may be exercised, in whole or in part, at the discretion of the holder. The warrant terms initially included a ‘cashless’ exercise feature which was subsequently removed in June 2024. The
warrants were treated as derivative liabilities at fair value through profit and loss between issuance in November 2023 and June 2024, resulting in a gain of A$5.8 million for the 2024 financial year. In June 2024 the warrants were
reclassified to equity as the Company considered them to now meet the fixed for fixed criteria in IAS32 upon OIC’s undertaking on the cashless exercise feature.
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The proceeds were allocated on a fair value basis, firstly to the SEF warrant derivative liability and then the residual to the Class A preferred share obligation. Transaction costs were allocated on a
relative fair value basis.
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OIC also provided commitments in November 2023 to purchase further tranches of preferred shares subject to achievement of certain milestones for which US$35 million was placed in escrow.
The Company has not recognized any financial liability or allocation of proceeds in November 2023 or during the 2024 financial year for these preferred shares as the associated escrow deposit was not considered to be within the
control of the Company. These commitments and escrow arrangements were subsequently modified in June 2024 on issuance by Carbon Revolution Operations of loan notes to OIC.
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Of the SEF warrants of up to 19.99% of the fully diluted Company shares on issue, 12.49% vested on completion of the initial US$35 million funding, a further 5% would vest on release of the US$35 million
held in escrow (such release subject to certain conditions and milestones), and the final 2.5% would vest on release of the final US$40 million funding (such release subject to certain conditions and milestones including OIC investment
committee approval).
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The proceeds received from the issuance of Class A Preferred Shares under the OIC financing must generally be used consistent with a budget agreed between the Company and OIC.
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OIC Class B preferred shares, Series 2024-A Notes and Amendments to the New Debt Program
Between April 2024 and October 2024, under amendments to the OIC Financing and the New Debt Program (such amendments collectively referred to herein as the “Escrow Tranche Amendments”), the
Company issued a series of loan notes (via Carbon Revolution Operations) and Class B Preferred Shares, and additional warrants, to OIC for consideration of US$35 million, replacing an original commitment to issue further preferred equity upon
completion of certain milestones. The terms of the issuance are:
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US$5 million advanced in the form of Class B Preferred Shares in April 2024, and US$30 million advanced in the form of loan notes (Series 2024-A notes) between May 2024 and October 2024 (of which US$10
million was advanced during the financial year ending June 30, 2024);
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In relation to the Class B Preferred Shares: mandatory redemption on November 3, 2028 aligned with the Class A Preferred Shares, with a 12% fixed accumulating dividend, and the Company may elect to redeem
outstanding Class B Preferred Shares at an earlier date at its discretion subject to returning to the holder the greater of (i) a 1.75x MOIC return on face value, or (ii) a 12% IRR.
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| • |
In relation to the Series 2024-A Notes, maturity date of May 2027 concurrent with maturity of the New Debt Program / USD term loan;
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| • |
In relation to the Series 2024-A Notes, 12% interest comprising an 8.5% coupon rate payable monthly and a further 3.5% monthly payment in kind (which is capitalized progressively into the amount
outstanding);
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In relation to the Series 2024-A Notes, progressive monthly repayments of principal commencing June 2026 – concurrent with the modified 2023 USD term loan;
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| • |
An exit premium payable on the Series 2024-A Notes of 2.0x invested capital plus a further $10 million, such exit premium being payable upon the earlier of a refinancing of the Series 2024-A notes, sale
of the Company or maturity in May 2027, inclusive of any principal and interest payments to date. The repayment of the exit premium in full will be reduced or delayed in certain limited circumstances;
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| • |
The exit premium on the Class B Preferred Shares is reduced by an amount equal to the amount of cash dividends and redemption payments that have been paid to the holder(s) of Class B Preferred Shares;
equally the amounts required to redeem the Class B Preferred Shares are reduced on account of payments made towards the exit premium, and where the amount required to redeem the Class B Preferred Shares is reduced to zero, the holder(s)
of the Class B Preferred Shares will surrender those shares for no additional consideration;
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| • |
The Company obtained a modification of the 2023 USD term loan such that it would rank equally to the Series 2024-A notes issued; and
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Further, US$0.01 SEF warrants to purchase a number of ordinary shares equivalent to 25.35% of ordinary shares issued calculated on a fully diluted basis (as defined in the OIC warrant) at the time of
exercise, the terms of which are equivalent to the November 2023 SEF warrants.
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The Company has determined that the Series 2024-A notes should be accounted for as financial liabilities at amortized cost to be accreted over the term up to the minimum
return amount at maturity. Proceeds from the Series 2024-A notes have been allocated between the amortized cost liability and the fair value of the warrants issued concurrently. Transaction costs were allocated on a relative fair value basis.
OIC Series 2025-A Notes and Amendment to the New Debt Program
In December 2024, the Company and the OIC Investors agreed to further amendments to the Securities Purchase Agreement, to facilitate funding US$25 million of the remaining $40 million (from the
original US$110 million) upon satisfaction of certain conditions, agreed upon and set forth in such amendment, in exchange for interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind
and the issuance by Carbon Revolution Operations of Fixed Rate Senior Notes, Series 2025-A Notes (the “Series 2025-A Notes”) pursuant to the Indenture, and the Indenture and related documents under the New Debt Program were also amended to
facilitate the release to Carbon Revolution Operations of an aggregate of US$2 million from the payment reserve fund established under the New Debt Program, in equal instalments of US$400,000 with each $5 million tranche of funding under the
above-mentioned amendments to the Securities Purchase Agreement, in exchange for interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind and the issuance by Carbon Revolution
Operations of an equivalent amount of additional Series-2023 A Notes. Upon redemption or maturity of the Series 2025-A Notes and additional Series-2023 A Notes, Carbon Revolution Operations is required to pay the holders thereof an exit
premium equal to 2.0 times the amount funded or released in exchange for such notes minus any cash interest or principal payments or fee payments thereon. In connection with the funding of each of the five tranches of US$5 million, the
Company will issue to the OIC Investors and the Existing Lenders, pro rata in proportion to the amount of their investment relative to the total amount invested by the OIC Investors and the Existing Lenders (between them on a pro-rata basis)
in each tranche, penny warrants to purchase an aggregate number of shares equal to 5.0% of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to
the OIC Investors. Additionally, after the issuance by Carbon Revolution Operations of the Series 2025-A Notes in the amount of US$25 million to the OIC Investors and release of the US$2 million from the payment reserve fund as described
above, each holder of Series 2023-A Notes agrees to waive cash interest not to exceed an aggregate of US$3 million (the “Cash Interest Suspension Period”) in exchange for the Trustee receiving payment in kind in an amount equal to such waived
cash interest plus interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind for the benefit of the holders of the Series 2023-A Notes, and the OIC Investors also agree to waive cash
interest on the Series 2024-A Notes and the Series 2025-A Notes, on the same terms, for the same period. Such amendments collectively are referred to herein as the “December 2024 Amendments”. The Escrow Tranche Amendments and the December
2024 Amendments are referred to herein as the “2024 Amendments”. The Series 2024-A notes and Series 2025-A notes are collectively referred to herein as the “OIC Notes”.
Pursuant to the December 2024 Amendments, on each of December 20, 2024 January 21, 2025, March 7, 2025 and May 9, 2025, US$5 million was funded in exchange for interest payable thereon and the
issuance to the OIC Investors of US$5 million aggregate principal amount of Series 2025-A Notes and the release from the payment reserve fund for the Existing Lenders of US$400,000 in exchange for interest payable thereon and the issuance to
the of US$400,000 aggregate principal amount of additional Series 2023-A Notes, and the OIC Investors (4.63%) and the Existing Lenders (0.37%) were issued penny warrants to purchase an aggregate number of shares equal to 5.0% of the Company’s
shares outstanding, determined on a “Fully-Diluted Basis”.
As of the date of this Annual Report, warrants to purchase ordinary shares equivalent to a total of 56.36% of ordinary shares issued calculated on a fully diluted basis, have now been issued to
the OIC Investors and vested, and warrants to purchase ordinary shares equivalent to a total of 1.48% of ordinary shares issued calculated on a fully diluted basis, have now been issued to Existing Lenders and vested.
Key Factors Affecting Operating Results in Future Periods
2025 Business Outlook
The initial Mega-line commissioning is a significant milestone and, combined with our ongoing capacity expansion program, positions us to meet the expected demand from
global OEMs.
The Company’s key operational focus areas for the upcoming 12 months include:
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Successful launches of production of new programs. Three programs have recently entered production and a further four awarded programs are currently in development or launch phase. These programs are in
the performance or premium/luxury/SUV and pick-up segments and include both internal combustion engine and EV drivetrains. We expect these programs currently in development or launch phase to commence production during CY25;
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Award of new customer programs. The Company is in discussions with customers and potential new customers about new wheel programs and expects that it will win new customer program awards which, together
with existing awarded programs (both those currently in production and yet to enter production) would aim to fill the capacity at the existing Australian manufacturing facility (such capacity is being added over time in line with
expected demand);
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Following completion of the initial phase of the Mega-line, further expansion of the production capacity of the Mega-line and other areas of the plant through both efficiency gains driving the
industrialization of production processes, and additional associated investments across the facility, to support expected future production requirements for awarded programs;
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Improvement in gross margin, with further efficiencies expected as further programs come online and volume ramps; and
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Leveraging the benefits of expected increased volumes in the Australian facility during the second half of the calendar year and realizing the benefits of the investment in automation and capacity
increases, reducing material costs through improved prices from certain suppliers as a result of volume increases, substituting certain materials with lower cost materials, sourcing certain materials from lower cost providers, shifting
certain supply arrangements from spot purchases to long term contracts, consolidating consumables suppliers, and implementing production processes and designs which utilize less material and production consumables. Overheads are also
being managed closely to align requirements with the Company’s program development lifecycles.
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Short term company liquidity measures include:
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Meeting the conditions for the release of the remaining US$5 million of the US$25 million of OIC funding agreed pursuant to the December 2024 Amendments, the release from the
payment reserve fund of the remaining US$0.4 million of the US$2 million agreed to be released pursuant to the December 2024 Amendments, and the waiver of US$3 million cash interest by the Existing Lenders for the Cash Interest
Suspension Period, and the waiver by the OIC Investors of an approximately equivalent amount of cash interest on the Series 2024-A Notes and the Series 2025-A Notes, on the same terms, for the same period, pursuant to the December
2024 Amendments;
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Securing agreement for ongoing deferral of previously agreed transaction costs deferrals from the capital reorganization amounting to a total of US$15.0 million (A$22.5 million).
Under an agreement the Group had reached with these creditors to delay payment, US$5 million (A$7.6 million) was payable in November 2024, with the remainder to be paid from the proceeds of certain fundraising transactions or on a
straight line basis over 5 years (depending on the option selected by the supplier). The US$5 million (A$7.6 million) payment was not made in November 2024 and a further US$10.0 million (A$15.0 million) is now payable or payable
during the next 12 months from signing date, unless the relevant suppliers agree to or accept further deferral of the transaction costs for at least twelve months from signing date and until sufficient cashflow can be generated from
operations or alternative sources of funding are obtained to pay down these debts;
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Securing agreement from key customers for ongoing bailment payments for shipped wheels to provide working capital relief;
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Pursuing certain claims against certain customers, including claim for payment for wheels shipped but not yet utilized in production by a customer, potential claims in relation to programs in which
ordered volumes have been below the volumes which the Company was required to build and reserve capacity for under its customer contracts, and a claim in relation to cancellation of a wheel program;
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Securing continued support from suppliers in the form of deferred payment terms; and
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Compliance with the terms of the MMI grant and receipt of the remaining milestone-based A$0.5 million funding amount payable under the MMI grant.
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Other potential sources of funding or liquidity include:
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Potential repurposing of the remaining US$15 million of the up to US$110 million contemplated under the original OIC Financing. The final US$40 million of the up to US$110 million OIC Financing was
intended to be for the purpose of funding towards a new manufacturing facility. Assuming OIC releases the final US$5 million tranche of the US$25 million of OIC funding agreed pursuant to the December 2024 Amendments, a further US$15
million of the up to US$110 million contemplated under the original OIC Financing will remain. If the Company did require near term assistance after exhausting all other reasonable sources of liquidity, OIC may consider repurposing
these funds to support the Company’s pathway to profitability in Australia; and
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Potential access to capital through the issuance of other debt or equity securities via public or private placement or utilization of the Committed Equity Facility through the
equity purchase agreement with Yorkville Advisors.
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As of April 24, 2025, the Company has eleven active awarded programs with five global OEMs (seven of which programs are currently in the serial production phase and four of which are in the
development phase). The Company expects all of these four programs to complete development and enter the production stage during CY25. The Company is also in discussions with customers and potential new customers about new wheel programs
and expects that it will win new customer program awards. The ability to secure award of new customer programs and the timing, size and profitability of such programs, the launch timing for new programs entering production, and the demand,
and rate of production volumes for new and ongoing programs will be key factors affecting operating results. The launch timing of new programs by OEM customers is largely outside the control of the Company and can impact operating results.
When a program is awarded, the OEMs do not provide volume commitments and the contracts are not take or pay by nature. The Company has experienced delays in orders for wheels in the past, including where commencement of production is later
than expected as a result of the OEM delaying the release of the relevant vehicle. Average pricing will be driven by sales mix as well as being impacted by the outcome of price negotiations or working capital initiatives.
The Company expects to continue to expand production capacity at the Australian facility through 2025 and early 2026 in line with expected demand from awarded programs. The Company expects
demand to increase over that period and in particular from around late 2025 as new programs are expected to have largely entered production (noting that demand fluctuates from month to month and quarter to quarter). The Company’s ability to
deliver program volumes also depends on its ability to ensure that the production facility has sufficient capacity to produce expected wheel volumes. Our future operating results also depend upon our ability to manage expenses, including
our initiatives to improve our production efficiency and reduce labor costs per wheel, as well as the costs of raw materials. Direct labor costs will be driven largely by production volumes, the plant efficiency initiatives and the
introduction of new productive equipment and hourly labor rates. Hourly labor rates are driven by negotiated outcomes in the production site’s enterprise bargaining agreement as well as shift structure and overtime premiums paid to deliver
required production output, and the extent of the use of labor hire. Raw material costs will be impacted by the spot price of raw materials, the outcome of negotiations with certain suppliers, volume increases, and the success of
initiatives to substitute for lower cost materials for certain materials, source certain materials from lower cost providers, shift certain supply arrangements from spot purchases to long term contracts, consolidate consumables suppliers,
and implement production processes and designs which utilize less material and production consumables, as well as freight costs.
As the Company is an early-stage business, fixed costs are relatively high proportionally, and a delay or reduction in wheel sales can have a significant impact on the
financial results. Research and Development costs will be incurred to deliver the programs currently in development as well as any ongoing development on production programs and research to expand the Company’s technology. Fixed costs will also
be driven by full year US-listed company and other compliance costs.
Available liquidity for the future periods is likely to be impacted by a number of factors, including the outcome of the above-mentioned short-term liquidity measures.
Refer to the section entitled “Risk Factors” in Item 3 of this Report.
Financial Overview
The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Report.
Comparison of Years Ended June 30, 2023 and June 30, 2022
Since the Company’s inception in 2017 through June 30, 2023, the date of the financial statements, the Company did not conduct operations and did not generate any revenue. In the fiscal year
ended June 30, 2023, the Company had a profit of €0 compared to €0 in net profit in the fiscal year ended June 30, 2022. The Company did not generate any operating revenues until the closing of the Business Combination following the date of
the financial statements when Carbon Revolution became a wholly owned subsidiary of the Company.
Comparison of Years Ended June 30, 2022 and June 30, 2021
For the years ended June 30, 2022 and June 30, 2021, the Company did not conduct operations and did not generate any revenue or expenses.
| B. |
Liquidity and Capital Resources
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Overview
The Company, prior to the Business Combination and as of the date of the financial statements included in this Report, did not conduct operations. As of June 30, 2023, the
Company had no cash and cash equivalents. The Company did not have any cash as of June 30, 2023 and therefore did not have any cash used in operating, investing or financing activities.
Share Capital Reduction
Following the Initial Closing, the Company applied to the High Court of Ireland for an order to confirm the Share Capital Reduction, and obtained the required Share Capital Reduction Order on
January 18, 2024. The Share Capital Reduction is intended to create a level of distributable profits which are available to cover, in part, the amount of any cash dividend or redemption amount payable to the holders of the Preferred Shares. The
funds included in the Company’s reserves will be permitted to be used for paying dividends and redeeming the Preferred Shares, which may reduce the Company’s funds available to fund operations and the Company’s growth without any amounts
expended in such dividends or redemptions being paid to holders of Ordinary Shares.
Subsidiary Restrictions
In connection with the New Debt Program, under the Proceeds Disbursing and Security Agreement (“PDSA”) entered into on or about May 23, 2023, the Company’s Australian subsidiaries are restricted
from paying dividends or making any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, or permitting any of their subsidiaries to do so outside the Carbon Revolution Group, subject to
certain exceptions, such as (i) the repurchase of stock of former employees as long as no event of default exists prior to such repurchase and/or would occur after giving effect to such repurchase, and provided that the aggregate amount of all
repurchases by all Australian subsidiaries does not exceed US$250,000.00 per fiscal year; and (ii) cash payments in lieu of issuing fractional shares of its stock, provided that the cash payments do not exceed US$25,000.00 in aggregate in any
fiscal year. In addition, Carbon Revolution USA LLC, the Company’s United States subsidiary, must not provide intercompany indebtedness, loans and advances or pay dividends to the Company and is excluded from the definition of “Co-Obligor”
under the PDSA, and so this entity does not benefit from the permitted provisions or exceptions under the PDSA.
Liquidity and Capital Resources
The Company did not undertake any trading activities during the years ended June 30, 2023 and June 30, 2022 and did not hold any assets at June 30, 2023 and June 30, 2022. As disclosed in note
1(ix) to the financial statements in Item 18, the Company expects to continue to incur net losses and negative cash flows from operating activities in accordance with its operating plan over the next twelve months from the date of the
filing of this Annual Report, but it expects that both capital expenditure (in relation to the Australian manufacturing facility) and unit production costs will reduce in the next 12 months from the date of the filing of this Annual
Report as the capacity expansion at the Australian plant will be substantially completed by that stage.
As an early-stage growth company, the Company’s ability to access additional capital is critical to fund operating losses, finalize the development and launch of awarded
wheel programs and complete the incremental capacity expansion to scale up production capacity to support projected demand. As the Company’s current level of cash and cash equivalents and other committed funding sources are not sufficient to
execute our business plan, failure to obtain additional financing will have a material, adverse impact on our business operations including developing, launching and producing new wheel programs and satisfying obligations as they become due.
The Company’s anticipated principal sources of liquidity as at the date of the filing of this Annual Report:
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meeting the conditions for the release of the remaining US$5 million (EUR 4.6 million) of the US$25 million (EUR 23.1 million) of OIC funding agreed pursuant to the December 2024
Amendments, the release from the payment reserve fund of the remaining US$0.4 million (EUR 0.4 million) of the US$2 million (EUR 1.8million) agreed to be released pursuant to the December 2024 Amendments, and the waiver of US$3
million (EUR 2.8 million) cash interest by the Existing Lenders for the Cash Interest Suspension Period, and the waiver by the OIC Investors of an approximately equivalent amount of cash interest on the Series 2024-A Notes and the
Series 2025-A Notes, on the same terms, for the same period, pursuant to the December 2024 Amendments;
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| • |
potential repurposing of the remaining US$15 million (EUR 13.9 million) of the up to US$110 million (EUR 101.6 million) contemplated under the original OIC Financing. The final US$40 million (EUR 37.0
million) of the up to US$110 million (EUR 101.6 million) OIC Financing was intended to be for the purpose of funding towards a new manufacturing facility. Assuming OIC releases the final US$5 million (EUR 4.6 million) tranche of
the US$25 million (EUR 23.1 million) of OIC funding agreed pursuant to the December 2024 Amendments, a further US$15 million (EUR 13.8 million) of the up to US$110 million (EUR 101.6 million) contemplated under the original OIC
Financing will remain. If the Company did require near term assistance after exhausting all other reasonable sources of liquidity, OIC may consider repurposing these funds to support the Company’s existing operations in Australia;
its unrestricted cash balance of A$1.5 million (EUR 0.84 million) at April 30, 2025; and
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potential access to capital through the potential issuance of other debt or equity securities via public or private placement and under the Committed Equity Facility (“CEF”).
|
As a result of our recurring losses from operations, accumulated deficit and projected capital needs, significant doubt exists regarding the Company’s ability to continue as a going concern
within the twelve months after the issuance date of these consolidated financial statements.
The Company’s ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve months to improve liquidity and working capital.
This plan relates to initiatives that were agreed upon for the next twelve months from the date of the filing of this Annual Report and which includes, but is not limited to:
| • |
Achieving the Company’s operating plan (for a summary of the key focus areas for 2025, refer to “Item 5. Operating and Financial Review and Prospects—A. Operating
Results—Key Factors Affecting Operating Results in Future Periods—2025 Business Outlook”);
|
| • |
Meeting the conditions for the release of the remaining US$5 million (EUR 4.6 million) of the US$25 million (EUR $23.1 million) of OIC funding agreed pursuant to the December 2024
Amendments, the release from the payment reserve fund of the remaining US$0.4 million (EUR0.4 million) of the US$2 million (EUR 1.8 million) agreed to be released pursuant to the December 2024 Amendments, and the waiver of US$3
million (EUR 2.8 million) cash interest by the Existing Lenders for the Cash Interest Suspension Period, and the waiver by the OIC Investors of an approximately equivalent amount of cash interest on the Series 2024-A Notes and the
Series 2025-A Notes, on the same terms, for the same period pursuant to the December 2024 Amendments;
|
| • |
Achieving forecast production levels, sales mix and pricing;
|
| • |
Reducing unit costs, reducing fixed overheads and limiting non-contracted capital expenditures in accordance with cost reduction initiatives;
|
| • |
Securing agreement for ongoing deferral of previously agreed transaction costs deferrals from the capital reorganization amounting to a total of US$15.0 million (EUR 13.9 million). Under an agreement the
Group had reached with these creditors to delay payment, US$5 million (EUR 4.6 million) was payable in November 2024, with the remainder to be paid from the proceeds of certain fundraising transactions or on a straight line basis over 5
years (depending on the option selected by the supplier). The US$5 million ( EUR 4.6 million) payment was not made in November 2024 and a further US$10.0 million (EUR 9.2 million) is now payable or payable during the next 12 months from
the date of the filing of this Annual Report, unless the relevant suppliers agree to or accept further deferral of the transaction costs for at least twelve months from the date of the filing of this Annual Report and until sufficient
cashflow can be generated from operations or alternative sources of funding are obtained to pay down these debts;
|
| • |
Ongoing support from suppliers and customers in the form of favorable payment terms and bailment payments
|
| • |
Successful outcome of claims which the Group has made or plans to make against customers primarily associated with ordered volumes that are below the volumes which the Group was required to build and
reserve capacity for under its customer contracts, and cancellation of a wheel program; and
|
| • |
Raising capital to fund operations through the issuance of debt or equity securities via public or private placement (including through the CEF).
|
In addition to successfully achieving these initiatives, it is also important that the Company complies with the New Debt Program loan covenants and the OIC Notes and
conditions of the Class A Preferred Shares and Class B Preferred Shares. The Company will also need to obtain the consent of the Servicer under the New Debt Program, and of OIC, prior to entering any new debt funding arrangements that are not
classified as permitted indebtedness under the agreements with those parties respectively, and the consent of OIC prior to entering into certain equity funding arrangements.
There is significant doubt that the Company will be successful in achieving these initiatives.
There can be no assurance that the Company will be able to obtain the financing or customer or supplier support needed to achieve its goals on acceptable terms or at all.
Additionally, any equity or equity linked financings would likely have a dilutive effect on the holdings of existing stockholders.
Contractual Obligations
As of June 30, 2023, the date of the financial statements, the Company did not conduct any operations. In the subsequent interim period, following the Business Combination, the Company conducts operations through
Carbon Revolution. Carbon Revolution has one lease for the head office and production facility. The lease agreement does not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased
assets may not be used as security for borrowing purposes.
Borrowings
Supplier finance arrangement
In 2021, Carbon Revolution PL entered into a supply chain finance agreement with a logistics company. Under the arrangement the logistics company agrees to pay amounts to
the participating supplier in respect of invoices owed by Carbon Revolution PL and receives settlement from Carbon Revolution PL at a later date. The principal purpose of this arrangement is to facilitate efficient ordering, importation,
warehousing, invoice management and payment processing. The arrangement is only for a limited number of suppliers and specific materials. As the arrangement results in extended payment terms beyond the terms agreed with those suppliers the
agreement is disclosed as a current borrowing. The facility has a fixed interest rate of 6% + RBA cash rate from June 28, 2023 onwards.
New Debt Program
In May 2023, Carbon Revolution Operations entered into New Debt Program arranged by PIUS under which Carbon Revolution Operations issued Series 2023-A notes in exchange for US$60 million.
Pursuant to the Escrow Tranche Amendments, Carbon Revolution Operations issued Series 2024-A notes to the OIC Investors. The Series 2024-A notes are pari passu with the Series 2023-A notes subject to limited exceptions. The loan is
denominated in U.S. Dollar and is translated to Australian dollars at each reporting period. The program includes certain reserves in an amount of A$7.2 million (as of June 30, 2024), that are not available at Carbon Revolution’s discretion
and disclosed as restricted trust funds. A$1.6 million of this reserve has subsequently been released to the Company. Costs of A$20.7 million incurred in regard to the establishment of the term loan have been netted off with the loan
amount and are being amortized over the term of the loan through the effective interest rate method.
As a result of amendments to the New Debt Program agreed in May 2024, under the New Debt Program:
| • |
Interest only is payable until June 2026, and from June 2026 interest will continue to be payable each month together with monthly principal repayments of USD$2 million until maturity in May 2027 with the
remaining balance of the principal being paid as a balloon payment at maturity;
|
| • |
Interest will be payable at 12% per annum (8.5% pa coupon plus an additional 3.5% accumulating paid-in-kind interest); and
|
| • |
3% amendment fee (US$1.8 million) payable at maturity.
|
Under the original terms of the New Debt Program, the Company was required to complete a qualified capital raise of at least US$45 million by December 31, 2023. The Company
did not achieve this, and as a result, the Company is required to pay US$1.5 million and issue 50,000 ordinary shares to the Servicer upon the earlier of the refinancing or payoff of the loan or its maturity in May 2027.
OIC Financing
OIC Class A Preferred Shares
In connection with the OIC Financing, in November 2023, the Company issued 350 Class A Preferred Shares to the OIC Investors with a 12% fixed accumulating distribution and
warrants for aggregate gross proceeds of US$35 million (equivalent to A$54.7 million) less transaction costs.
These Class A Preferred Shares are recognized as a financial liability at amortized cost as they must be redeemed by November 2028. The Company may elect to redeem Class A
Preferred Shares on issue at an earlier date at its discretion subject to a minimum return of the greater of a 12% internal rate of return or 1.75x return on face value, in all circumstances, to the holders of the Preferred Shares.
The OIC Investors have also received warrants in exchange for the funding released to the Company under the OIC Financing (“OIC Warrants”). As at the date of this document, the OIC Investors have
received OIC Warrants entitling them to up to approximately 56.36% of the fully diluted Company Ordinary Shares on issue. The OIC Warrants may be exercised, in whole or in part, at the discretion of the holders. The initial OIC Warrants
included a ‘cashless’ exercise feature which was subsequently removed in June 2024 by way of the then existing OIC Warrants being reissued with amended terms. Due to the OIC Warrants initially including that feature, the initial OIC Warrants
were treated as derivative liabilities at fair value through profit and loss between issuance in November 2023 and June 2024, resulting in a gain of A$5.8 million for the 2024 financial year. In June 2024 the warrants were reclassified to
equity as the Company considered them to now meet the fixed for fixed criteria in IAS32 upon the removal of the cashless exercise feature.
Under the original terms of the OIC Financing, OIC retained the right to subscribe for further Class A Preferred Shares after November 2023 in exchange for further releases
of funding from escrow to the Company, subject to the Company achieving certain milestones. The Company has not recognized any financial liability or allocation of proceeds in November 2023 or during the 2024 financial year for these preferred
shares as the associated escrow deposit was not considered to be within the control of the Company. These commitments and escrow arrangements were subsequently modified from April 2024.
OIC Class B Preferred Shares and Series 2024-A notes and Amendment to the New Debt Program
Between April 2024 and October 2024, under amendments to the OIC Financing and the New Debt Program, the Company issued a series of loan notes (via Carbon Revolution Operations) and Class B
Preferred Shares, and additional warrants, to OIC for consideration of US$35 million, replacing an original commitment to issue further preferred equity upon completion of certain milestones. The terms of the issuance are:
| • |
US$5 million advanced in the form of Class B Preferred Shares in April 2024, and US$30 million advanced in the form of loan notes (Series 2024-A notes) between May 2024 and October 2024 (of which US$10
million was advanced during the financial year ending June 30, 2024);
|
| • |
In relation to the Class B Preferred Shares: mandatory redemption on November 3, 2028 aligned with the Class A Preferred Shares, with a 12% fixed accumulating dividend, and the Company may elect to redeem
outstanding Class B Preferred Shares at an earlier date at its discretion subject to returning to the holder the greater of (i) a 1.75x MOIC return on face value, or (ii) a 12% IRR.
|
| • |
In relation to the Series 2024-A Notes, maturity date of May 2027 concurrent with maturity of the USD term loan;
|
| • |
In relation to the Series 2024-A Notes, 12% interest comprising an 8.5% coupon rate payable monthly and a further 3.5% monthly payment in kind (which is capitalized progressively into the amount
outstanding);
|
| • |
In relation to the Series 2024-A Notes, progressive monthly repayments of principal commencing June 2026 – concurrent with the modified 2023 USD term loan;
|
| • |
An exit premium payable on the Series 2024-A Notes of 2.0x invested capital plus a further $10 million, such exit premium being payable upon the earlier of a refinancing of the Series 2024-A notes, sale
of the Company or maturity in May 2027, inclusive of any principal and interest payments to date. The repayment of the exit premium in full will be reduced or delayed in certain limited circumstances;
|
| • |
The exit premium on the Class B Preferred Shares is reduced by an amount equal to the amount of cash dividends and redemption payments that have been paid to the holder(s) of Class B Preferred Shares;
equally the amounts required to redeem the Class B Preferred Shares are reduced on account of payments made towards the exit premium, and where the amount required to redeem the Class B Preferred Shares is reduced to zero, the holder(s)
of the Class B Preferred Shares will surrender those shares for no additional consideration;
|
| • |
The Company obtained a modification of the 2023 USD term loan such that it would rank equally to the Series 2024-A notes issued; and
|
| • |
Further, US$0.01 SEF warrants to purchase a number of ordinary shares equivalent to 25.35% of ordinary shares issued calculated on a fully diluted basis (as defined in the OIC warrant) at the time of
exercise, the terms of which are equivalent to the November 2023 SEF warrants.
|
The Company has determined that the Series 2024-A notes should be accounted for as financial liabilities at amortized cost to be accreted over the term up to the minimum
return amount at maturity. Proceeds from the Series 2024-A notes have been allocated between the amortized cost liability and the fair value of the warrants issued concurrently. Transaction costs were allocated on a relative fair value basis.
OIC Series 2025-A Notes and Amendment to the New Debt Program
In December 2024, the Company and the OIC Investors agreed to further amendments to the Securities Purchase Agreement, to facilitate funding US$25 million of the remaining $40 million (from the
original US$110 million) upon satisfaction of certain conditions, agreed upon and set forth in such amendment, in exchange for interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind
and the issuance by Carbon Revolution Operations of Fixed Rate Senior Notes, Series 2025-A Notes (the “Series 2025-A Notes”) pursuant to the Indenture, and the Indenture and related documents under the New Debt Program were also amended to
facilitate the release to Carbon Revolution Operations of an aggregate of US$2 million from the payment reserve fund established under the New Debt Program, in equal instalments of US$400,000 with each $5 million tranche of funding under the
above-mentioned amendments to the Securities Purchase Agreement, in exchange for interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind and the issuance by Carbon Revolution
Operations of an equivalent amount of additional Series-2023 A Notes. Upon redemption or maturity of the Series 2025-A Notes and additional Series-2023 A Notes, Carbon Revolution Operations is required to pay the holders thereof an exit
premium equal to 2.0 times the amount funded or released in exchange for such notes minus any cash interest or principal payments or fee payments thereon. In connection with the funding of each of the five tranches of US$5 million, the
Company will issue to the OIC Investors and the Existing Lenders, pro rata in proportion to the amount of their investment relative to the total amount invested by the OIC Investors and the Existing Lenders (between them on a pro-rata basis)
in each tranche, penny warrants to purchase an aggregate number of shares equal to 5.0% of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to
the OIC Investors. Additionally, after the issuance by Carbon Revolution Operations of the Series 2025-A Notes in the amount of US$25 million to the OIC Investors and release of the US$2 million from the payment reserve fund as described
above, each holder of Series 2023-A Notes agrees to waive cash interest not to exceed an aggregate of US$3 million (the “Cash Interest Suspension Period”) in exchange for the Trustee receiving payment in kind in an amount equal to such waived
cash interest plus interest thereon payable at a rate of 12% per annum, of which 8.5% is payable in cash and 3.5% is payable in-kind for the benefit of the holders of the Series 2023-A Notes, and the OIC Investors also agree to waive cash
interest on the Series 2024-A Notes and the Series 2025-A Notes, on the same terms, for the same period.
Pursuant to the December 2024 Amendments, on each of December 20, 2024, January 21, 2025, March 7, 2025 and May 9, 2025, US$5 million was funded in exchange for interest payable thereon and the
issuance to the OIC Investors of US$5 million aggregate principal amount of Series 2025-A Notes and the release from the payment reserve fund for the Existing Lenders of US$400,000 in exchange for interest payable thereon and the issuance to
the of US$400,000 aggregate principal amount of additional Series 2023-A Notes, and the OIC Investors (4.63%) and the Existing Lenders (0.37%) were issued penny warrants to purchase an aggregate number of shares equal to 5.0% of the Company’s
shares outstanding, determined on a “Fully-Diluted Basis”.
As of the date of this Annual Report, warrants to purchase ordinary shares equivalent to a total of 56.36% of ordinary shares issued calculated on a fully diluted basis, have now been issued to
the OIC Investors and vested, and warrants to purchase ordinary shares equivalent to a total of 1.48% of ordinary shares issued calculated on a fully diluted basis, have now been issued to Existing Lenders and vested.
| C. |
Research and development, patents and licenses, etc.
|
See “Item 4. Information on the Company—Business Overview—Research and Development.”
| D. |
Trend Information
|
See “Item 5. Operating and Financial Review and Prospects—A. Operating Results.”
| E. |
Critical Accounting Policies and Estimates
|
Overview
Our consolidated financial statements are prepared in accordance with IFRS, which require us to make estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income, and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period
in which the estimates are revised and in any future periods affected.
Critical Accounting Policies and Estimates
The Company’s financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”) (together “IFRS”). The
financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain crucial accounting estimates. It also requires management to exercise
its judgment in the process of applying the Group’s accounting policies. In the application of the Company’s accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amount of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the financial year in which the estimate is revised if the revision affects only that financial year or in the
financial year of the revision and future financial years if the revision affects both current and future financial years. There are no significant items recognized in the financial statements which require the use of estimates or judgments.
The Company’s functional and presentational currency is Euro.
The following accounting policies have been applied:
Foreign Exchange
Transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of
each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing at that date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction
is included as an exchange gain or loss and recognized in profit or loss.
Ordinary Share Capital
The ordinary share capital of the Company is presented as equity.
New and Revised IFRS Standards in Issue
The Group has applied a number of amendments to IFRS Accounting Standards issued by the International Accounting Standards Board (IASB) that are mandatorily effective for the accounting period
ended June 30, 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
|
•
|
Annual Improvements to IFRS Standards 2018–2020
|
|
•
|
Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)
|
|
•
|
Reference to the Conceptual Framework (Amendments to IFRS 3)
|
|
•
|
International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12)
|
At the date of authorization of the consolidated financial statements, other Standards and Interpretations issued but not yet effective and relevant for the Group were listed below.
|
Standard and Interpretation
|
Effective for annual reporting periods beginning on or after
|
Expected to be initially applied in the financial year ending
|
|
Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8
|
January 1, 2023
|
June 30, 2024
|
|
Amendment to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction
|
January 1, 2023
|
June 30, 2024
|
|
Amendment to IFRS 16 – Leases on sale and leaseback
|
January 1, 2024
|
June 30, 2025
|
|
Amendments to IAS 1 – Non-current liabilities with covenants
|
January 1, 2024
|
June 30, 2025
|
|
Amendments to IAS 7 and IFRS 7 on Supplier finance arrangements
|
January 1, 2024
|
June 30, 2025
|
|
Amendments to IAS 8 – Definition of Accounting Estimates
|
January 1, 2023
|
June 30, 2024
|
| A. |
Directors and Senior Management
|
Management and Board of Directors
The following sets forth the names, business addresses and functions of the Company’s directors and senior management as of the date of this Annual Report. The Company’s Amended and Restated
Memorandum and Articles of Association provide that the Company Board of Directors (the “Company Board”) has three classes of directors with the directors of each class serving staggered three-year terms. Class I directors shall serve a term
expiring at Company’s 2024 annual meeting of shareholders, Class II directors shall serve a term expiring at Company’s 2025 annual meeting of shareholders and Class III directors shall serve a term expiring at Company’s 2026 annual meeting of
shareholders. In addition to directors that are members of the three classes, for so long as any Class A Preferred Shares remain outstanding, the Class A Preferred Majority is entitled from time to time to appoint two Class A Preferred
Directors and to remove and/or replace such Class A Preferred Directors.
|
Name
|
Age
|
Position and Class
|
|
Directors
|
||
|
Robert A. Lutz
|
93
|
Chairman and Class III Director
|
|
Jacqueline A. Dedo
|
64
|
Class I Director
|
|
Donald Hampton Jr(1)
|
58
|
Class III Director
|
|
Burt Jordan
|
58
|
Class II Director
|
|
Chris Leary
|
36
|
Class A Preferred Director
|
|
Jonathan Magaziner
|
40
|
Class A Preferred Director
|
|
Matti Masanovich
|
53
|
Class I Director
|
|
Dale McKee
|
65
|
Class I Director
|
|
Executive Officers
|
||
|
Donald Hampton Jr(1)
|
58
|
Chief Executive Officer and Director
|
|
Gerard Buckle
|
56
|
Chief Financial Officer
|
|
David French
|
62
|
Vice President Operations
|
|
Ashley Denmead
|
43
|
Chief Technology Officer
|
|
David Nock
|
52
|
General Counsel and Company Secretary
|
|
Alia Comai(2)
|
50
|
Chief Revenue Officer
|
(1) Replaced Jacob Dingle as Director and Chief Executive Officer on March 19, 2025
(2) Designated as an officer April 22, 2025
Directors
Robert A. Lutz. Mr. Lutz has served as a director since the closing of the Business Combination and was appointed
Chairman of the Company Board in February 2024. Mr. Lutz has been President and Chief Executive Officer of Lutz Communications since May 2010. Prior to Lutz Communications, Mr. Lutz held various positions at General Motors from September 2001
through December 2009 and served in an advisory capacity thereafter until he retired in May 2010, including, among other positions, Vice Chairman of Product Development, Chairman of General Motors North America and Vice Chairman Marketing and
Communications. Mr. Lutz also served as Chairman and Chief Executive Officer of Exide Technologies from 1998 until 2002 and served on its board of directors until May 2004. Prior to his service at Exide Technologies, Mr. Lutz served in a
variety of positions at Chrysler between 1986 and 1998, including as President and Chief Operating Officer, and at Ford Motor Company between 1974 and 1986. Mr. Lutz earned a Bachelor’s degree in Production Management from the University of
California-Berkeley in 1961 and a Master’s degree in Marketing from the University of California-Berkeley in 1962. Mr. Lutz brings to the Company Board significant board and executive experience in the automotive industry.
Jacqueline A. Dedo. Ms. Dedo has served as a director since the closing of the Business Combination. Since May
2015, Ms. Dedo has served as a co-founder of Aware Mobility LLC, which is focused on the development, investing, partnering and application of both electrified propulsion and connectivity tools, platforms and applications. Prior to May 2015,
Ms. Dedo served as President of Piston Group and held various positions with Dana Holding Corp, The Timken Company, Motorola, Covisint LLC, Robert Bosch Corporation and Cadillac Motor Car Company. Ms. Dedo received a Bachelor of Science
degree in Electrical Engineering from Kettering University. Ms. Dedo serves as a member of the board of directors of Li-Cycle Holdings Corp. (NYSE: LICY) since August 2022 and Workhorse Group Inc. (Nasdaq: WKHS) since May 2020. Ms. Dedo
brings to the Company Board over 30 years of global automotive, off highway, industrial and aftermarket experience.
Donald Hampton, Jr Mr. Hampton was appointed Acting Chief Executive Officer and as a director on March 19, 2025 and as Chief Executive
Officer on May 12, 2025. Mr. Hampton most recently served as President and Chief Executive Officer of Pace Industries from 2020 to 2022, following his service as President North America for Faurecia,
beginning in 2016. After beginning his professional career as a Supervisor at the Allied Signal spark plug plant in his hometown of Fostoria, Ohio, he served as an executive and corporate officer at multiple other Tier 1 automotive
suppliers, holding global leadership positions at Honeywell International / Allied Signal, Maxion Wheels / Hayes Lemmerz and Rea Magnet Wire Company. Mr. Hampton is also a veteran of eight years with two branches of service having served in
the Army National Guard and with the United States Navy in Atsugi, Japan. He earned both his B.B.A. in Accounting and an M.B.A. from Tiffin University in Tiffin, Ohio and is a member of the Board of Trustees of that institution. Mr. Hampton brings to the Company significant executive and operational expertise in the automotive industry.
Burt Jordan. Mr. Jordan has served as a director since the closing of the Business Combination. Mr. Jordan has
served as the President and a director of Atlantic Coastal Acquisition Corp. I since December 2020 and as the President and a director of Atlantic Coastal Acquisition Corp. II since October 2023. Previously, Mr. Jordan was an executive at
Ford Motor Company from 1999 until 2020, where he most recently served as Vice President of Global Purchasing Operations and Supply Chain Sustainability. In this role, Mr. Jordan drove strategy transformation, growth and efficiencies through
program delivery, purchasing strategy and supply chain sustainability. He served as a non-executive director of Xos, Inc. (Nasdaq: XOS) from August 2021 to April 2024 and has been serving as a non-executive director of ABC Technologies (TSX:
ABCT) since November 2021. Mr. Jordan holds a Bachelor’s degree in Business Administration from Alma College in Michigan. He was also appointed to the United States Air Force Academy. Mr. Jordan brings to the Company Board extensive
management, supply chain and global leadership experience.
Chris Leary. Mr. Leary has served as a director of the Company since February 23, 2024. Mr. Leary currently serves as an Investment
Partner and Head of Infra Equity at OIC, leading the firm’s structured equity investment strategy, focused on sustainable middle market infrastructure opportunities. Mr. Leary is also a voting member of the Investment Committees for Infra
Equity and Infra Growth at OIC, and a voting member of OIC’s valuation committee. Prior to joining OIC, Mr. Leary served at Barclays Natural Resource Investments (BNRI), a multibillion-dollar private equity fund invested globally in energy,
power, renewables, asset-heavy infrastructure services and mining. Mr. Leary has served on the boards of numerous private companies, in a voting and observer capacity, throughout his career as a private equity and private debt investor in the
infrastructure and natural resource sectors. Mr. Leary holds a Bachelor of Science in both Physics and Management from Boston College’s Carroll School of Management, graduating summa cum laude. Mr. Leary brings to the Company Board extensive
investment, capital markets, M&A, and finance experience.
Jonathan Magaziner. Mr. Magaziner has served as a director of the Company since February 23, 2024. Mr. Magaziner is
a Senior Vice President for the Infra Equity Strategy at OIC, where he is responsible for the origination, due diligence, structuring, and execution of the firm’s investments in middle market infrastructure businesses. Mr. Magaziner currently
serves on the board of Bravo Infrastructure Group, owner of Radiance Solar, a leading North American solar construction company and OIC capital partner. Prior to OIC, Mr. Magaziner served as an attorney with the Private Capital Transactions
Group at Ropes & Gray LLP, where he represented operating companies, private equity firms, and hedge funds in a variety of traditional and special situations transactions, including structured equity and credit investments,
securitizations, leveraged buyouts, and restructurings. Mr. Magaziner also brings several years of experience working in business development and finance positions at growing energy and infrastructure businesses. Mr. Magaziner holds a B.A. in
Public Policy from Brown University, a J.D., cum laude, from Harvard Law School, and an M.B.A with High Distinction from Harvard Business School, where he was a Baker Scholar. Mr. Magaziner brings to the Company Board significant executive
and transactional experience.
Matti Masanovich. Mr. Masanovich has served as a director since the closing of the Business Combination. Mr.
Masanovich has served as Senior Vice President and Chief Financial Officer of Catalent since July 2023. Prior to joining Catalent, Mr. Masanovich served as Executive Vice President and Chief Financial Officer of Tenneco Automotive from August
2020 until November 2022. Prior to joining Tenneco Automotive, Mr. Masanovich was Chief Financial Officer of Superior Industries International, Inc. between September 2018 and August 2020. Previously, he was with General Cable Corporation,
serving from November 2016 to June 2018 as Senior Vice President and Chief Financial Officer. Prior to that, Mr. Masanovich served in various senior finance and accounting roles at Tier 1 automotive suppliers such as International Automotive
Components and Aptiv (formerly Delphi). Mr. Masanovich holds a Bachelor of Commerce and Masters of Business Administration from the University of Windsor. He was also previously a chartered accountant with the Canadian Institute of Chartered
Accountants. Mr. Masanovich brings to the Company Board extensive management and finance and accounting experience.
Dale McKee. Mr. McKee has served as a director of Carbon Revolution PL since September 2018 and a director of the
Company since the closing of the Business Combination. Mr. McKee serves as director, honorary treasurer, and chair of the Audit and Risk Committee of Museums Board of Victoria and as Trustee of the Marion and EH Flack Trust. He previously
served as a senior partner at PricewaterhouseCoopers from 1993 to 2018. Mr. McKee is a former member of the Australian Auditing Standards Board. He holds a Bachelor of Business from Federation University and is a Fellow of the Institute of
Chartered Accountants in Australia and New Zealand. Mr. McKee brings to the Company Board extensive experience with respect to audit, accounting, corporate governance, risk management, and capital markets matters.
Executive Officers
Donald Hampton, Jr. See “—Directors”.
Gerard Buckle. Mr. Buckle has served as the Chief Financial Officer of Carbon Revolution PL since September 2019
and as the Chief Financial Officer of the Company since December 2022. From December 2015 to September 2019, he served as General Manager Southern Region for Incitec Pivot Fertilisers (a division of Incitec Pivot Ltd) and General Manager of
Finance and Investor Relations for Incitec Pivot Ltd. He previously served as Chief Financial Officer at Olex Australia Pty Ltd, Orica Chemnet (a division of Orica Australia Pty Ltd) and Jetstar Airways Pty Ltd. Mr. Buckle is a chartered
accountant in Australia, with a Bachelor of Business from Ballarat University and a Graduate Diploma of Applied Finance from the Financial Services Institute of Australia.
Ashley Denmead. Dr. Denmead has served as the Chief Technology Officer of the Company since the closing of the
Business Combination. Dr. Denmead is a founder of Carbon Revolution PL and an experienced executive with 19 years of experience developing and commercializing the technology to bring carbon fiber wheels to the automotive market. In the last
five years, Dr. Denmead has maintained a position on the Carbon Revolution PL and the Company’s executive team, including as Engineering and Design Director and more recently becoming the Chief Technology Officer. During this period, he has
been responsible for the company’s product design and technology direction. Dr. Denmead holds a Bachelor in Mechanical Engineering and Computer Science and a Doctor of Philosophy in Composite Materials both from Deakin University.
David French. Mr. French has served as the Vice President Operations of Carbon Revolution since January 2023 and
as an officer of the Company since the closing of the Business Combination. He is a globally experienced automotive executive with extensive background in business planning and strategy, vehicle program delivery, product development systems
and manufacturing leadership. From February 1984 to April 2019, Mr. French previously held senior management roles at Ford Motor Company of Australia Pty Ltd, including Programs Director, Commercials Vehicle Asia, Pacific and Africa. Mr.
French also served as a director of Ford Motor Company of Australia Pty Ltd. He was a member of the PAC Group (USA), an advisory board with a special interest in business alliance development, from September 2020 to January 2022. Mr. French
holds a Bachelor of Mechanical Engineering degree from the University of Adelaide.
David Nock. Mr. Nock has served as General Counsel since August 2017 and as Company Secretary of Carbon Revolution
PL since September 2017 and as General Counsel and Company Secretary of the group since the closing of the Business Combination. From 2012 to July 2016, he served as Regional Commercial Director of Oakley Asia Pacific (Luxottica), and from
2016 to July 2017, he served as General Manager of South-East Asia, India and Korea – Oakley Distributors and Franchisees (Luxottica). From 2006 to 2011, he served as Regional General Counsel for Quiksilver Asia Pacific. Earlier in his
career, Mr. Nock was corporate counsel at ACP Magazines and solicitor at Minter Ellison. Mr. Nock holds Arts and Law Degrees from the University of Melbourne and a Master of Business Administration from Melbourne Business School.
Alia Comai. Ms. Comai has served as Chief Revenue Officer since June
2024. From February 2022 to June 2024, Ms. Comai served as Vice President and General Manager – North America at Questar Auto Technologies, Inc. From September 2019 to February 2022, Ms. Comai served as Vice President of Neapco Holdings
LLC. She has almost three decades experience in the automotive industry, beginning her career as a product development engineer at Chrysler and subsequently held progressive, cross-functional roles with leading Tier-1 automotive suppliers
such as Magna, Nippon Seiki, and Bosch over a twenty-year span. Ms. Comai holds a Bachelor of Applied Science in Electric Engineering from the University of Windsor and a Master of Business Administration from the University of Detroit Mercy.
The business address for each of the directors and executive officers of the Company is Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland.
Family Relationships
There are no family relationships among any of our executive officers or directors.
Arrangements and Understandings
Ms. Dedo and Messrs. Jordan, Lutz and Masanovich were selected from a list of director candidates mutually agreed between Carbon Revolution PL and Twin Ridge. Pursuant to the OIC Shareholder’s
Agreement, Messrs. Leary and Magaziner were appointed directors of the Company. See “Item 5. Operating and Financial Review and Prospects, A. Operating Results, Impact of Business Combination and Related
Financing Transactions.” Except as described herein, there are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or
executive officer.
| B. |
Compensation
|
As of June 30, 2023, which was prior to the completion of the Business Combination, none of the Company’s then executive officers or directors have received any compensation for services
rendered to the Company. Following the Business Combination, which occurred after June 30, 2023, the executive officers and directors of Carbon Revolution became the directors and executive officers of the Company.
| C. |
Board Practices
|
The information below is provided for the fiscal year of the Company ended June 30, 2023. Prior to the Business Combination on November 3, 2023, the Company did not have any operations.
Service Period
As of June 30, 2023 and prior to the Business Combination, Jacob Dingle, Rolando Ebuna and Ronan Donohoe served on the board of directors of the Company. Ronan Donohoe was appointed to the
board on 25 November 2022. Jacob Dingle and Rolando Ebuna were appointed to the board on 22 December 2022. Ronan Donohoe and Rolando Ebuna resigned on closing of the Business Combination.
Directors’ Service Contracts with the Company or Subsidiaries
The directors appointed as of June 30, 2023 did not have in place formal service contracts with the Company. Rolando Ebuna and Ronan Donohoe were appointed pursuant to the terms of an
engagement letter between the Company and Cafico International, pursuant to which Cafico International agreed to provide Irish resident directors to the Company. Jacob Dingle did not have a formal service contract in place with respect to
his services as a director for the financial year ended June 30, 2023, but a formal service contract was put in place on closing of the Business Combination.
Committee Information
As of June 30, 2023 and prior to the Business Combination, the Company had not established any committees of the board. Upon consummation of the Business Combination, the Board set up an Audit
& Risk Committee and a Remuneration & Nominating Committee to carry out certain responsibilities of the board as set out in their respective charters.
| D. |
Employees
|
As of June 30, 2023, the Company did not have any employees or operations.
| E. |
Share Ownership
|
Information regarding the ownership of Ordinary Shares by our directors and executive officers is set forth in Item 7.A of this Report.
| F. |
Disclosure of a registrant’s action to recover erroneously awarded compensation.
|
Not applicable
|
ITEM 7.
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
| A. |
Major Shareholders
|
The following table sets forth information relating to the beneficial ownership of our Ordinary Shares as of June 30, 2024 by:
| • |
each person, or group of affiliated persons, known by us to beneficially own more than 5% of outstanding Ordinary Shares;
|
| • |
each of our directors;
|
| • |
each of our directors and executive officers; and
|
| • |
all of our directors and executive officers as a group.
|
The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A
shareholder is also deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (i) the exercise of any option, warrant or right, (ii) the
conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement, or (iv) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, Ordinary Shares subject to options or other rights (as set forth above) held by that person that are currently exercisable, or will become exercisable within 60 days
thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person. Each person named in the table has sole voting and investment power with respect to all of
the Ordinary Shares shown as beneficially owned by such person, except as otherwise indicated in the table or footnotes below. The Company’s major shareholders do not have different voting rights from other holders of Ordinary Shares.
The percentage of Ordinary Shares beneficially owned is computed on the basis of 1,885,184 Ordinary Shares outstanding as of June 30, 2024 after giving effect to the Business Combination, and
does not include 1,939,420 Ordinary Shares issuable upon the exercise of outstanding warrants as at June 30, 2024.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all Ordinary Shares beneficially owned
by them. To our knowledge, no Ordinary Shares beneficially owned by any executive officer, director or director nominee have been pledged as security.
|
Beneficial Owner
|
Number
of
Ordinary Shares
|
Percentage
of
All Ordinary Shares
|
||||||
|
Executive Officers, Directors and Director Nominees
|
||||||||
|
Jacqueline A. Dedo
|
--
|
--
|
||||||
|
Jacob Dingle(1)
|
30,151
|
1.6
|
%
|
|||||
|
Burt Jordan
|
--
|
--
|
||||||
|
Chris Leary
|
--
|
--
|
||||||
|
Robert A. Lutz
|
--
|
--
|
||||||
|
Jonathan Magaziner
|
--
|
--
|
||||||
|
Matti Masanovich
|
--
|
--
|
||||||
|
Dale McKee(2)
|
801
|
*
|
||||||
|
Gerard Buckle(3)
|
3,147
|
*
|
||||||
|
David French
|
4,780
|
*
|
||||||
|
Ashley Denmead
|
15,442
|
*
|
||||||
|
David Nock(4)
|
2,266
|
*
|
||||||
|
All executive officers and directors as a group (13 persons)
|
56,587
|
3.0
|
%
|
|||||
|
Other 5% Shareholders
|
||||||||
|
Daniel Hennessy
|
134,000
|
7.1
|
%
|
|||||
| * |
Indicates beneficial ownership of less than 1% of total outstanding Ordinary Shares.
|
| (1) |
24,036 Ordinary Shares are owned by Point Grey Investments Pty Ltd.
|
| (2) |
684 Ordinary Shares are held by McKee Family Investments Pty Ltd.
|
| (3) |
123 Ordinary Shares are held jointly with his wife, Susan Mary Buckle.
|
| (4) |
139 Ordinary Shares are held by his wife, Belinda Nock.
|
Note, on March 19, 2025, Jacob Dingle ceased to serve as a Director and Chief Executive Officer of the Company and Donald Hampton, Jr was appointed as a Director and Acting Chief Executive Officer of the Company,
and as Chief Executive Officer on May 12, 2025. Alia Comai was designated as an Officer of the Company on April 22, 2025.
Significant Changes in Ownership by Major Shareholders
We have experienced significant changes in the percentage ownership held by major shareholders as a result of our Business Combination.
Holders
The record holder of the largest number (approximately 82.76%) of shares is Cede & Co., which is based in the United States, but serves as a depositary for shares held by participants
therein. Based upon the information known to the Company with respect to the identity and addresses of the participants in Cede & Co., almost all of the shares are held by participants based in Australia.
| B. |
Related Party Transactions
|
The following is a description of certain related party transactions we (or Carbon Revolution PL prior to the Business Combination) have entered into since July 1, 2022 with any of our executive
officers, directors or their affiliates and holders of more than 10% of any class of our voting securities in the aggregate, which we refer to as related parties, other than compensation arrangements.
Business Combination
On November 3, 2023, Twin Ridge, the Company, Carbon Revolution PL and MergerSub, consummated the business combination pursuant to the terms of a Business
Combination Agreement (“the BCA”), dated November 29, 2022, as amended or supplemented from time to time, pursuant to which, among other things, Twin Ridge merged with and into MergerSub, with MergerSub surviving as a wholly-owned
subsidiary of the Company, with shareholders of Twin Ridge receiving Ordinary Shares, in exchange for their existing Twin Ridge ordinary shares and existing Twin Ridge warrant holders having their warrants automatically exchanged by
assumption by the Company of the obligations under such warrants, including to become exercisable in respect of Ordinary Shares instead of Twin Ridge ordinary shares. In addition, Twin Ridge, Carbon Revolution PL and the Company implemented
a scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) and a capital reduction under Part 2J.1 of the Corporations Act 2001 (Cth) in accordance with the Scheme Implementation Deed, which resulted in all shares of Carbon
Revolution PL being canceled in return for consideration, with Carbon Revolution PL issuing one share to the Company (resulting in Carbon Revolution PL becoming a wholly-owned subsidiary of the Company) and the Company issuing Ordinary
Shares to the shareholders of Carbon Revolution PL.
Related Party Loans
On March 10, 2023, Twin Ridge issued an unsecured promissory note in the total principal amount of up to $1,500,000 (the “Promissory Note”) to Carbon Revolution. The
Promissory Note does not bear interest and matured upon closing of the Business Combination.
Registration Rights Agreement
At the closing of the Business Combination, the Company, the Founder Holders and certain shareholders of Carbon Revolution PL entered into a Registration Rights Agreement, pursuant to which,
among other things, the Company will agree to undertake certain shelf registration obligations in accordance with the Securities Act, and certain subsequent related transactions and obligations, including, among other things, undertaking
certain registration obligations, and the preparation and filing of required documents.
Lock-Up Agreements
Prior to the closing of the Business Combination, certain directors and officers of the Company entered into separate Lock-Up Agreements, pursuant to which the Ordinary Shares
held by such shareholders were locked-up and subject to transfer restrictions for 180 days following the closing date of the Business Combination, subject to certain exceptions.
Indemnification Agreements
The Company entered into indemnification agreements with each of the directors and executive officers of the Company to provide contractual indemnification providing for
indemnification and advancements by the Company of certain expenses and costs relating to claims, suits or proceedings arising from his or her service to the Company or, at the Company’s request, service to other entities, as officers or
directors occurring at or prior to the closing of the Business Combination to the maximum extent permitted by applicable law.
The Company also maintains standard policies of insurance under which coverage is provided (1) to its directors and officers against loss arising from claims made by reason of
breach of duty or other wrongful act, while acting in their capacity as directors and officers of the Company, and (2) to the Company with respect to payments which may be made by the Company to such officers and directors pursuant to any
indemnification provision contained in the Company Amended and Restated Memorandum and Articles of Association or otherwise as a matter of law.
OIC Financing
See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—OIC Financing.”.
| C. |
Interests of Experts and Counsel
|
Not applicable.
|
ITEM 8.
|
FINANCIAL INFORMATION |
| A. |
Consolidated Statements and Other Financial Information
|
See Item 18 of this Report for Carbon Revolution Public Limited Company’s consolidated financial statements and other financial information. The Company did not conduct operations as of June
30, 2023.
Legal Proceedings
From time to time, the Company may become involved in legal proceedings or may be subject to claims arising in the ordinary course of business. Such proceedings or claims may
involve disputes with customers, suppliers, consumers, regulators, employees, contractors, competitors, investors or other parties, and may involve disputes relating to intellectual property rights. Although the results of any current
proceedings or claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a long term material adverse effect on our business, operating results, financial
condition or cash flows. Litigation can have an adverse impact on us (regardless of the outcome) because of factors including the cost of defending a claim, diversion of management or related resources, impact on reputation and relationships,
and depending on outcome, settlement costs and cost of remedies, which we may become liable for or subject to.
Dividends
The Company has not paid any cash dividends on the Ordinary Shares to date and does not intend to pay a cash dividend. The payment of any dividends in the future will be
dependent, among other things, upon Carbon Revolution’s revenues and earnings, if any, capital requirements and general financial condition as well as compliance with the Company’s Amended and Restated Memorandum and Articles of Association.
In addition, under the terms of the New Debt Program, subject to certain exceptions, the Company is restricted from paying any dividends or making any other distribution on capital stock. Similarly, under the terms of the OIC Financing, in
the event the Company made a dividend or distribution or other payment to shareholders, it would be considered a Springing Rights Matter.
| B. |
Significant Changes
|
A discussion of significant changes in our business can be found under “Item 5. Operating and Financial Review and Prospects, A. Operating Results, Impact of
Business Combination and Related Financing Transactions”.
|
ITEM 9.
|
THE OFFER AND LISTING |
| A. |
Offer and Listing Details
|
Listing of Ordinary Shares and Public Warrants
The Ordinary Shares and Public Warrants were listed following the Business Combination and are listed on Nasdaq under the symbols “CREV” and “CREVW,” respectively. Holders of Ordinary Shares and
Public Warrants should obtain current market quotations for their securities. There can be no assurance that the Ordinary Shares and/or Public Warrants will remain listed on the Nasdaq. If the Company fails to comply with the Nasdaq listing
requirements, the Ordinary Shares and/or Public Warrants could be delisted from Nasdaq. In particular, Nasdaq has initial and continuing listing standards, including public float or shareholders’ equity and round lot holders requirements.
Based upon the Company’s current public float and its shareholders’ equity as of June 30, 2024, the Company is not in compliance with the continuing listing standards and expects to receive a notice of non-compliance from the Nasdaq staff. A
delisting of the Ordinary Shares and Public Warrants will likely affect the liquidity of the Ordinary Shares and Public Warrants and could inhibit or restrict the ability of the Company to raise additional financing.
Public Warrants
Upon completion of the Business Combination, there were 7,102,890 Public Warrants outstanding. The Public Warrants, each of which is exercisable for one-tenth of an Ordinary Share, each at an exercise price of
$11.50 per one-tenth of an Ordinary Share ($115.00 per whole Ordinary Share) will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.
| B. |
Plan of Distribution
|
Not applicable.
| C. |
Markets
|
The Ordinary Shares and Public Warrants are listed on Nasdaq under the symbols “CREV” and “CREVW,” respectively. There can be no assurance that the Ordinary Shares and/or
Public Warrants will remain listed on Nasdaq. Based upon the Company’s current public float and its shareholders’ equity as of June 30, 2024, the Company is not in compliance with the continuing listing standards and expects to receive a
notice of non-compliance from the Nasdaq staff. If the Company fails to comply with Nasdaq listing requirements, the Ordinary Shares and/or Public Warrants could be delisted from Nasdaq. In particular, Nasdaq has initial and continuing
listing standards, including public float or shareholders’ equity and round lot holders requirements. A delisting of the Ordinary Shares will likely affect the liquidity of the Ordinary Shares and/or Public Warrants and could inhibit or
restrict the ability of the Company to raise additional financing.
| D. |
Selling Shareholders
|
Not applicable.
| E. |
Dilution
|
Not applicable.
| F. |
Expenses of the Issuer
|
Not applicable.
|
ITEM 10.
|
ADDITIONAL INFORMATION |
| A. |
Share Capital
|
Not applicable.
| B. |
Memorandum and Articles of Association
|
The Company is a public limited company organized and existing under the laws of Ireland. The Company was formed on July 5, 2017 as a private limited liability company
incorporated in Ireland under the name “Poppetell Limited” and changed its name on December 6, 2022 to “Carbon Revolution Limited”. The Company was re-registered as a public limited company on May 29, 2023, upon which its name changed to
“Carbon Revolution Public Limited Company”. The Company’s affairs are governed by the ICA, the laws of Ireland and the Company’s Memorandum and Articles of Association.
Structured Voting Rights
In connection with the OIC Financing, for so long as there are Class A Preferred Shares in issue, the prior written consent of the Class A Preferred Shareholders holding a
majority of the Class A Preferred Shares in issue (“Class A Majority”) shall be required before the Company can undertake certain matters, as set out in the Company’s Amended and Restated Memorandum and Articles of Association (“Class A
Structured Voting Rights”). Additionally, for so long as there are Class B Preferred Shares in issue, the prior written consent of the Class B Preferred Shareholders holding a majority of the Class B Preferred Shares in issue (“Class B
Majority”) shall be required before the Company can undertake certain matters, as set out in the certificate of designation of the Class B Preferred Shares (“Class B Structured Voting Rights”, and together with the Class A Structured Voting
Rights, the “Structured Voting Rights”).
Directors
The directors, other than Chris Leary and Jonathan Magaziner, are divided into three classes, designated Class I, Class II and Class III. The term of the initial Class I
directors shall terminate at the conclusion of the Company’s 2024 annual general meeting; the term of the initial Class II directors shall terminate on the conclusion of the Company’s 2025 annual general meeting; and the term of the initial
Class III directors shall terminate on the conclusion of the Company’s 2026 annual general meeting. Directors are eligible to stand for re-election at the relevant annual general meeting. Directors shall be re-elected for a three-year term.
Cumulative voting in the election of directors is not provided for. Chris Leary and Jonathan Magaziner, appointed in February 2024, are Class A Preferred Directors’ and are not subject to reelection due to their appointment right by OIC.
Permitted Interests of Directors
Under the Company’s Amended and Restated Memorandum and Articles of Association, so long as a director has disclosed to the Company Board any interests he/she may have in a
contract or proposed contract with the Company, he/she may vote in respect of any contract, appointment or arrangement in which he/she is interested and be counted in the quorum present at the meeting.
Compensation of the Directors
Pursuant to the Company’s Amended and Restated Memorandum and Articles of Association, the compensation of the Directors is determined by the Company Board. Where Director
compensation is not provided for in the Company’s operating budget, the approval of the Class A Majority shall be required in accordance with the Structured Voting Rights.
Borrowing Powers
Pursuant to the Company’s Amended and Restated Memorandum and Articles of Association, among the directors’ powers are the right to borrow money and to mortgage or charge the
Company’s undertaking, property and uncalled capital or any part thereof. These powers are subject to the Structured Voting Rights, pursuant to which the Company must obtain the consent of a Class A Majority before it incurs any indebtedness
other than Permitted Indebtedness (as defined in the Amended and Restated Memorandum and Articles of Association).
No Age Limit Requirement
The Amended and Restated Memorandum and Articles of Association do not impose any age restrictions or mandatory retirement age for Directors.
No Share Qualification
The Stock Ownership Policy sets out minimum stock holding requirements for Directors, CEO, CFO and other executive team members. The policy sets our minimum shareholding
requirements for directors and members of the executive team of the Company. For directors the minimum is five times annual cash fees (excludes committee fees or additional chair compensation). For the CEO the minimum is five times annual
cash remuneration. For the CFO the minimum is 2.5 times annual cash remuneration. Participants are expected to meet the minimum holding requirements within five years. The calculation may include shares of common stock of the Company together
with certain earned and vested RSUs and other rights to such shares. With respect to any non-executive director who serves on the board pursuant to the nomination rights or other agreement with a shareholder of the Company, whether set forth
in a contractual arrangement or the terms of any class or series of preferred shares, the calculation shall also include any shares owned such shareholder directly and any shares issuable upon exercise of any vested options or warrants to
acquire shares.
Disclosure of Shareholding
Under the Companies Act 2014 of Ireland, there is a notification requirement for shareholders who become or cease to be interested in 3% of the shares of an Irish public
limited company. The shareholders must notify the Company if, as a result of a transaction, the shareholder will become interested in 3% or more of the shares of the Company or if, as a result of a transaction, a shareholder who was
interested in 3% or more of the shares of the Company ceases to be so interested. Where a shareholder is interested in 3% or more of the shares of the Company, the shareholder must notify the Company of any alteration of his or her interest
that brings his or her total holding through the nearest whole percentage number, whether an increase or a reduction.
Amendment to Rights
Where the rights attaching to shares are set out in the Amended and Restated Memorandum and Articles of Association, any changes to these rights will need to be effected by
way of a special resolution (passed by 75% of the votes cast by shareholders attending and voting at the meeting) amending the Amended and Restated Memorandum and Articles of Association. Additionally, the rights attaching to a particular
class of shares may only be varied if (a) the holders of 75% of the nominal value of the issued shares of that class consent in writing to the variation, or (b) a special resolution, passed at a separate general meeting of the holders of that
class, sanctions the variation. For so long as there are Preferred Shares in issue, any amendments to the Amended and Restated Memorandum and Articles of Association will also require the consent of a Class A Majority and Class B Majority.
Subject to the Structured Voting Rights, the Company Board is empowered to cause preferred shares to be issued from time to time and may fix the rights attaching to such
preferred shares. The Company Board may change the rights of any series of preferred shares that has been created but not yet issued. Once issued, the rights attaching to a series of preferred shares may only be varied with the consent in
writing of 75% of the holders of those shares or by a special resolution passed by that class.
Ordinary Shares
Dividend Rights
The holders of Ordinary Shares are entitled to such dividends as may be declared by the Company Board, subject to the Structured Voting Rights. Dividends may be declared and
paid out of the funds legally available therefor, or any other fund or account which can be authorized for this purpose in accordance with the ICA.
Voting Rights
Each Ordinary Share shall be entitled to one vote on all matters subject to the vote at general meetings of the Company. Voting at any meeting of shareholders is by way of a
poll, which shall be taken in such manner as the chairperson of the meeting directs.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to Ordinary Shares cast at a
meeting, while a special resolution requires the affirmative vote of no less than 75% of the votes cast attaching to the outstanding Ordinary Shares at a meeting. Where the shareholders wish to act by way of written resolution in lieu of
holding a meeting, unanimous consent of the holders of Ordinary Shares shall be required. A special resolution (and, in the case of a Structured Voting Rights matter, the consent of a Class A Majority) will be required for important matters
such as a change of name, reducing the share capital or making changes to the Amended and Restated Memorandum and Articles of Association to be in effect, assuming approval of all of the charter proposals and upon consummation of the
Transactions.
Provisions in the Memorandum and Articles of Association enable a person who would otherwise incur a mandatory offer obligation under the Irish Takeover Rules by the
acquisition of Ordinary Shares to avoid that obligation by requesting that the Company redesignate some or all of its Ordinary Shares as restricted voting ordinary shares having no right to vote at general meetings of the Company but
otherwise ranking pari passu with the other Ordinary Shares.
Transfer of Ordinary Shares
Subject to the restrictions contained in the BCA with respect to the Company’s Ordinary Shares, and subject to any further restrictions contained in the Amended and Restated
Memorandum and Articles of Association, any Company shareholder may transfer all or any of his or her Ordinary Shares by an instrument of transfer in the usual or common form or any other form approved by the Company Board.
Liquidation
On a return of capital on winding-up or otherwise (other than on conversion, redemption or purchase of Ordinary Shares), assets available for distribution will first be
applied in paying to holders of the Preferred Shares the relevant Class A Preferred Share Return (as defined in this Report) and Class B Preferred Share Return (as defined in this Report), following which any remaining assets shall be
distributed among the holders of the Ordinary Shares on a pro rata basis. If the Company’s assets available for distribution are insufficient to pay to the holders of Preferred Shares their Class A Preferred Share Return and Class B Preferred
Share Return, the assets will be distributed so that the losses are borne by the holders of the Preferred Shares proportionately. Where there are sufficient assets available to pay the Class A Preferred Share Return and Class B Preferred
Share Return to all holders of Preferred Shares, but the assets are insufficient to repay all of the paid-up Ordinary Shares, the assets will be distributed so that the losses are borne by the Company’s ordinary shareholders proportionately.
General Meetings of Shareholders
Shareholders’ meetings may be convened by the Company Board on the requisition of the shareholders or, if the Company Board fails to so convene a meeting, such extraordinary
general meeting may be convened by the requisitioning shareholders where the requisitioning shareholders hold not less than 10% of the paid-up share capital of the Company. Any action required or permitted to be taken at any annual or
extraordinary general meetings may be taken only upon the vote of the shareholders at an annual or extraordinary general meeting duly noticed and convened in accordance with the Company’s Amended and Restated Memorandum and Articles of
Association and the ICA. Unanimous consent of the holders of Ordinary Shares shall be required before the shareholders may act by way of written resolution without a meeting.
Warrants
Public Shareholders’ Warrants
The Public Warrants will entitle the registered holder to purchase one-tenth of an Ordinary Share. Each Public Warrant will entitle the registered holder to purchase one-tenth
of an Ordinary Share at a price of $11.50 per one-tenth of an Ordinary Share ($115.00 per whole Ordinary Share), subject to adjustment as discussed below, at any time commencing on November 29, 2023. The Public Warrants will expire on
November 3, 2028, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
Under the Existing Warrant Agreement, the Company will not be obligated to deliver any Ordinary Shares pursuant to the exercise of a Public Warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Ordinary Shares underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to our
satisfying our obligations described below with respect to registration, or a valid exemption from registration is available. No Public Warrant will be exercisable, and we are not obligated to issue any Ordinary Shares to holders seeking to
exercise their warrants, unless the issuance of the shares upon such exercise is registered, qualified or deemed to be exempt from registration or qualification under the securities laws of the state of the exercising holder. In the event
that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire
worthless. In no event will we be required to net cash settle any Public Warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full
purchase price for the unit solely for the Ordinary Shares underlying such unit.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the effective time of the Closing, the Company will use commercially
reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Ordinary Shares issuable upon exercise of the Public Warrants. The Company will use commercially reasonable efforts to
cause the same to become effective within 60 business days after the effective time of the Closing, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the
Public Warrants in accordance with the provisions of the Existing Warrant Agreement. If a registration statement covering the issuance of shares issuable upon the exercise of Public Warrants is not effective by the 60th business day from the
Closing, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise Public Warrants on a cashless
basis pursuant to an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering the Public Warrant for that number of Ordinary Shares equal to the lesser of (A) the
quotient obtained by dividing (x) the product of the number of Ordinary Shares underlying the Public Warrants, multiplied by the excess of the “fair market value” (as defined below) less the exercise
price of the Public Warrants by (y) the fair market value and (B) 0.361. The “fair market value” as used in this paragraph shall mean the volume weighted average price of Ordinary Shares for the 10 trading days ending on the trading day prior
to the date on which the notice of exercise is received by the warrant agent.
Notwithstanding the above, if Ordinary Shares are at the time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy the
definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9)
of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use commercially reasonable efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not available.
Redemption of Public Warrants when the price per Ordinary Share equals or exceeds $180.00.
Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants (excluding the warrants sold in a private placement in connection with the
IPO of Twin Ridge at a price of $1.50 per warrant to the Sponsor that were subsequently exchanged for one Public Warrant each (the “Founder Warrants”)):
| • |
in whole and not in part;
|
| • |
at a price of $0.01 per warrant;
|
| • |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
| • |
if, and only if, the closing price of the Ordinary Shares equals or exceeds $180.00 per share (as adjusted for adjustments described under – Anti-dilution Adjustments) for any 20 trading days within a
30-trading day period ending on the third trading day prior to the date on which notice of the redemption is sent to the warrant holders.
|
If and when the warrants become redeemable, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under
all applicable state securities laws.
We will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the issuance of the Ordinary Shares issuable upon
exercise of the Public Warrants is then effective and a current prospectus relating to those Ordinary Shares is available throughout the 30-day redemption period. If and when the Public Warrants become redeemable by us, we may exercise our
redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The redemption criterion discussed above have been established to prevent a redemption call unless there is at the time of the call a significant premium to the Warrant
exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Public Warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date.
However, the price of the Ordinary Shares may fall below the $180.00 redemption trigger price (as adjusted for adjustments described under – Anti-dilution Adjustments) as well as the $115.00 per whole Ordinary Share warrant exercise price
after the redemption notice is issued.
Redemption of Public Warrants when the price per Ordinary Share equals or exceeds $100.00.
When the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| • |
in whole and not in part;
|
| • |
at $1.00 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that
number of shares determined by reference to the table below, based on the redemption date and the “fair market value” (as defined below) of the Ordinary Shares, except as otherwise described below;
|
| • |
if, and only if, the closing price of the Ordinary Shares equals or exceeds $100.00 per public share (as adjusted for adjustments described under – Anti-dilution Adjustments) for any 20 trading days within
the 30-trading day period ending three trading days before we send the notice of redemption to the warrant holders; and
|
| • |
if the closing price of the Ordinary Shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant
holders is less than $180.00 per share (as adjusted for adjustments described under – Anti-dilution Adjustments), the Founder Warrants must also be concurrently called for redemption on the same terms as the outstanding Public
Warrants, as described above.
|
The “fair market value” as used in this paragraph means the volume weighted average price of Ordinary Shares for the ten (10) trading days immediately following the date on
which the notice of redemption is sent to the holders of warrants.
Beginning on the date the notice of redemption is given until the Public Warrants are redeemed or exercised, holders may elect to exercise their Public Warrants on a cashless
basis. The numbers in the table below represent the number of Ordinary Shares that a warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market
value” of the Ordinary Shares on the corresponding redemption date (assuming holders elect to exercise their Public Warrants and such warrants are not redeemed for $1.00 per warrant), determined for these purposes based on volume weighted
average price of the Ordinary Shares as reported during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of Public Warrants, and the number of months that the corresponding redemption
date precedes the expiration date of the Public Warrants, each as set forth in the table below. We will provide our warrant holders with the final fair market value no later than one business day after the 10-trading day period described
above ends.
The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of Ordinary Shares issuable upon exercise of a Public
Warrant or the exercise price of a Public Warrant is adjusted as set forth under the subheading “—Anti-dilution Adjustments” below. If the number of Ordinary Shares issuable upon exercise of a warrant
is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of Ordinary Shares deliverable upon exercise of a
Public Warrant to purchase a whole Ordinary Share immediately prior to such adjustment and the denominator of which is the number of Ordinary Shares deliverable upon exercise of a Public Warrant as so adjusted. The number of Ordinary Shares
in the table below shall be adjusted in the same manner and at the same time as the number of Ordinary Shares issuable upon exercise of a Public Warrant. If the exercise price of a Public Warrant is adjusted, (a) in the case of an adjustment
pursuant to the fifth paragraph under the heading “—Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted price multiplied by a fraction, the
numerator of which is the higher of the Market Value and the Newly Issued Price as set forth under the heading “—Anti-dilution Adjustments” and the denominator of which is $100.00 and (b) in the case
of an adjustment pursuant to the second paragraph under the heading “—Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price less the
decrease in the exercise price of a Public Warrant pursuant to such exercise price adjustment.
|
Fair Market Value of Ordinary Shares
|
|||||||||||||||||||
|
Redemption Date
(period to expiration of warrants)
|
≤$100.00
|
$110.00
|
$120.00
|
$130.00
|
$140.00
|
$150.00
|
$160.00
|
$170.00
|
≥$180.00
|
||||||||||
|
60 months
|
0.261
|
0.281
|
0.297
|
0.311
|
0.324
|
0.337
|
0.348
|
0.358
|
0.361
|
||||||||||
|
57 months
|
0.257
|
0.277
|
0.294
|
0.310
|
0.324
|
0.337
|
0.348
|
0.358
|
0.361
|
||||||||||
|
54 months
|
0.252
|
0.272
|
0.291
|
0.307
|
0.322
|
0.335
|
0.347
|
0.357
|
0.361
|
||||||||||
|
51 months
|
0.246
|
0.268
|
0.287
|
0.304
|
0.320
|
0.333
|
0.346
|
0.357
|
0.361
|
||||||||||
|
48 months
|
0.241
|
0.263
|
0.283
|
0.301
|
0.317
|
0.332
|
0.344
|
0.356
|
0.361
|
||||||||||
|
45 months
|
0.235
|
0.258
|
0.279
|
0.298
|
0.315
|
0.330
|
0.343
|
0.356
|
0.361
|
||||||||||
|
42 months
|
0.228
|
0.252
|
0.274
|
0.294
|
0.312
|
0.328
|
0.342
|
0.355
|
0.361
|
||||||||||
|
39 months
|
0.221
|
0.246
|
0.269
|
0.290
|
0.309
|
0.325
|
0.340
|
0.354
|
0.361
|
||||||||||
|
36 months
|
0.213
|
0.239
|
0.263
|
0.285
|
0.305
|
0.323
|
0.339
|
0.353
|
0.361
|
||||||||||
|
33 months
|
0.205
|
0.232
|
0.257
|
0.280
|
0.301
|
0.320
|
0.337
|
0.352
|
0.361
|
||||||||||
|
30 months
|
0.196
|
0.224
|
0.250
|
0.274
|
0.297
|
0.316
|
0.335
|
0.351
|
0.361
|
||||||||||
|
27 months
|
0.185
|
0.214
|
0.242
|
0.268
|
0.291
|
0.313
|
0.332
|
0.350
|
0.361
|
||||||||||
|
24 months
|
0.173
|
0.204
|
0.233
|
0.260
|
0.285
|
0.308
|
0.329
|
0.348
|
0.361
|
||||||||||
|
21 months
|
0.161
|
0.193
|
0.223
|
0.252
|
0.279
|
0.304
|
0.326
|
0.347
|
0.361
|
||||||||||
|
18 months
|
0.146
|
0.179
|
0.211
|
0.242
|
0.271
|
0.298
|
0.322
|
0.345
|
0.361
|
||||||||||
|
15 months
|
0.130
|
0.164
|
0.197
|
0.230
|
0.262
|
0.291
|
0.317
|
0.342
|
0.361
|
||||||||||
|
12 months
|
0.111
|
0.146
|
0.181
|
0.216
|
0.250
|
0.282
|
0.312
|
0.339
|
0.361
|
||||||||||
|
9 months
|
0.090
|
0.125
|
0.162
|
0.199
|
0.237
|
0.272
|
0.305
|
0.336
|
0.361
|
||||||||||
|
6 months
|
0.065
|
0.099
|
0.137
|
0.178
|
0.219
|
0.259
|
0.296
|
0.331
|
0.361
|
||||||||||
|
3 months
|
0.034
|
0.065
|
0.104
|
0.150
|
0.197
|
0.243
|
0.286
|
0.326
|
0.361
|
||||||||||
|
0 months
|
—
|
—
|
0.042
|
0.115
|
0.179
|
0.233
|
0.281
|
0.323
|
0.361
|
||||||||||
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the
redemption date is between two redemption dates in the table, the number of Ordinary Shares to be issued for each Public Warrant exercised for a whole Ordinary Share (ten Public Warrants are required to be exercised to obtain one whole
Ordinary Share) exercised will be determined by a straight-line interpolation between the number of Ordinary Shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a
365 or 366-day year, as applicable. For example, if the volume weighted average price of the Ordinary Shares during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the Public
Warrants is $110.00 per share, and at such time there are 57 months until the expiration of the Public Warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.277 Ordinary Shares for each
Public Warrant exercised for a whole Ordinary Share (ten Public Warrants are required to be exercised to obtain one whole Ordinary Share). For an example where the exact fair market value and redemption date are not as set forth in the table
above, if the volume weighted average price of the Ordinary Shares during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the Public Warrants is $135.50 per share, and at such
time there are 38 months until the expiration of the Public Warrants, holders may choose to, in connection with this redemption feature, exercise their Public Warrants for 0.298 Ordinary Shares for each Public Warrant exercised for a whole
Ordinary Share (ten Public Warrants are required to be exercised to obtain one whole Ordinary Share). In no event will the Public Warrants be exercisable on a cashless basis in connection with this redemption feature for more than 0.361
Ordinary Shares per warrant exercisable for a whole Ordinary Share (subject to adjustment). Finally, as reflected in the table above, if the Public Warrants are out of the money and about to expire, they cannot be exercised on a cashless
basis in connection with a redemption pursuant to this redemption feature, since they will not be exercisable for any Ordinary Shares.
This redemption feature is structured to allow for all of the outstanding Public Warrants to be redeemed when the Ordinary Shares are trading at or above $100.00 per share,
which may be at a time when the trading price of the Ordinary Shares is below the exercise price of the Public Warrants. This redemption feature permits redemption of the Public Warrants without the warrants having to reach the $180.00 per
share threshold set forth above. Holders choosing to exercise their Public Warrants in connection with a redemption pursuant to this feature will, in effect, receive a number of Ordinary Shares for their Public Warrants based on an option
pricing model with a fixed volatility input. This redemption right is an additional mechanism by which outstanding Public Warrants can be redeemed, and therefore permitting certainty with respect to capital structure as the Public Warrants
would no longer be outstanding and would have been exercised or redeemed. Warrant holders would receive the applicable redemption price if such redemption right were exercised; it would permit a quick redemption process, if determined to be
in the best interest to do so. As such, the warrants would be redeemed in this manner, when in the best interest, to update our capital structure to remove the warrants and pay the redemption price to the warrant holders.
As stated above, the Public Warrants can be redeemed when the Ordinary Shares are trading at a price starting at $115.00, which is below the exercise price of $150.00 per
share, because it will provide certainty with respect to our capital structure and cash position while providing warrant holders with the opportunity to exercise their Public Warrants on a cashless basis for the applicable number of Ordinary
Shares. If the Company chooses to redeem the Public Warrants when the Ordinary Shares are trading at a price below the exercise price of the warrants, this could result in the warrant holders receiving fewer Ordinary Shares than they would
have received if they exercised their Public Warrants for Ordinary Shares if and when such Ordinary Shares were trading at a price higher than the exercise price of $115.00 per share.
No fractional Ordinary Shares will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional interest in an Ordinary Share, we will round
down to the nearest whole number of the number of Ordinary Shares to be issued to the holder. If, at the time of redemption, the Public Warrants are exercisable for a security other than the Ordinary Shares pursuant to the Existing Warrant
Agreement, the Public Warrants may be exercised for such security. At such time as the Public Warrants become exercisable for a security other than the Ordinary Shares, the Company will use commercially reasonable efforts to register under
the Securities Act the security issuable upon the exercise of the Public Warrants.
Redemption procedures.
Holder Election to Limit Exercise. A holder of a warrant may notify the Company in writing in the event it elects to be subject to a
requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would
beneficially own in excess of 9.8% (as specified by the holder) of the Ordinary Shares issued and outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments. If the number of outstanding Ordinary Shares is increased by a capitalization or share dividend paid in
Ordinary Shares to all or substantially all holders of Ordinary Shares, or by a split up of Ordinary Shares or other similar event, then, on the effective date of such capitalization or share dividend, split up, or similar event, the number
of Ordinary Shares issuable on exercise of each Public Warrant will be increased in proportion to such increase in the outstanding Ordinary Shares. A rights offering to holders of Ordinary Shares entitling holders to purchase Ordinary Shares
at a price less than the historical fair market value (as defined below) will be deemed a share dividend of a number of Ordinary Shares equal to the product of (i) the number of Ordinary Shares actually sold in such rights offering (or
issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Ordinary Shares) and (ii) one minus the quotient of (x) the price per Ordinary Share paid in such rights offering and (y) the
historical fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Ordinary Shares, in determining the price payable for Ordinary Shares, there will be taken into account any
consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) “historical fair market value” means the volume weighted average price of Ordinary Shares as reported during the 10 trading
day period ending on the trading day prior to the first date on which the Ordinary Shares trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the Public Warrants are outstanding and unexpired, pays a dividend or makes a distribution in cash, securities or other assets
to the holders of Ordinary Shares on account of such Ordinary Shares (or other securities into which the warrants are convertible), other than (a) as described above, (b) any cash dividends or cash distributions which, when combined on a per
share basis with all other cash dividends and cash distributions paid on the Ordinary Shares during the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately
reflect any other adjustments and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of Ordinary Shares issuable on exercise of each Public Warrant) but only with respect to
the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50 per share, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash
and/or the fair market value of any securities or other assets paid on each ordinary share in respect of such event.
If the number of issued and outstanding Ordinary Shares is decreased by a consolidation, combination, reverse share sub-divisions or reclassification of Ordinary Shares or
other similar event, then, on the effective date of such consolidation, combination, reverse share sub-divisions, reclassification or similar event, the number of Ordinary Shares issuable on exercise of each warrant will be decreased in
proportion to such decrease in issued and outstanding Ordinary Shares.
Whenever the number of Ordinary Shares purchasable upon the exercise of the warrants is adjusted, as described above, the Public Warrant exercise price will be adjusted by
multiplying the Public Warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of Ordinary Shares purchasable upon the exercise of the Public Warrants immediately prior to such
adjustment, and (y) the denominator of which will be the number of Ordinary Shares so purchasable immediately thereafter.
In addition, if (x) we issue additional Ordinary Shares or equity-linked securities for capital raising purposes in connection with the closing of the Business Combination at
an issue price or effective issue price of less than $92.00 per Ordinary Share (with such issue price or effective issue price to be determined in good faith and in the case of any such issuance to Sponsors or their affiliates, without taking
into account any Founder Shares held by the Founder Holders or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total
equity proceeds, and interest thereon, that was available for the funding of the Business Combination on the date of the completion of the Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the
Ordinary Shares during the 20 trading day period starting on the trading day prior to the Twin Ridge Merger Effective Time (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public Warrants will be adjusted
(to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $180.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of
the Market Value and the Newly Issued Price, and the $100.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
In case of any reclassification or reorganization of the outstanding Ordinary Shares (other than those described above or that solely affects the par value of such Ordinary
Shares), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization
of our outstanding Ordinary Shares), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the
holders of the Public Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Public Warrants and in lieu of the Ordinary Shares immediately theretofore purchasable
and receivable upon the exercise of the rights represented thereby, the kind and amount of Ordinary Shares or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or
upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were entitled to exercise a
right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be
deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by
such holders under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part,
and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of
Rule 13d-3 under the Exchange Act) more than 50% of the issued and outstanding Ordinary Shares, the holder of a warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually
have been entitled as a shareholder if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Ordinary Shares held by such holder had been purchased pursuant
to such tender or exchange offer, subject to adjustment (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the Existing Warrant Agreement. If less than 70% of
the consideration receivable by the holders of Ordinary Shares in such a transaction is payable in the form of Ordinary Shares in the successor entity that is listed for trading on a national securities exchange or is quoted in an established
over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such
transaction, the warrant exercise price will be reduced as specified in the Existing Warrant Agreement based on the Black-Scholes value (as defined in the Existing Warrant Agreement) of the warrant. The purpose of such exercise price
reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential
value of the warrants.
The Public Warrants that are to be exchanged for Public Warrants have been issued in registered form under the Existing Warrant Agreement. The Existing Warrant Agreement
provides that the terms of the Public Warrants may be amended without the consent of any holder for the purposes of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the Existing Warrant Agreement to the
description of the terms of the warrants and the Existing Warrant Agreement set forth in the prospectus for Twin Ridge’s initial public offering, or defective provision, (ii) amending the definition of ordinary cash dividends on Ordinary
Shares as contemplated by and in accordance with the Existing Warrant Agreement or (iii) adding or changing any provisions with respect to matters or questions arising under the Existing Warrant Agreement as the parties to the Existing
Warrant Agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Public Warrants, provided that the approval by the holders of at least 50% of the then outstanding
Public Warrants is required to make any change that adversely affects the interests of the registered holders. You should review a copy of the Existing Warrant Agreement, which has been filed as an exhibit to this Report, for a complete
description of the terms and conditions applicable to the Public Warrants.
The Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form
on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number
of Public Warrants being exercised. The warrant holders do not have the rights or privileges of holders of Ordinary Shares and any voting rights until they exercise their Public Warrants and receive Ordinary Shares. After the issuance of
Ordinary Shares upon exercise of the Public Warrants, each holder will be entitled to one vote for each Ordinary Share held of record on all matters to be voted on by shareholders.
Warrants may be exercised only for a whole number of Ordinary Shares. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a
holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of Ordinary Shares to be issued to the warrant holder.
We have agreed that, subject to applicable law, any action, proceeding or claim against us arising out of or relating in any way to the Existing Warrant Agreement will be
brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such
action, proceeding or claim. This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and
exclusive forum.
Founder Warrants
Except as described below, the Founder Warrants will have terms and provisions that are identical to those of the Public Warrants. The Founder Warrants (including the Ordinary
Shares issuable upon exercise thereof) will not be transferable, assignable or salable until 30 days after the Business Combination (except pursuant to limited exceptions to Twin Ridge’s officers and directors and other persons or entities
affiliated with the Sponsor) and they will not be redeemable by us (except as described under “—Warrants—Public Shareholders’ Warrants—Redemption of Public Warrants for Ordinary Shares when the price per
Ordinary Share equals or exceeds $100.00”) so long as they are held by the Sponsor or its permitted transferees (except as otherwise set forth herein). The Sponsor, or its permitted transferees, have the option to exercise the
Founder Warrants on a cashless basis. If the Founder Warrants are held by holders other than Sponsor or its permitted transferees, the Founder Warrants will be redeemable by us in all redemption scenarios and exercisable by the holders on the
same basis as the Public Warrants.
Except as described above under “—Public Shareholders’ Warrants—Redemption of Public Warrants for Ordinary Shares when the price per Ordinary
Share equals or exceeds $100.00”, if holders of the Founder Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its Founder Warrants for that number of Ordinary Shares
equal to the quotient obtained by dividing (x) the product of the number of Ordinary Shares underlying the Founder Warrants, multiplied by the excess of the “Sponsor fair market value” over the exercise price of the Founder Warrants by (y)
the Sponsor fair market value. For these purposes, the “Sponsor fair market value” shall mean the average reported closing price of the Ordinary Shares for the 10 trading days ending on the third
trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
OIC Warrants
Under the OIC Financing, OIC was issued the initial OIC Warrant, a warrant to purchase Ordinary Shares at an exercise price of US$0.01 per Ordinary Share (adjusted from time
to time in accordance with the terms of the OIC Warrant).
The initial OIC Warrant has a term of seven years from the Initial Closing unless exercised earlier in accordance with its terms. The OIC Warrant may be exercised for cash or
may be exercised on a cashless basis.
The terms of the initial OIC Warrant were subsequently amended in connection with subsequent releases of funds from the escrow account to change the amount for which the
initial OIC Warrant may be exercised. As amended, the OIC Warrant may be exercised for a number of Ordinary Shares in an amount equal to, as of a specified date, (i) the aggregate number of outstanding Ordinary Shares calculated on a
Fully-Diluted Basis (as defined in the OIC Warrant), multiplied by the vested warrant percentage (the “Vested Warrant Percentage”), which will be calculated as follows:
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12.49%, on and from the Initial Closing; plus
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0.7% in connection with the escrow release in April 2024; plus 0.43% in connection with each additional escrow release, of which four escrow releases have been completed as of the date of this Annual Report;
plus
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2.5%, subject to OIC not having failed to fund a Subsequent Financing upon the satisfaction of the relevant conditions by the Company, upon the earlier of:
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completion of a Subsequent Financing; and
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24 months after the Initial Closing.
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In addition to the vesting of a portion of the initial OIC Warrant, in connection with each additional funding release, the Company issued additional warrants to the OIC Investors. On April 10,
2024, the Company issued the Warrant No. 2 to the OIC Investors that are exercisable for a number of shares equal to 7.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 2). On May 24,
2024, the Company issued the Warrant No. 3 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 3). On June 21,
2024, the Company issued Warrant No. 4 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No.4). On July 10, 2024,
the Company issued Warrant No. 5 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No.5). On July 29, 2024, the
Company issued the Warrant No. 6 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No.6). On September 5, 2024, the
Company issued Warrant No. 7 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No.7). On October 30, 2024, the
Company issued Warrant No. 8 to the OIC Investors that is exercisable for a number of shares equal to 2.5% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 8). On December 20, 2024, the
Company issued Warrant No. 9 to the OIC Investors that is exercisable for a number of shares equal to 4.63% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 9). On January 21, 2025, the
Company issued Warrant No. 11 to the OIC Investors that is exercisable for a number of shares equal to 4.63% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 11). On March 7, 2025, the
Company issued Warrant No. 13 to the OIC Investors that is exercisable for a number of shares equal to 4.63% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 13). On May 9, 2025, the
Company issued Warrant No. 27 to the OIC Investors that is exercisable for a number of shares equal to 4.63% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrant No. 27). On March 7, 2025, the
Company issued Warrants No. 14 to 26 to the lenders under the New Debt Program, that are collectively exercisable in aggregate for a number of shares equal to 1.11% of the Company’s shares outstanding, determined on a Fully-Diluted Basis
(as defined in Warrants No. 14 to 26). On such date, Warrants No. 10 and 12 were voided and previous Warrant No. 14 was replaced. On May 9, 2025, the Company issued Warrants No. 28 to 40 to the lenders under the New Debt Program, that are
collectively exercisable in aggregate for a number of shares equal to 0.37% of the Company’s shares outstanding, determined on a Fully-Diluted Basis (as defined in Warrants No. 28 to 40).
As of the date of this Annual Report, warrants to purchase ordinary shares equivalent to a total of 56.36% of ordinary shares issued calculated on a fully diluted basis, have now been issued
to the OIC Investors and vested, and warrants to purchase ordinary shares equivalent to a total of 1.48% of ordinary shares issued calculated on a fully diluted basis, have now been issued to Existing Lenders and vested.
Preferred Shares
Class A Preferred Shares
The terms of the Class A Preferred Shares are as set forth in the Company’s Amended and Restated Memorandum and Articles of Association.
The holders of the Class A Preferred Shares are entitled to cumulative dividends of 12% per annum, on the Class A Preferred Share Amount (as defined in the Amended and
Restated Memorandum and Articles of Association) of each Preferred Share during the applicable fiscal quarter, which accrue daily and are payable in cash or Class A Preferred Shares at the Company’s option, in accordance with the terms of the
Company’s Amended and Restated Memorandum and Articles of Association. No distributions shall be made with respect to any shares in the capital of the Company prior to the holders of the Class A Preferred Shares having received their Class A
Preferred Share Return (as defined below). On return of capital on liquidation, a capital reduction or otherwise, the assets remaining shall first be applied in paying the holders of Class A Preferred Shares (the ‘‘Class A Preferred
Shareholders’’) prior and in preference to the members holding any other class of shares in the capital of the Company. Upon redemption, the holders of the Class A Preferred Shares are also entitled to receive a dividend make-whole payment.
The holders of Class A Preferred Shares have the right to exercise a number of votes at any general meeting of the Company, calculated in accordance with the formula set forth
in the Company’s Amended and Restated Memorandum and Articles of Association. The Company may elect to redeem some or all of the Class A Preferred Shares during the five years following the Initial Closing, and is required to redeem the Class
A Preferred Shares on the fifth anniversary of the Initial Closing in cash. “Class A Preferred Share Return” means an amount of cash or redemption payments sufficient to cause the holders of the Class A Preferred Shares to receive the
aggregate of the sum of (x) in the case of the Initial and Released Class A Preferred Shares (as defined in the Company’s Amended and Restated Memorandum and Articles of Association), (i) the greater of (A) a MOIC (as defined in the Company’s
Amended and Restated Memorandum and Articles of Association) of one and three quarters (1.75) or (B) a twelve percent (12%) IRR with respect to $70,000,000 less the OIC Reserve Recovery Amount (as defined in the Company’s Amended and Restated
Memorandum and Articles of Association, if any; plus (ii) a MOIC of one and one quarter (1.25) with respect to the OIC Reserve Recovery Amount), which shall be allocated pro rata amongst the Initial and Released Class A Preferred Shares; (y)
with respect to any Preferred Share issued on a Subsequent Closing, the greater of (A) a MOIC of one and three quarters (1.75) or (B) a twelve percent (12%) IRR with respect to the Class A Preferred Share Amount attributable thereto; and (z)
with respect to each Class A Preferred PIK Share (as defined in the Company’s Amended and Restated Memorandum and Articles of Association) issued, the Class A Preferred Share Amount attributable thereto, plus any accrued but unpaid dividends
thereon, provided, however, that if the Class A Preferred Share by reference to which a Class A Preferred PIK Share was issued, is redeemed, such Class A Preferred PIK Share shall also be deemed to be redeemed for no additional consideration.
The holders of Class A Preferred Shares are entitled to vote separately as a single class, for the election of one or more additional Directors in case of dividend arrears or other specified events, or upon other matters.
Holders of Class A Preferred Shares are entitled to cumulative dividends at the Class A Preferred Dividend Rate (as defined in the Company’s Amended and Restated Memorandum
and Articles of Association), which accrue daily from the date of issuance of the Class A Preferred Share, prorated for the partial fiscal quarter (“Class A Preferred Dividend”). The Class A Preferred Dividend is paid on the Class A Preferred
Payment Date (as defined in the Company’s Amended and Restated Memorandum and Articles of Association) and prior to any dividend or other distribution being paid or made with respect to any other class of shares of capital stock of the
Company, with respect to the fiscal quarter ended immediately prior to such Class A Preferred Payment Date. Payment of the Class A Preferred Dividend may be satisfied by payment in cash at the Class A Preferred Dividend Rate or through the
issuance of additional Class A Preferred Shares (a ‘‘Class A Preferred PIK Distribution’’). The number of Class A Preferred PIK Shares to be issued on a Class A Preferred PIK Distribution shall be determined by dividing: (i) the relevant
amount of Class A Preferred Dividends to be satisfied by the issue of Class A Preferred PIK Shares; by (ii) the Class A Preferred Share Amount, and rounding up the quotient. No fractional shares shall be issued on a Class A Preferred PIK
Distribution.
Class B Preferred Shares
The terms of the Class B Preferred Shares are as set forth in the Company’s certificate of designation of Class B Preferred Shares. The Class B Preferred Shares have
substantially the same terms as the Class A Preferred Shares except, if certain conditions are not satisfied by the Company when required. However, subsequent to the issuance of the Class B Preferred Shares, such conditions were waived by
holders of the requisite majority of the Class B Preferred Shares.
Anti-Takeover Provisions
Some provisions of our Amended and Restated Memorandum and Articles of Association may discourage, delay or prevent a change of control of our company or management that
shareholders may consider favorable, including provisions that:
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require that the Company Board be classified into three classes of directors with staggered three-year terms;
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permit the Company Board to fill any vacancies; and
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prohibit shareholder action by written consent without unanimous approval of all holders of the Ordinary Shares.
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The Amended and Restated Memorandum and Articles of Association of the Company is included herein as Exhibit 1.1 to this Report.
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Material Contracts
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Except as otherwise disclosed in this Report (including the exhibits thereto), we are not currently, and have not been in the last two years, party to any material contract,
other than contracts entered into in the ordinary course of business.
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Exchange Controls and Other Limitations Affecting Security Holders
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Under the laws of Ireland, except as indicated below, there are currently no restrictions on the export or import of capital, including foreign exchange controls or
restrictions that affect the remittance of dividends (other than dividend withholding tax where an exemption does not apply), interest or other payments to non-resident holders of our Ordinary Shares.
It is an offense under Irish law (pursuant to various statutory instruments) to transfer funds or make funds or economic resources available, directly or indirectly to any
person or entity in contravention of Irish, EU or United Nations sanctions or to otherwise contravene Irish, EU or United Nations sanctions. Any transfer of, or payment in respect of, securities involving a person or entity that is currently
the subject of Irish, EU or United Nations sanctions or any person or entity controlled by any of the foregoing, or any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as implemented into
Irish law.
The Financial Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make provision for the restriction of financial transfer between Ireland and other
countries and persons. Financial transfers are broadly defined and include all transfers which would be movements of capital or payments. The acquisition or disposal of shares issued by an Irish incorporated company and associated payments
may fall within this definition. In addition, dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish incorporated company would fall within this definition.
The 1992 Act and underlying EU regulations prohibit financial transfers with certain persons and entities listed in the EU Consolidated Financial Sanctions List and United
Nations Security Council Consolidated List and include, but are not limited to, certain persons from/in and entities in Afghanistan, Belarus, Bosnia & Herzegovina, Burma (Myanmar), Burundi, the Central African Republic, China, the
Democratic Republic of Congo, the Republic of Guinea, the Republic of Guinea-Bissau, Haiti, Iran, Iraq, the Democratic People’s Republic of Korea (North Korea), Libya, Lebanon, Mali, Nicaragua, Pakistan, Palestinian Territory, Russia, Sudan,
South Sudan, Somalia, Syria, Tunisia, Turkey, Ukraine, Venezuela, Yemen, Zimbabwe, and certain known terrorists and terrorist groups, and countries that harbor certain terrorist groups, including the Albanian branch of Al-Haramain, Al-Qaeda
members in various countries, Al Shabaab in Kenya and Somalia, and Boko Haram in Nigeria, without the prior permission of the Central Bank of Ireland.
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Taxation
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Material U.S. Federal Tax Considerations
The following discussion is a summary of the material U.S. federal income tax considerations applicable to U.S. Holders (as defined below) of the ownership and disposition of
our Ordinary Shares and Public Warrants. This discussion addresses only those U.S. Holders that hold our Ordinary Shares and/or Public Warrants as capital assets within the meaning of Section 1221 of the Code (generally property held for
investment). This summary does not discuss all aspects of U.S. federal income taxation that may be relevant to particular investors in light of their particular circumstances, or to investors subject to special tax rules, such as:
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financial institutions;
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insurance companies;
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mutual funds;
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pension plans;
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S corporations;
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broker-dealers;
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traders in securities that elect mark-to-market treatment;
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regulated investment companies;
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real estate investment trusts;
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trusts and estates;
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tax-exempt organizations (including private foundations);
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investors that hold our Ordinary Shares or Public Warrants as part of a “straddle”, “hedge”, “conversion”, “synthetic security”, “constructive ownership transaction”, “constructive sale” or other integrated
transaction for U.S. federal income tax purposes;
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investors subject to the alternative minimum tax provisions of the Code;
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U.S. Holders that have a functional currency other than the U.S. dollar;
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U.S. expatriates;
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U.S. Holders owning or considered as owning (directly, indirectly, or through attribution) 5 percent (measured by vote or value) or more of our Ordinary Shares;
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persons who received our Ordinary Shares as compensation;
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accrual method taxpayers that file applicable financial statements as described in Section 451(b); and
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persons who are not U.S. Holders, all of whom may be subject to tax rules that differ materially from those summarized below.
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This summary does not discuss any state, local, or non-U.S. tax considerations, any non-income tax (such as gift or estate tax) considerations, the alternative minimum tax or
the Medicare tax on net investment income.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our Ordinary Shares or Public Warrants, the tax
treatment of a partner in such partnership will generally depend upon the status of the partner, the activities of the partnership and the partner and certain determinations made at the partner level. If a U.S. Holder is a partner of a
partnership holding our Ordinary Shares or Public Warrants, such holder is urged to consult its tax advisor regarding the tax consequences of the ownership and disposition of our Ordinary Shares and Public Warrants by the partnership.
This summary is based upon the Code, the regulations promulgated by the U.S. Treasury Department (“Treasury Regulations”), current administrative interpretations and practices
of the U.S. Internal Revenue Service (“IRS”), and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS
would not assert, or that a court would not sustain a position contrary to any of the tax considerations described below.
THIS SUMMARY DOES NOT PURPORT TO BE A COMPREHENSIVE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF OUR ORDINARY SHARES OR PUBLIC WARRANTS. U.S. HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES TO SUCH U.S. HOLDER OF THE OWNERSHIP AND DISPOSITION OF ORDINARY SHARES AND PUBLIC
WARRANTS, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE AND LOCAL AND OTHER TAX LAWS.
Consequences to U.S. Holders
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our Ordinary Shares or Public Warrants, as the case may be, that is:
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an individual who is a U.S. citizen or resident of the United States;
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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of
Columbia;
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an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
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a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons (within the meaning of the Code) who have the authority to control all
substantial decisions of the trust or (B) that has in effect a valid election under applicable Treasury Regulations to be treated as a U.S. person.
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Tax Consequences of Ownership and Disposition of our Ordinary Shares and Public Warrants
Dividends and Other Distributions on Ordinary Shares
Subject to the PFIC rules discussed below under the heading “—Passive Foreign Investment Company Rules”, distributions on our Ordinary
Shares will generally be taxable as a dividend for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of
our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in its Ordinary Shares. Any remaining excess will be
treated as gain realized on the sale or other disposition of the Ordinary Shares and will be treated as described below under the heading “—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition
of Ordinary Shares and Public Warrants”. The amount of any such distribution will include any amounts withheld by us (or another applicable withholding agent). Any amount treated as dividend income will be treated as foreign-source
dividend income. Amounts treated as dividends that are paid to a U.S. Holder that is a taxable corporation generally will be taxed at regular rates and will not qualify for the dividends received deduction generally allowed to domestic
corporations in respect of dividends received from other domestic corporations. With respect to non-corporate U.S. Holders, under tax laws currently in effect and subject to certain exceptions (including, but not limited to, dividends treated
as investment income for purposes of investment interest deduction limitations), dividends generally will be taxed at the lower applicable long-term capital gains rate only if our Ordinary Shares are readily tradable on an established
securities market in the United States or we are eligible for benefits under an applicable tax treaty with the United States, and we are not treated as a PFIC with respect to such U.S. Holder at the time the dividend was paid or in the
preceding taxable year and provided certain holding period requirements are met. The amount of any dividend distribution paid in Euros will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of
payment, regardless of whether the payment is in fact converted into U.S. dollars at that time. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. The foreign
currency gain or loss from such conversion will be ordinary income or loss and generally will be U.S. source.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Ordinary Shares and Public Warrants
Subject to the PFIC rules discussed below under the heading “—Passive Foreign Investment Company Rules”, upon any sale, exchange or
other taxable disposition of Ordinary Shares or Public Warrants, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference between (i) the sum of (x) the amount cash and (y) the fair market value of any other
property received in such sale, exchange or other taxable disposition and (ii) the U.S. Holder’s adjusted tax basis in such Ordinary Share or Public Warrant (determined as described above or below), in each case, as calculated in U.S.
dollars. Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period for such Ordinary Share exceeds one year. Long-term capital gain realized by a non-corporate
U.S. Holder generally will be taxable at a reduced rate. The deductibility of capital losses is subject to limitations. This gain or loss generally will be treated as U.S. source gain or loss.
If Ordinary Shares or Public Warrants are sold, exchanged, redeemed, retired or otherwise disposed of in a taxable transaction for Euros, the amount realized generally will be
the U.S. dollar value of the Euros received based on the spot rate in effect on the date of sale, exchange, redemption, retirement or other taxable disposition. If you are a cash method taxpayer and the Ordinary Shares and/or Public Warrants
are traded on an established securities market, Euros paid or received will be translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. An accrual method taxpayer may elect the same treatment with respect
to the purchase and sale of Ordinary Shares or Public Warrants traded on an established securities market, provided that the election is applied consistently from year to year. Such election cannot be changed without the consent of the IRS.
Euros received on the sale or other disposition of an Ordinary Share or Public Warrant generally will have a tax basis equal to its U.S. dollar value as determined pursuant to the rules above. Any gain or loss recognized by you on a sale,
exchange, redemption, retirement or other taxable disposition of Euros will be ordinary income or loss and generally will be U.S.-source gain or loss.
Exercise, Lapse, or Redemption of a Public Warrant
Subject to the PFIC rules discussed below under the heading “—Passive Foreign Investment Company Rules” and except as discussed below
with respect to the cashless exercise of a Public Warrant, a U.S. Holder generally will not recognize gain or loss upon the acquisition of an Ordinary Share on the exercise of a Public Warrant for cash. A U.S. Holder’s initial tax basis in an
Ordinary Share received upon exercise of the Public Warrant generally will equal the sum of the U.S. Holder’s initial investment in the Public Warrant and the exercise price, in each case, as calculated in U.S. dollars. It is unclear whether
a U.S. Holder’s holding period for the Ordinary Share received will commence on the date of exercise of the Public Warrant or the day following the date of exercise of the Public Warrant; in either case, the holding period will not include
the period during which the U.S. Holder held the exercised Public Warrant. If a Public Warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the Public Warrant.
The tax consequences of a cashless exercise of a Public Warrant are not clear under current law. Subject to the PFIC rules discussed below under the heading “—Passive Foreign Investment Company Rules”, a cashless exercise may not be taxable, either because the exercise is not a realization event or because the exercise is treated as a “recapitalization” for U.S.
federal income tax purposes. In either situation, a U.S. Holder’s tax basis in the Ordinary Shares received generally should equal the U.S. Holder’s tax basis in the Public Warrants. If the cashless exercise were treated as not giving rise to
a realization event, it would be unclear whether a U.S. Holder’s holding period for the Ordinary Shares received would be treated as commencing on the date of exercise of the Public Warrant or the day following the date of exercise of the
Public Warrant. If the cashless exercise were treated as a recapitalization, the holding period of the Ordinary Shares received would include the holding period of the Public Warrants exercised.
It is also possible that a cashless exercise may be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. Holder may be deemed
to have surrendered a number of Public Warrants having an aggregate fair market value equal to the exercise price for the total number of Public Warrants to be exercised. Subject to the PFIC rules discussed below under the heading “—Passive Foreign Investment Company Rules”, the U.S. Holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the Public Warrants deemed surrendered
and the U.S. Holder’s tax basis in such Public Warrants. In this case, a U.S. Holder’s tax basis in the Ordinary Shares received would equal the sum of the U.S. Holder’s initial investment in the Public Warrants exercised and the exercise
price of such Public Warrants. It is unclear whether a U.S. Holder’s holding period for the Ordinary Shares would commence on the date of exercise of the Public Warrant or the day following the date of exercise of the Public Warrant; in
either case, the holding period will not include the period during which the U.S. Holder held the Public Warrant.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. Holder’s holding period would commence with respect to
the Ordinary Shares received, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. Holders are urged to consult their
tax advisors regarding the tax consequences of a cashless exercise.
Subject to the PFIC rules described below under the heading “—Passive Foreign Investment Company Rules”, if we redeem Public Warrants
for cash pursuant to the redemption provisions of the Public Warrants or if we purchase Public Warrants in an open market transaction, such redemption or purchase will generally be treated as a taxable disposition of such Public Warrants by
the U.S. Holder, taxed as described above under “—Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Ordinary Shares and Public Warrants”.
Adjustment to Exercise Price
Under Section 305 of the Code, if certain adjustments are made (or not made) to the number of shares to be issued upon the exercise of a Public Warrant or to the Public
Warrant’s exercise price, a U.S. Holder may be deemed to have received a constructive distribution with respect to the warrant, which could result in adverse consequences for the U.S. Holder, including the inclusion of dividend income (with
the consequences generally as described above under the heading “—Dividends and Other Distributions on Ordinary Shares”). The rules governing constructive distributions as a result of certain
adjustments with respect to a Public Warrant are complex, and U.S. Holders are urged to consult their tax advisors on the tax consequences of any such constructive distribution with respect to a Public Warrant.
Passive Foreign Investment Company Rules
The treatment of a U.S. Holder of Ordinary Shares and Public Warrants could be materially different from that described above if we are, or we or any of our predecessors (to
whom we refer to herein as “we” or “us”) have been, during any taxable year in which such U.S. Holder holds or has held an interest in us, treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes.
A foreign (i.e., non-U.S.) corporation will be classified as a PFIC for U.S. federal income tax purposes if either (i) at least 75% of its gross income in a taxable year,
including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income or (ii) at least 50% of its assets in a taxable year (ordinarily determined based on
fair market value and averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive
income. Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.
Because our PFIC status for any taxable year is an annual determination that can be made only after the end of such taxable year, there can be no assurance that we will not be
a PFIC for the taxable year ending December 31, 2023, or any future taxable year.
Although a foreign corporation’s PFIC status is determined annually, a determination that an entity (or any of its predecessors) is or was a PFIC for a taxable year in which a
U.S. Holder holds or has held shares in such entity (or any such predecessor) generally continues to apply to such U.S. Holder for subsequent taxable years in which the holder continues to hold shares in such entity (including a successor
entity), whether or not such entity continues to be a PFIC. As such, if we were a PFIC during the holding period of a U.S. Holder, any Ordinary Shares may, in the absence of certain elections described below, be treated as stock of a PFIC,
even if we fail to meet the test for PFIC status for the taxable year ending December 31, 2023, or future taxable years. Therefore, if we are or have been determined to be a PFIC for any taxable year (or portion thereof) that is included in
the relevant holding period of a U.S. Holder of Ordinary Shares or Public Warrants and, in the case of Ordinary Shares, the U.S. Holder did not make either (i) a timely and effective qualified electing fund (“QEF”) election for our first
taxable year as a PFIC in such U.S. Holder’s relevant holding period (such taxable year as it relates to each U.S. Holder, the “First PFIC Holding Year”), (ii) a QEF election along with a purging election, or (iii) a “mark-to-market”
election, each as discussed below, such U.S. Holder generally will be subject to special and adverse rules with respect to (i) any gain recognized by the U.S. Holder on the sale or other disposition of its Ordinary Shares or Public Warrants
and (ii) any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder
in respect of the Ordinary Shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the Ordinary Shares).
Under these rules:
| • |
the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s relevant holding period for the Ordinary Shares or Public Warrants;
|
| • |
the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before
the first day of the First PFIC Holding Year, will be taxed as ordinary income;
|
| • |
the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable
to the U.S. Holder; and
|
| • |
an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the U.S. Holder with respect to the tax attributable to each such other taxable year of
the U.S. Holder.
|
PFIC Elections
In general, a U.S. Holder may avoid the adverse PFIC tax consequences described above in respect of Ordinary Shares (but not Public Warrants) by making a timely and
effective QEF election (if eligible to do so) with respect to such holder’s First PFIC Holding Year. A U.S. Holder that makes a QEF election will include in income its pro rata share of our net capital gains (as long-term capital gain)
and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends if we are treated as a PFIC for that
taxable year. A U.S. Holder generally can make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.
A U.S. Holder may not make a QEF election with respect to its Public Warrants. As a result, if a U.S. Holder sells or otherwise disposes of such Public Warrants (other
than upon exercise of such Public Warrants for cash) and we were a PFIC at any time during the U.S. Holder’s holding period of such Public Warrants, any gain recognized generally will be treated as an excess distribution, taxed as
described above. If a U.S. Holder that exercises such Public Warrants properly makes and maintains a QEF election with respect to the newly acquired Ordinary Shares, the QEF election will apply to the newly acquired Ordinary Shares (it is
not clear how a previously made QEF election that is in effect with respect to Ordinary Shares would apply to Ordinary Shares subsequently acquired on the exercise of such warrants). Notwithstanding such QEF election, the adverse tax
consequences relating to PFIC shares, adjusted to take into account the current income inclusions resulting from the QEF election, will continue to apply with respect to such newly acquired Ordinary Shares (which generally will be deemed
to have a holding period for purposes of the PFIC rules that includes the holding period the U.S. Holder will have had for the Public Warrants), unless the U.S. Holder makes a purging election under the PFIC rules. Under one type of
purging election, the U.S. Holder will be deemed to have sold such shares at their fair market value and any gain recognized on such deemed sale will be treated as an excess distribution, as described above. As a result of such purging
election, the U.S. Holder will have a new basis and holding period in the Ordinary Share acquired upon the exercise of the warrants solely for purposes of the PFIC rules.
The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF
election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC Annual Information Statement, to a
timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or
with the consent of the IRS. U.S. Holders are urged to consult their tax advisors regarding the availability and tax consequences of a retroactive QEF election under their particular circumstances.
In order to comply with the requirements of a QEF election, a U.S. Holder must receive a PFIC Annual Information Statement from us. We have not determined whether we will
provide U.S. Holders this information if we determines that we are a PFIC.
Alternatively, if a U.S. Holder, at the close of its taxable year, owns (or is deemed to own) shares in a PFIC that are treated as marketable shares, the U.S. Holder may
make a mark-to-market election with respect to such shares for such taxable year. If a U.S. Holder makes (or has made) a valid mark-to-market election with respect to Ordinary Shares for such holder’s First PFIC Holding Year, such holder
will generally not be subject to the adverse PFIC tax consequences discussed above in respect to its Ordinary Shares as long as such shares continue to be treated as marketable shares. Instead, the U.S. Holder will generally include as
ordinary income for each year in its holding period that we are treated as a PFIC the excess, if any, of the fair market value of its Ordinary Shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S.
Holder also will recognize an ordinary loss in respect of the excess, if any, of its adjusted basis of its Ordinary Shares over the fair market value of its Ordinary Shares at the end of its taxable year (but only to the extent of the net
amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in its Ordinary Shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or
other taxable disposition of its Ordinary Shares will be treated as ordinary income. Although there is uncertainty under the current rules, the holder of an option, such as the Public Warrants, does not appear to be entitled to make a
mark-to-market election. Special tax rules may also apply if a U.S. Holder makes a mark-to-market election for a taxable year after such holder’s First PFIC Holding Year.
The mark-to-market election is available only for “marketable stock”, generally, stock that is regularly traded on a national securities exchange that is registered with
the Securities and Exchange Commission, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. If made, a mark-to-market
election would be effective for the taxable year for which the election was made and for all subsequent taxable years unless the Ordinary Shares cease to qualify as “marketable stock” for purposes of the PFIC rules or the IRS consents to
the revocation of the election. U.S. Holders are urged to consult their tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to Ordinary Shares under their particular circumstances.
Related PFIC Rules
If we are a PFIC and, at any time, have a non-U.S. subsidiary that is classified as a PFIC, a U.S. Holder generally would be deemed to own a proportionate amount of the
shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC, or the U.S.
Holder otherwise was deemed to have disposed of an interest in the lower-tier PFIC.
A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder, may have to file an IRS Form 8621 (whether or not a QEF or
mark-to-market election is made) and to provide such other information as may be required by the U.S. Treasury Department. Failure to do so, if required, will extend the relevant statute of limitations applicable to such U.S. Holder.
The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above.
Accordingly, U.S. Holders of Ordinary Shares and Public Warrants are urged to consult their own tax advisors concerning the application of the PFIC rules to our securities under their particular circumstances.
Additional Reporting Requirements
Certain U.S. Holders may be required to file an IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) to report a transfer of property to us.
Substantial penalties may be imposed on a U.S. Holder that fails to comply with this reporting requirement and the period of limitations on assessment and collection of U.S. federal income taxes will be extended in the event of a failure
to comply. In addition, certain U.S. Holders holding specified foreign financial assets with an aggregate value in excess of the applicable dollar thresholds are required to report information to the IRS relating to Ordinary Shares,
subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by U.S. financial institutions), by attaching a complete IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their tax
return for each year in which they hold Ordinary Shares. Substantial penalties apply to any failure to file IRS Form 8938 and the period of limitations on assessment and collection of U.S. federal income taxes will be extended in the
event of a failure to comply. U.S. Holders are urged to consult their tax advisors regarding the effect, if any, of these rules on the ownership and disposition of Ordinary Shares.
Treasury Regulations meant to require the reporting of certain tax shelter transactions could be interpreted to cover transactions generally not regarded as tax shelters,
including certain foreign currency transactions. Under the applicable Treasury Regulations, certain transactions are required to be reported to the IRS including, in certain circumstances, a sale, exchange, retirement or other taxable
disposition of foreign currency, to the extent that such sale, exchange, retirement or other taxable disposition results in a tax loss in excess of a threshold amount. U.S. Holders should consult their tax advisor to determine the tax
return obligations, if any, with respect to Ordinary Shares, Public Warrants, and the receipt of any non-U.S. currency in respect thereof, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement).
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information
reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and
certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it
to a refund, provided that the required information is timely furnished to the IRS.
The U.S. federal income tax discussion set forth above is included for general informational purposes only and may not be applicable depending upon a
U.S. Holder’s particular situation. All U.S. Holders are urged to consult their own tax advisor with respect to the tax consequences of the acquisition, ownership and disposition of Ordinary Shares and Public Warrants including the tax
consequences under state, local, estate, non-U.S. and other tax laws and tax treaties and the possible effects of changes in U.S. or other tax laws.
Material Irish Tax Considerations to Non-Irish Holders
Scope
The following is a summary of the anticipated material Irish tax consequences of the Business Combination to certain Non-Irish Holders (as defined below) of Ordinary
Shares and Public Warrants (for the purposes of this section, the “Securities”) and the acquisition, ownership and disposal of Securities received by such holders pursuant to the Business Combination. The summary is based upon Irish tax
laws and the published practice of the Irish Revenue Commissioners in effect on the date of this Report and submissions which have been made to, and confirmed by, the Irish Revenue Commissioners. Changes in law and/or administrative
practice may result in a change in the tax consequences described below, possibly with retrospective effect.
A “Non-Irish Holder” is an individual who beneficially owns their Securities, that is neither resident nor ordinarily resident in Ireland for Irish tax purposes and does
not hold their Securities, in connection with a trade carried on by such person through an Irish branch or agency.
This summary does not constitute tax advice and is intended only as a general guide. The summary is not exhaustive and security holders should consult their tax advisors
about the Irish tax consequences (and tax consequences under the laws of other relevant jurisdictions) of the Business Combination and of the acquisition, ownership and disposal of Securities. The summary applies only to Non-Irish Holders
who hold their Securities, as capital assets and does not apply to other categories of Non-Irish Holders, such as dealers in securities, trustees, insurance companies, collective investment schemes and Non-Irish Holders who acquired, or
are deemed to have acquired, their Securities by virtue of an Irish office or employment (performed or carried on to any extent in Ireland).
The summary does not, except where expressly stated, consider the position of Non-Irish Holders who hold their Securities directly (and not beneficially through a broker
or custodian (through DTC)). The Irish tax consequences of transactions in Securities held directly are generally negative when compared with Securities held through DTC. Any Non-Irish Holder contemplating holding their Securities
directly should consult their personal tax advisors as to the Irish tax consequences of acquiring, owning and disposing of such Securities.
Irish Tax on Chargeable Gains (“Irish CGT”)
The current rate of tax on chargeable gains (where applicable) in Ireland is 33%.
Non-Irish Holders will not be within the territorial scope of a charge to Irish CGT on a disposal of their Securities, provided that Securities neither (a) were used in or
for the purposes of a trade carried on by such Non-Irish Holder through an Irish branch or agency, nor (b) were used, held or acquired for use by or for the purposes of an Irish branch or agency.
Stamp Duty
The rate of stamp duty (where applicable) on transfers of shares or warrants of Irish incorporated companies is 1% of the greater of the price paid or market value of the
shares or warrants acquired. Where Irish stamp duty arises, it is generally a liability of the transferee. However, in the case of a gift or transfer at less than fair market value, all parties to the transfer are jointly and severally
liable.
Irish stamp duty may be payable in respect of transfers of Securities, depending on the manner in which the Securities are held. The Company has entered into arrangements
with DTC to allow the Securities to be settled through the facilities of DTC. As such, the discussion below discusses separately the security holders who hold their shares through DTC and those who do not.
Securities Held Through DTC
The Irish Revenue Commissioners have confirmed that transfers of Securities effected by means of the transfer of book entry interests in DTC will not be subject to Irish
stamp duty.
Securities Held Outside of DTC or Transferred Into or Out of DTC
A transfer of Securities where any party to the transfer holds such Securities outside of DTC may be subject to Irish stamp duty.
Holders of Securities wishing to transfer their Securities into (or out of) DTC may do so without giving rise to Irish stamp duty provided that:
| • |
there is no change in the beneficial ownership of such shares as a result of the transfer; and
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the transfer into (or out of) DTC is not effected in contemplation of a sale of such shares or warrants by a beneficial owner to a third party.
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Withholding Tax on Dividends (“DWT”)
Distributions made by the Company will, in the absence of one of many exemptions, be subject to DWT, currently at a rate of 25%.
For DWT and Irish income tax purposes, a distribution includes any distribution that may be made by the Company to holders of Ordinary Shares, including cash dividends,
non-cash dividends and additional stock taken in lieu of a cash dividend. Where an exemption from DWT does not apply in respect of a distribution made to a holder of Ordinary Shares, the Company is responsible for withholding DWT prior to
making such distribution.
General Exemptions
Irish domestic law provides that a non-Irish resident holder of Ordinary Shares is not subject to DWT on distributions received from the Company if such holder of Ordinary
Shares is beneficially entitled to the distribution and is either:
| • |
a person (not being a company) resident for tax purposes in a Relevant Territory (including the United States) and is neither resident nor ordinarily resident in Ireland (for a list
of Relevant Territories for DWT purposes, please see Exhibit 15.1 to this Report;
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a company resident for tax purposes in a Relevant Territory, provided such company is not under the control, whether directly or indirectly, of a person or persons who is or are resident in Ireland;
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a company that is controlled, directly or indirectly, by persons resident in a Relevant Territory and who is or are (as the case may be) not controlled by, directly or indirectly, persons who are
not resident in a Relevant Territory;
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a company whose principal class of shares (or those of its 75% direct or indirect parent) is substantially and regularly traded on a stock exchange in Ireland, on a recognized stock exchange either
in a Relevant Territory or on such other stock exchange approved by the Irish Minister for Finance; or
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a company that is wholly-owned, directly or indirectly, by two or more companies where the principal class of shares of each of such companies is substantially and regularly traded on a stock
exchange in Ireland, a recognized stock exchange in a Relevant Territory or on such other stock exchange approved by the Irish Minister for Finance,
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and provided, in all cases noted above (but subject to “— Ordinary Shares Held by U.S. Resident Shareholders” below), the Company or, in respect of
Ordinary Shares held through DTC, any qualifying intermediary appointed by the Company, has received from the holder of such Ordinary Shares, where required, the relevant DWT Forms prior to the payment of the distribution. In practice, in
order to ensure sufficient time to process the receipt of relevant DWT Forms, the holders of Ordinary Shares, where required, should furnish the relevant DWT Form to:
| • |
its broker (and the relevant information is further transmitted to any qualifying intermediary appointed by the Company) before the record date for the distribution (or such later date before the
distribution payment date as may be notified to the holder of Ordinary Shares by the broker) if its Ordinary Shares are held through DTC; or
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the Company’s transfer agent before the record date for the distribution if its Ordinary Shares are held outside of DTC.
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Links to the various DWT Forms are available at: http://www.revenue.ie/en/tax/dwt/forms/index.html. The information on such website does not constitute a part of, and is
not incorporated by reference into, this Report. Such forms are generally valid, subject to a change in circumstances, until December 31 of the fifth year after the year in which the forms were completed.
For non-Irish resident holders of Ordinary Shares that cannot avail themselves of one of Ireland’s domestic law exemptions from DWT, it may be possible for such holder of
Ordinary Shares to rely on the provisions of a double tax treaty to which Ireland is party to reduce the rate of DWT.
Ordinary Shares Held by U.S. Resident Shareholders
The Irish Revenue Commissioners have confirmed that distributions paid in respect of Ordinary Shares that are owned by a U.S. resident and held through DTC will not be
subject to DWT provided the address of the beneficial owner of such Ordinary Shares in the records of the broker holding such Ordinary Shares is in the United States (and such broker has further transmitted the relevant information to a
qualifying intermediary appointed by the Company). It is strongly recommended that such holders of Ordinary Shares ensure that their information is properly recorded by their brokers (so that such brokers can further transmit the relevant
information to a qualifying intermediary appointed by the Company).
The Irish Revenue Commissioners have confirmed that distributions paid in respect of Ordinary Shares that are held outside of DTC and are owned by a security holder who is
a resident of the United States will not be subject to DWT if such holder of Ordinary Shares provides a completed IRS Form 6166 or a valid DWT Form to the Company’s transfer agent to confirm its U.S. residence and claim an exemption.
If any holder of Ordinary Shares that is resident in the United States receives a distribution from which DWT has been withheld, the holder of Ordinary Shares should
generally be entitled to apply for a refund of such DWT from the Irish Revenue Commissioners, provided the holder of Ordinary Shares is beneficially entitled to the distribution.
Ordinary Shares Held by Residents of Relevant Territories Other than the United States
Holders of Ordinary Shares who are residents of Relevant Territories, other than the United States, must satisfy the conditions of one of the exemptions referred to above
under the heading “—General Exemptions”, including the requirement to furnish valid DWT Forms, in order to receive distributions without suffering DWT. If such holders of Ordinary Shares hold their
Ordinary Shares through DTC, they must provide the appropriate DWT Forms to their brokers (so that such brokers can further transmit the relevant information to a qualifying intermediary appointed by the Company) before the record date
for the distribution (or such later date before the distribution payment date as may be notified to holder of Ordinary Shares by the broker). If such holders of Ordinary Shares hold their Ordinary Shares outside of DTC, they must provide
the appropriate DWT Forms to the Company’s transfer agent before the record date for the distribution.
If any holder of Ordinary Shares who is resident in a Relevant Territory receives a distribution from which DWT has been withheld, the holder of Ordinary Shares may be
entitled to a refund of DWT from the Irish Revenue Commissioners provided the holder of Ordinary Shares is beneficially entitled to the distribution.
Shares Held by Other Persons
Holders of Ordinary Shares that do not fall within any of the categories specifically referred to above may nonetheless fall within other exemptions from DWT. If any
holders of Ordinary Shares are exempt from DWT, but receive distributions subject to DWT, such holders of Ordinary Shares may apply for refunds of such DWT from the Irish Revenue Commissioners.
Distributions paid in respect of Ordinary Shares held through DTC that are owned by a partnership formed under the laws of a Relevant Territory and where all the
underlying partners are resident in a Relevant Territory will be entitled to exemption from DWT if all of the partners complete the appropriate DWT Forms and provide them to their brokers (so that such brokers can further transmit the
relevant information to a qualifying intermediary appointed by the Company) before the record date for the distribution (or such later date before the distribution payment date as may be notified to the holder of Ordinary Shares by the
broker). If any partner is not a resident of a Relevant Territory, no part of the partnership’s position is entitled to exemption from DWT.
Qualifying Intermediary
Prior to paying any distribution, the Company will put in place an agreement with an entity that is recognized by the Irish Revenue Commissioners as a “qualifying
intermediary”, which will provide for certain arrangements relating to distributions in respect of Ordinary Shares that are held through DTC, which are referred to as the “Deposited Securities”. The agreement will provide that the
qualifying intermediary shall distribute or otherwise make available to Cede & Co., as nominee for DTC, any cash dividend or other cash distribution with respect to the Deposited Securities after the Company delivers or causes to be
delivered to the qualifying intermediary the cash to be distributed.
The Company will rely on information received directly or indirectly from its qualifying intermediary, brokers and its transfer agent in determining where holders of
Ordinary Shares reside, whether they have provided the required U.S. tax information and whether they have provided the required DWT Forms. Holders of Ordinary Shares that are required to file DWT Forms in order to receive distributions
free of DWT should note that such forms are generally valid, subject to a change in circumstances, until December 31 of the fifth year after the year in which such forms were completed.
Additional Anti-avoidance Measures
Notwithstanding the above stated exemptions, payments of distributions to associated entities in jurisdictions that are on the EU list of non-cooperative jurisdictions
or zero-tax jurisdictions may be subject to DWT on payment. Association for these purposes generally means a 50% ownership connection (assessed on the basis of share ownership, voting power or entitlement to profits on a distribution)
or the ability to participate in the board of directors in a manner that causes, or could cause, the affairs of the company to be conducted in accordance with that person’s wishes.
Income Tax on Dividends Paid on Ordinary Shares
Irish income tax may arise for certain persons in respect of distributions received from Irish resident companies.
A Non-Irish Holder that is entitled to an exemption from DWT will generally have no Irish income tax or universal social charge liability on a distribution from the
Company. A Non-Irish Holder that is not entitled to an exemption from DWT, and therefore is subject to DWT, generally will have no additional Irish income tax liability or liability to universal social charge. The DWT deducted by the
Company discharges the Irish income tax liability and liability to universal social charge.
Capital Acquisitions Tax (“CAT”)
CAT comprises principally gift tax and inheritance tax on property situated in Ireland for CAT purposes or otherwise within the territorial scope of CAT. CAT could apply
to a gift or inheritance of the Securities because the Securities are regarded as property situated in Ireland for CAT purposes as the Company’s share register must be held in Ireland. The person who receives the gift or inheritance has
primary liability for CAT.
CAT is currently levied at a rate of 33% on the value of any taxable gift or inheritance above certain tax-free thresholds. The appropriate tax-free threshold depends upon
(1) the relationship between the donor and the donee and (2) the aggregation of the values of previous taxable gifts and inheritances received by the donee from persons within the same group threshold. Gifts and inheritances passing
between spouses are exempt from CAT, as are gifts to certain charities. Children have a current lifetime tax-free threshold of €335,000 in respect of taxable gifts or inheritances received from their parents. There is also a “small gift
exemption” from CAT whereby the first €3,000 of the taxable value of all taxable gifts taken by a donee from any one donor, in each calendar year, is exempt from CAT and is also excluded from any future aggregation. This exemption does
not apply to an inheritance.
THE IRISH TAX CONSIDERATIONS SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY AND ARE NOT INTENDED TO PROVIDE ANY DEFINITIVE TAX REPRESENTATIONS TO
HOLDERS. EACH SECURITY HOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES THAT MAY APPLY TO SUCH SECURITY HOLDER.
| F. |
Dividends and Paying Agents
|
Not applicable.
| G. |
Statement by Experts
|
Not applicable.
| H. |
Documents on Display
|
Documents concerning the Company referred to in this Report may be inspected at the principal executive offices of the Company at Ten Earlsfort Terrace, Dublin 2, D02
T380, Ireland.
The Company is subject to certain of the informational filing requirements of the Exchange Act. Since the Company is a “foreign private issuer,” it is exempt from the
rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers, directors and principal shareholders of the Company are exempt from the reporting and “short-swing” profit recovery
provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of Ordinary Shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly
as U.S. public companies whose securities are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting
firm. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that the Company files with or furnishes electronically to the SEC.
| I. |
Subsidiary Information
|
|
Name
|
Registered Office
|
Nature of business
|
Class of
shares held
|
Proportion
of Nominal
Value
|
|
Carbon Revolution Pty Ltd
|
Building NR, Geelong Technology Precinct, 75 Pigdons Road, Waurn Ponds Vic 3216 Australia
|
IP owner, holding company
|
Ordinary
|
100%
|
|
Carbon Revolution Operations Pty Ltd
|
Building NR, Geelong Technology Precinct, 75 Pigdons Road, Waurn Ponds Vic 3216 Australia
|
Carbon fiber wheels design manufacture and sale
|
Ordinary
|
100%
|
|
Carbon Revolution Technology Pty Ltd
|
Building NR, Geelong Technology Precinct, 75 Pigdons Road, Waurn Ponds Vic 3216 Australia
|
No activities
|
Ordinary
|
100%
|
|
Carbon Revolution (USA) LLC
|
1209 Orange Street, Wilmington, County of New Castle, Delaware 19801, USA
|
Employs small sales team
|
n/a
|
100%
|
|
Poppettell Merger Sub
|
Floor 4, Willow House, Cricket Square, Grand Cayman KY1-9010, Cayman Islands
|
Twin Ridge merged with and into this entity. No activities
|
Ordinary
|
100%
|
| ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|
Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide this information.
| ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not applicable.
| Item 13. |
Defaults, Dividend Arrearages and Delinquencies.
|
Not applicable.
| Item 14. |
Material Modifications to the Rights of Security Holders and Use of Proceeds.
|
Not applicable.
| Item 15. |
Controls and Procedures.
|
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information
required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well-designed
and operated, can provide only reasonable assurance of achieving the desired control objectives. Company management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
the design and operation of the Company’s disclosure controls and procedures as of June 30, 2023. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, the
disclosure controls and procedures were not effective due to the material weaknesses identified by management, as described below. The Company’s disclosure controls and procedures are designed to ensure that information required to be
disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is
accumulated and communicated to Company management, including the Chief Executive Officer, to allow timely decisions regarding required disclosures.
The material weaknesses referenced above are described below:
| • |
Lack of appropriately designed, implemented and documented procedures and controls at both entity- and process-level to allow for the Company to achieve complete, accurate and timely financial reporting.
This is pervasive across the entity-level and each of the key business processes, including controls over the preparation and review of account reconciliations and journal entries, and controls over information technology to
ensure access to financial data is adequately restricted to appropriate personnel.
|
| • |
Segregation of duties has not been sufficiently established across the key business and financial processes. Given the size, nature of the organization and the current structure of the finance function,
a lack of segregation of duties applied to the key business and financial processes across the organization has been identified. A consequence of the lack of segregation of duties is the heightened risk of fraud or material
misstatement when no appropriate mitigating controls are in place.
|
| • |
Lack of personnel with appropriate knowledge and experience relating to SEC reporting requirements to enable the entity to design and maintain an effective financial reporting process. A lack of
knowledge and experience in these areas may lead to the Company being in breach of SEC financial reporting and other related requirements, especially given that the current finance function has not been designed to include
sufficient accounting and financial reporting personnel with the requisite knowledge and experience in the application of SEC financial reporting rules and regulations.
|
The Company has begun preparation of a plan to remediate these material weaknesses. These remediation measures are ongoing and include hiring additional accounting and
financial reporting personnel and implementing additional policies, procedures and controls.
In order to maintain and improve the effectiveness of its internal control over financial reporting, the Company will expend, and anticipates that it will continue to expend, significant
resources, including accounting-related costs and significant management oversight. The Company’s independent registered public accounting firm is not required to formally attest to the effectiveness of its internal control over
financial reporting until after it is no longer an emerging growth company. At such time, the Company’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at
which the Company’s internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could adversely affect the business
and operating results and could cause a decline in the price of the Ordinary Shares. Any material weaknesses will not be considered remediated until the mitigating controls have operated for the required period of time and until the
operating effectiveness of the controls has been validated, through testing, by management.
Management’s Annual Report on Internal Control Over Financial Reporting
This Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the
SEC for newly public companies.
Attestation Report of the Registered Public Accounting Firm
This Report does not include an attestation report of the Company’s registered public accounting firm because as an “emerging growth company” we are exempt from Section
404(b) of the Sarbanes-Oxley Act.
Changes in Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the year ended June 30, 2023 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
| Item 16. |
[Reserved]
|
| Item 16A. |
Audit Committee Financial Expert.
|
Audit and risk committee members include Dale McKee (chair), Matti Masanovich and Jacqueline A. Dedo. Each member of the Audit and risk committee satisfies the
“independence” requirements set forth in Rule 10A-3 under the Exchange Act and is financially literate and each of Matti Masanovich and Dale McKee qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
| Item 16B. |
Code of Ethics.
|
We adopted a Code of Conduct applicable to our directors, officers and employees (the “Code of Conduct”). A copy of the Code of Ethics is available on our website. We
intend to post on the Corporate Governance section of our website required disclosures concerning any amendments to, or waivers from, any provision of the Code of Conduct.
| Item 16C. |
Principal Accountant Fees and Services.
|
|
|
For the Years Ended
June 30,
|
|||||||
|
|
2023
|
2022
|
||||||
|
|
(Euros in thousands)
|
|||||||
|
Audit Fees
|
60,300 |
-
|
||||||
|
Audit-Related Fees
|
-
|
-
|
||||||
|
Tax Fees
|
-
|
-
|
||||||
|
All Other Fees
|
-
|
-
|
||||||
|
Total Fees
|
60,300 |
-
|
||||||
KPMG was engaged in December 2023 to audit the financial statements of the Company as of June 30, 2023, June 30, 2022 and June 30, 2021 and for each of the three fiscal years ending June 30,
2023, 2022 and 2021. KPMG did not perform any audit services for the Company prior to June 30, 2023 and has not been paid or delivered any invoices for services provided during such period, however, this represents the fee for the years
ended 30 June 2023, 2022 and 2021. Furthermore, as the Company did not consolidate Carbon Revolution Limited or any of its subsidiaries as of June 30, 2023, no fee for services rendered to, or with respect of, such entities have been
included.
Audit and Risk Committee Pre-approval Policy and Procedures
The Audit and Risk Committee established a policy that all audit and permissible non-audit services provided by the independent registered public accounting firm will be pre-approved by the Audit and Risk
Committee, and all such services were pre-approved materially in accordance with this policy during the fiscal year ended June 30, 2024. These services included audit services, audit-related services, and services related to research
and development taxation services. The Audit and Risk Committee considered whether the provision of each non-audit service was compatible with maintaining the independence of the auditors.
| Item 16D. |
Exemptions from the Listing Standards for Audit Committees.
|
Not applicable.
| Item 16E |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
|
Not applicable.
| Item 16F. |
Change in Registrant’s Certifying Accountant.
|
Not applicable.
| Item 16G. |
Corporate Governance.
|
Disclosure of compensation for additional members of the Company’s management body is not required in the Company’s home country and is not otherwise publicly disclosed by
the Company.
The corporate governance practice in the Company’s home country does not require the Company to obtain shareholder approval prior to the issuance of securities in certain
circumstances as set forth in Nasdaq Rule 5635. The Company has elected to comply with its home country requirements in lieu of Nasdaq Rule 5635.
| Item 16H. |
Mine Safety Disclosure.
|
Not applicable.
| Item 16I. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
|
Not applicable.
| Item 16J. |
Insider Trading Policies
|
We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of our securities by directors, senior management, and
employees that are reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and any listing standards applicable to our company. The insider trading policy is filed as an exhibit to this
Report.
| ITEM 17. |
FINANCIAL STATEMENTS
|
The consolidated financial statements of the Company as of June 30, 2023, 2022 and 2021 have been audited by KPMG (PCAOB ID No. ), independent registered public accounting firm.
| ITEM 18. |
FINANCIAL STATEMENTS
|
The audited financial statements of the Company as of June 30, 2023 are included in pages 114 to 127 of this Report.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Carbon Revolution Public Limited Company
Opinion on the Consolidated Financial Statements
We have audited
the accompanying consolidated statements of financial position of Carbon Revolution Public Limited Company and subsidiaries (the Company) as of June 30, 2023, 2022 and 2021, the related consolidated statements of profit or loss, comprehensive
income, cash flows, and changes in equity for each of the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 2023, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with IFRS Accounting Standards as issued by the
International Accounting Standards Board.
Going Concern
The accompanying
consolidated financial statements have been prepared assuming that the Company, after giving effect to the scheme of arrangement as outlined in Note 6, will continue as a going concern. As discussed in Note 1(ix) to the consolidated financial
statements, the Company, after implementing the scheme of arrangement, has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1(ix). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
/s/ KPMG
We have served as the Company’s auditor since 2023.
May 30, 2025
© 2025 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a
scheme approved under Professional Standards Legislation.
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
|
Year ended June 30
|
|||||||||||
|
|
2023
Total
€
|
2022
Total
€
|
2021
Total
€
|
||||||||
|
Profit for the year
|
|
|
|
||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
Year ended June 30
|
||||||||||||
|
2023
Total
€
|
2022
Total
€
|
2021
Total
€
|
||||||||||
|
Profit for the year
|
|
|
|
|||||||||
|
Other comprehensive income
|
|
|
|
|||||||||
|
Total comprehensive income
|
|
|
|
|||||||||
These statements should be read in conjunction with the notes to the financial statements, that are an integral part of the consolidated financial statements.
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
| As at June 30 | ||||||||||||||||
|
Note
|
2023
Total
€
|
2022
Total
€
|
2021
Total
€
|
|||||||||||||
|
ASSETS
|
|
|
|
|||||||||||||
|
LIABILITIES
|
||||||||||||||||
|
NET ASSETS
|
|
|
|
|||||||||||||
|
EQUITY
|
||||||||||||||||
|
Ordinary share capital
|
3
|
|
|
|
||||||||||||
| Receivables from Officers |
3 |
( |
) | ( |
) | ( |
) | |||||||||
|
TOTAL EQUITY
|
|
|
|
|||||||||||||
These statements should be read in conjunction with the notes to the financial statements, that are an integral part of the consolidated
financial statements.
116
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
| Note |
Share
Capital
€
|
Total
€
|
|||||||
|
Balance at July 1, 2020
|
|
|
|||||||
|
Profit for the year
|
|
|
|||||||
|
Other comprehensive income
|
|
|
|||||||
|
At 30 June 2021
|
|
|
|||||||
|
Balance at July 1, 2021
|
|
|
|||||||
|
Profit for the year
|
|
|
|||||||
|
Other comprehensive income
|
|
|
|||||||
|
At 30 June 2022
|
|
|
|||||||
|
Balance at July 1, 2022
|
|
|
|||||||
|
Profit for the year
|
|
|
|||||||
|
Other comprehensive income
|
|
|
|||||||
|
Issue of share capital
|
3 |
|
|
||||||
|
Receivables from Officers
|
3 |
(
|
)
|
(
|
)
|
||||
|
At 30 June 2023
|
3 |
|
|
||||||
These statements should be read in conjunction with the notes to the financial statements, that are an integral part of the consolidated financial statements.
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
During the current financial year ended June 30, 2023 and prior financial years ended June 30, 2022, and June 30, 2021, Carbon Revolution Public Limited Company did no no no
These statements should be read in conjunction with the notes to the financial statements, that are an integral part of the
consolidated financial statements.
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023, 2022 and 2021
|
1.
|
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
|
The principal accounting policies adopted by Carbon Revolution Public Limited Company are set out below.
| i) |
GENERAL INFORMATION
|
Carbon Revolution Limited (formerly known as Poppetell Limited) registered in Ireland on July 5, 2017, with registration number 607450 as a private
limited company. On May 29, 2023, Carbon Revolution Limited reregistered as a Public Limited Company (Carbon Revolution Public Limited Company) (“the Company”) under the Companies Act 2014 in the Republic of Ireland. The registered office
address of the Company is 10 Earlsfort, Dublin 2, D02 T380. The Company is a holding company as a result there were no operations or cashflows. During the 2023 financial year Poppettell Merger Sub was incorporated in the Cayman Islands as a
subsidiary of the Company. These financial statements present the results of the Company and its subsidiary as a Group (“the Group”) from the date of incorporation of the subsidiary.
| ii) |
BASIS OF PREPARATION
|
The Group’s financial statements have been prepared in accordance with International Financial Accounting Standards as issued by the International Accounting Standards Board (“IASB”) (together “IFRS”).
The financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain crucial accounting estimates. It also requires management to exercise its judgment in the process of applying
the Group’s accounting policies (see note 1.viii).
The consolidated financial statements were authorized for issue on May 30, 2025 by the Board of Directors of the Company.
The Group’s functional and presentational currency is Euro.
| iii) |
BASIS OF CONSOLIDATION
|
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries)
as of 30 June each year. Control is achieved when the Company:
• Has the power over the investee
• Is exposed, or has rights, to variable returns from its involvement with the investee
• Has the ability to use its power to affect its returns
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the
subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are
eliminated on consolidation.
119
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023,
2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023, 2022 and 2021
| iv) |
FOREIGN EXCHANGE
|
Transactions in currencies other than the Group’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing at that date. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is included as an exchange gain or loss and recognized in profit or loss.
| v) |
ORDINARY SHARE CAPITAL
|
The ordinary share capital of the Company is presented as equity.
| vi) |
CHANGES IN ACCOUNTING POLICIES
|
The Group has applied a number of amendments to IFRS that are mandatorily effective for the accounting period ended June 30, 2023. Their adoption has not had
any material impact on the disclosures or on the amounts reported in these financial statements.
| • |
Annual Improvements to IFRS Standards 2018–2020
|
| • |
Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)
|
| • |
Reference to the Conceptual Framework (Amendments to IFRS 3)
|
| • |
International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12)
|
| vii) |
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE AT JUNE 30, 2023
|
At the date of authorization of the consolidated financial statements, other Standards and Interpretations issued but not yet effective and
relevant for the Group were listed below.
|
Standard and Interpretation
|
Effective for annual
reporting periods beginning
on or after
|
Expected to be initially
applied in the financial
year ending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adoption of these standards will not impact the net profit or loss or net balance sheet
position, and will only impact financial statement disclosures in future periods.
120
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022
AND 2021
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023, 2022 and 2021
| viii) |
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
|
In the application of the Group’s accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying
amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the financial year in
which the estimate is revised if the revision affects only that financial year or in the financial year of the revision and future financial years if the revision affects both current and future financial years. There are no significant items
recognized in the financial statements which require the use of estimates or judgments.
| ix) |
GOING CONCERN
|
The accompanying consolidated financial statements have been prepared in
accordance with IFRS Accounting Standards applicable to a going concern basis. The going concern basis of preparation assumes that the Group will continue in operation one year after the date these consolidated financial statements are issued
and will be able to realize assets and discharge liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets,
liabilities, and reported expenses that may be necessary if these financial statements were prepared on an alternative basis which would be required in the event that the Group is unable to continue as a going concern.
The Company did not undertake any trading activities during the years ended
June 30, 2023 and June 30, 2022 and did not hold any assets at June 30, 2023 and June 30, 2022. As noted below (note 6), subsequent to the end of the financial period, the Company acquired Carbon Revolution group, an Australian advanced
manufacturing company in a merger arrangement, as a result of which, the Company became the parent of the Carbon Revolution group.
The Group expects to continue to incur net losses and negative cash flows from
operating activities in accordance with its operating plan over the next twelve months from signing date. However, the Group expects that unit production costs will continue to reduce as new wheel programs are introduced and other planned
efficiency measures are implemented, and the Group expects capital costs related to the capacity build of the Australian plant will reduce in the next twelve months from signing date as the current phase of capacity expansion at the Australian
plant has been substantially completed.
As an early-stage growth company, the Group’s ability to access additional
capital is critical to fund operating losses, finalise the development and launch of awarded wheel programs and complete the current phase of expansion of manufacturing facilities to scale up production capacity. As the Group’s current level
of cash and cash equivalents and other committed funding sources are not sufficient to execute our business plan, failure to achieve management’s forecast performance or obtain additional financing will have a material, adverse impact on our
business operations including developing, launching and producing new wheel programs and satisfying obligations as they become due.
121
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
The Group’s principal sources of liquidity at signing date are:
| • |
|
Ongoing support from PIUS Limited LLC and its affiliates (“PIUS”) and Orion Infrastructure Capital (“OIC”) of US$
|
|
o
|
conditional access to US$
|
|
o
|
conditional access to US$
|
|
o
|
moving from cash paid interest to Payment in Kind (“PIK”) interest from July 2025 to December 2025, which is worth approximately US$
|
|
•
|
OIC also has US$
|
|
•
|
Its unrestricted cash balance of US$
|
|
•
|
Ongoing support from suppliers and customers in the form of favorable payment terms and bailment arrangements;
|
|
•
|
Access to capital through the issuance of debt or equity securities via public or private placement; and
|
|
•
|
Access to capital under the Committed Equity Facility (“CEF”).
|
As a result of our recurring losses from operations, accumulated deficit and
projected capital needs, significant doubt exists regarding the Group’s ability to continue as a going concern for at least one year after the issuance date of these consolidated financial statements.
The Group’s ability to continue as a going concern is contingent upon
successful execution of the Group’s intended plan over the next twelve months from signing date to improve liquidity and working capital. This plan relates to initiatives that were agreed upon for the next twelve months from signing date and
includes, but is not limited to:
|
•
|
Satisfying the conditions necessary to access the remaining US$
|
|
•
|
Achieving forecast production levels, sales mix and pricing;
|
|
•
|
Reducing unit costs, reducing fixed overheads and limiting non-contracted capital expenditures in accordance with cost reduction initiatives;
|
|
•
|
Securing agreement for ongoing deferral of previously agreed transaction costs deferrals from the capital reorganization amounting to a total of US$
|
|
•
|
Ongoing support from suppliers and customers in the form of favorable payment terms and bailment arrangements;
|
|
•
|
Successful outcome of claims which the Group has made or plans to make against customers primarily associated with ordered volumes that are below the
volumes which the Group was required to build and reserve capacity for under its customer contracts, and cancellation of a wheel program; and
|
|
•
|
Raising capital to fund operations through the issuance of debt or equity securities via public or private placement (including through the CEF).
|
122
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
In addition to successfully achieving these initiatives, it is also critical
that the Group complies with the New Debt PIUS loan covenants and OIC Financing milestones and continues to receive support from suppliers and customers through the favorable payment terms and extension of customer bailment arrangements.
Under current arrangements, the Group is due to commence making repayments of
principal in relation to its loan facilities in June 2026. The Group is currently forecasting that it will not be generating sufficient cash to make these repayments and as such the repayment terms will require renegotiation of its debt
financing arrangements or a new facility put in place with extended repayment terms.
There is significant doubt that the Group will be successful in achieving these
initiatives.
Furthermore, recent macroeconomic market conditions, particularly impacting
automotive manufacturers in the USA and their suppliers, and the implementation of tariffs on goods imported into the USA may negatively impact the demand of the Group’s products, or its commercial arrangements with its customers which may have
a detrimental effect in the Group’s operations and financial position.
There can be no assurance that the Group will be able to obtain the financing
needed to achieve its goals on acceptable terms or at all. Additionally, any equity or equity linked financings would likely have a dilutive effect on the holdings of existing stockholders.
123
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
| 2. |
REMUNERATION
|
The Group
had no no t receive any remuneration (2022 and 2021 - €).
|
3.
|
SHARE CAPITAL
|
|
Ordinary share capital: shares of €
|
2023
Number
|
2023
€
|
2022
Number
|
2022
€
|
2021
Number
|
2021
€
|
||||||||||||||||||
|
Shares on issue
|
||||||||||||||||||||||||
| Receivables from Officers | - | ( |
) | - | ( |
) | - | ( |
) | |||||||||||||||
|
At 30 June 2023 (and 30 June 2022 and 30 June 2021)
|
||||||||||||||||||||||||
The Company issued 24,900 ordinary shares of €1 each on March 31, 2023, in addition to the 100 ordinary shares of €1 each issued at the date of the Company’s incorporation, resulting in Receivables from Officers of €25,000 and Ordinary Share Capital of €25,000 at 30 June 2023
(2022 and 2021: €100
The ordinary shares include the following
rights: to attend any general meeting of the Company and to exercise one vote per ordinary share held at any general meeting of the
Company; to participate pro rata in all dividends declared by the Company; and, in the event of the Company’s winding up, to participate pro rata in the total assets of the Company.
As outlined in note 6 to these financial statements the Company repurchased the issued share capital subsequent to the year end.
124
CARBON REVOLUTION PUBLIC LIMITED COMPANY
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 30 JUNE 2023, 2022 AND 2021
NOTES TO THE FINANCIAL STATEMENTS
|
4.
|
RISK MANAGEMENT FRAMEWORK
|
The Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework.
Credit risk
The Group has no exposure to credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
During the years under review, the administrative costs of the Group have been borne by an entity with common directorship (refer to note 7).
Credit risk
The Group has no exposure to credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
During the years under review, the administrative costs of the Group have been borne by an entity with common directorship (refer to note 7).
| 5. |
CAPITAL MANAGEMENT
|
During the financial years ended June 30, 2023, 2022 and 2021, the capital structure of the Group consists of equity comprising ordinary share capital. During those financial years the Group was not exposed to any externally imposed capital or gearing requirements.
| 6. |
EVENTS AFTER THE REPORTING PERIOD
|
On September 22, 2023 the Company entered into a securities purchase agreement (Securities Purchase Agreement) and other documents with OIC Structured Equity
Fund I Range, LLC and OIC Structured Equity Fund I GPFA Range, LLC (fund vehicles affiliated with OIC) .
On November 3, 2023, the Company became a co-obligor to a Joinder to Proceeds Disbursing and Security Agreement (“the agreement”) by which the Company pledged,
assigned and granted a security interest in all right, title and interest in and to the collateral, whether owned at the date of the agreement or thereafter acquired.
The Company was part of a BCA with Twin Ridge Capital Acquisition Corp., a Cayman Islands based special purpose acquisition company, Poppettell Merger Sub, a
Cayman Islands based subsidiary of the Company and an Australian company Carbon Revolution Limited (“Carbon Revolution”) and an accompanying scheme implementation deed (“SID”) to become publicly listed in the U.S. via a series of transactions,
including a scheme of arrangement. This provided for Carbon Revolution Limited shareholders to be issued shares in the Company, in proportion to their shares in Carbon Revolution Limited. On November 3, 2023, the arrangement was consummated and
the Company began trading on the Nasdaq.
On November 22, 2023, the Company repurchased 25,000
ordinary shares of €1 each.
On April 10, 2024, the Company entered into an amendment to the Securities Purchase Agreement (Amended OIC Purchase Agreement) with OIC Structured Equity Fund I
GPFA Range, LLC and OIC Structured Equity Fund I Range, LLC (OIC Investors). The Amended OIC Purchase Agreement amended the First Reserve Release Condition to provide for the early release of US$5 million (EUR 4.6 million) from escrow and to remove certain
conditions in the Second Reserve Release Condition. Such US$5 million (EUR 4.6 million) amount was released from escrow in exchange for the issuance of Class B Preferred Shares and a warrant to purchase a number of shares equal to 7.5 % of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously
issued to the OIC Investors. Under the Amended OIC Purchase Agreement, OIC may elect, but is not obligated, to release funds to acquire additional Preferred Shares.
125
On May 24, 2024 and June 21, 2024, the Company entered into further amendments to the Securities Purchase Agreement with OIC Investors, providing that all or a
portion of the remaining funds held in the escrow account may be released in exchange for preferred shares issued by the Company or debt instruments issued by the Company or its subsidiaries, including Carbon Revolution Operations Pty Ltd
(“Carbon Revolution Operations”), as well as associated warrants. Under the Securities Purchase Agreement, as amended, OIC may elect, but is not obligated, to release funds from escrow in exchange for Preferred Shares issued by the Company or
debt instruments issued by the Company. Under such amendments, on such dates an aggregate US$10 million (EUR 9.3 million) was released from escrow and the Company (via Carbon Revolution Operations) issued an aggregate principal amount of additional Series
2024-A Notes to OIC. The Company also issued to the OIC Investors a warrant to purchase a number of shares equal to 2.5 % of the
Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC Investors.
On July 10, 2024, US$5 million (EUR 4.6 million) was released from escrow and the Company (via Carbon Revolution Operations) issued an aggregate principal amount of additional Series
2024-A Notes to OIC, in connection with the satisfaction of the applicable conditions for the fourth Escrow Release. The Company also issued to the OIC Investors a warrant to purchase a number of shares equal to 2.5 % of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously
issued to the OIC Investors.
On July 29, 2024, US$5 million (EUR 4.6 million) was released from escrow and the Company (via Carbon Revolution Operations) issued an aggregate principal amount of additional Series
2024-A Notes to OIC in such amount. OIC waived certain conditions for the fifth Escrow Release to enable the release of funds prior to August 1, 2024 and without measurement of the Company’s performance with respect to the applicable monthly
milestones for such release as of July 31, 2024. The Company also issued to the OIC a warrant to purchase a number of shares equal to 2.5 %
of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC.
On September 5, 2024, US$5 million (EUR 4.5 million) was released from escrow and the Company (via Carbon Revolution Operations) issued an aggregate principal amount of additional Series
2024-A Notes to OIC in such amount. The Company also issued to the OIC a warrant to purchase a number of shares equal to 2.5 % of the
Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC.
On October 30, 2024, US$5 million (EUR 4.6 million) was released from escrow and the Company (via Carbon Revolution Operations) issued a corresponding aggregate principal amount of
additional Series 2024-A Notes to OIC. OIC waived one of the conditions for the release of the Seventh Escrow Release. The Company also issued to the OIC a warrant to purchase a number of shares equal to 2.5 % of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC.
Proceeds from the OIC investment will be used to fund operations and investments in capacity in the near term.
Under an agreement the Group had previously reached relating to transaction cost deferrals from the capital reorganization with the relevant creditors, US$5 million (EUR 4.6 million) was
payable on November 3, 2024, with the remainder to be paid from the proceeds of certain fundraising transactions or on a straight line basis over 5 years (depending on the option selected by the supplier). The US$5 million (EUR 4.6 million) payment was not made in November 2024 and a further US$10.0 million (EUR 9.2 million) is now payable or payable in twelve months from signing date, unless the relevant suppliers agree to or accept further deferral of the transaction costs for at least twelve
months from signing date and until sufficient cashflow can be generated from operations or alternative sources of funding are obtained to pay down these debts.
126
On December 20, 2024, the Company and the OIC entered into Amendment No. 4 to the Securities Purchase Agreement, providing for the funding of US$25 million (EUR 24.1 million) in five tranches, each equal to US$5 4.8 five tranches of US$400,000 (EUR 384,915 ), subject to satisfying certain conditions in exchange for preferred shares issued by the Company or debt instruments issued by Carbon Revolution Operations. Pursuant
to other documents entered into simultaneously therewith, the OIC Investors will purchase from Carbon Revolution Operations notes of a new series, Series 2025-A Notes. In connection with the funding of each of the five tranches of US$5 4.8 400,000 (EUR 384,915 ), the Company will issue to the OIC Investors and the Existing Lenders, pro
rata in proportion to the amount of their investment relative to the total amount invested by the OIC Investors and the Existing Lenders in each tranche, penny warrants to purchase an aggregate number of shares equal to 5.0 % of the Company’s shares outstanding, determined on a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously
issued to the OIC.
On December 20, 2024, upon the satisfaction of the first of the release conditions, US$5 million (EUR 4.8 million) was funded in exchange for the
issuance by Carbon Revolution Operations to the OIC Investors of US$5 million (EUR 4.8 million) aggregate principal amount of Series 2025-A Notes and the release from the payment reserve fund of US$400,000 (EUR 384,915 ) in exchange for interest thereon payable
at a rate of 12 % per annum, of which 8.5 %
is payable in cash and 3.5 % is payable in-kind for the benefit of the Existing Lenders. Additionally, the OIC Investors (4.63 %) and the Existing Lenders (0.37 %)
were issued penny warrants to purchase an aggregate number of shares equal to 5.0 % of the Company’s shares outstanding, determined on
a “Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC, and otherwise containing the same terms as the warrants issued to the OIC in prior reserve releases.
On January 21, 2025, upon the satisfaction of the conditions to the release of a second instalment of the aggregate of US$25 million (EUR 24.1 million) for
which the conditions were agreed upon in December, US$5 million (EUR 4.8 million) was funded in exchange for interest payable thereon at the rate described above and the issuance to the OIC Investors of US$5 million (EUR 4.8 million) aggregate
principal amount of Series 2025-A Notes, and the simultaneous release from the payment reserve fund of US$400,000 (EUR 386,361 ) as an additional term advance in exchange for interest payable thereon at the rate described above. Additionally, as required in respect of
each US$5.4 million (EUR 5.2
million) tranche of funding to be released under the above amendments agreed on December 20, 2024 (incorporating US$5 million (EUR 4.8 million) released by the OIC Investors and US$400,000
(EUR 386,361 ) released from the payment reserve fund under the New Debt Program), the OIC Investors (4.63 %) and the Existing Lenders (0.37 %)
were issued penny warrants to purchase an aggregate number of shares equal to 5.0 % of the Group’s shares outstanding, determined on a
“Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC Investors, and otherwise containing substantially the same terms as the warrants issued to the OIC Investors in prior reserve releases.
On March 7, 2025, upon the satisfaction of the conditions to the release of a third instalment of the aggregate of US$25 million (EUR 24.1 million) for which the conditions were
agreed upon in December, US$5 million (EUR 4.6 million) was funded in exchange for interest payable thereon at the rate described above and the issuance to the OIC Investors of US$5 million (EUR 4.6 million) aggregate principal amount of Series 2025-A
Notes, and the simultaneous release from the payment reserve fund of US$400,000 (EUR 370,648 ) as an additional term advance in exchange for interest payable thereon at the rate described above. Additionally, as required in respect of each US$5.4 million (EUR 5.0 million) tranche
of funding to be released under the above amendments agreed on December 20, 2024 (incorporating US$5 million (EUR 4.6 million) released by the OIC Investors and US$400,000
(EUR 370,648 million) released from the payment reserve fund under the New Debt Program), the OIC Investors (4.63 %) and the Existing Lenders (0.37 %)
were issued penny warrants to purchase an aggregate number of shares equal to 5.0 % of the Group’s shares outstanding, determined on a
“Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC Investors, and otherwise containing substantially the same terms as the warrants issued to the OIC Investors in prior reserve releases.
On May 09, 2025, upon the satisfaction of the conditions to the release of a fourth instalment of the aggregate of US$25 million (EUR 24.1 million) for which the conditions were
agreed upon in December, US$5 million (EUR 4.6 million) was funded in exchange for interest payable thereon at the rate described above and the issuance to the OIC Investors of US$5 million aggregate principal amount of Series 2025-A Notes, and the simultaneous release from the payment reserve fund of US$400,000 (EUR 369,800 ) as an additional term advance in exchange for interest
payable thereon at the rate described above. Additionally, as required in respect of each US$5.4 million tranche of funding to be
released under the above amendments agreed on December 20, 2024 (incorporating US$5 million (EUR 4.6 million) released by the OIC Investors and US$400,000
(EUR 369,800 ) released from the payment reserve fund under the New Debt Program), the OIC Investors (4.63 %) and the Existing Lenders (0.37 %)
were issued penny warrants to purchase an aggregate number of shares equal to 5.0 % of the Group’s shares outstanding, determined on a
“Fully-Diluted Basis” in the same manner as applicable to the existing warrants previously issued to the OIC Investors, and otherwise containing substantially the same terms as the warrants issued to the OIC Investors in prior reserve releases.
Since June 30, 2024, there have been a number of other amendments to the New Debt Program and OIC Financing, including changes to financial covenants under the
New Debt Program and funding milestones under the OIC Financing, and there have been a number of waivers by the counterparties to the New Debt Program for various events of default, including relating to breaches of loan covenants and a
milestones (or milestones) have been waived under the OIC Financing.
|
7.
|
TRANSACTIONS BORNE BY CARBON REVOLUTION
|
Carbon Revolution Limited paid for Director & Officer insurance in the amount
of US$ 223,125 (translating to € 207,930 )
(2022 and 2021 - €). The Company incurred other administrative costs of €22,171 in relation to the year ended 30 June 2023 (2022 – €; 2021 - €) which Carbon Revolution Limited has paid. The Company has been advised by Carbon Revolution Limited that it will not seek recovery of these
amounts.
|
8.
|
GUARANTEES, CAPITAL COMMITMENTS AND CONTINGENCIES
|
The Group had no guarantees in place during the financial year and there were no open
capital commitments no r contingent liabilities as at 30 June, 2023 (2022 and 2021: ).
|
9.
|
INFORMATION ABOUT SUBSIDIARIES
|
On November 28, 2022, the Company incorporated a 100 % owned subsidiary. The subsidiary, Poppetell Merger Sub, is a dormant entity with no transactions prior to the merger with Carbon Revolution
Limited, incorporated in the Cayman Island.
127
| ITEM 19. |
EXHIBITS
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|
Exhibit
No.
|
|
Description
|
|
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Amended and Restated Memorandum and Articles of Association of Carbon Revolution Public Limited Company (incorporated by reference to Exhibit 1.1 of the Company’s Form 20-F, filed with the SEC on
November 13, 2023).
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Specimen Ordinary Shares Certificate of Carbon Revolution Public Limited Company (incorporated by reference to Exhibit 2.1 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Warrant Certificate of Carbon Revolution Public Limited Company (incorporated by reference to Exhibit 2.2 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Description of Securities (incorporated by reference to Exhibit 2.3 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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Indenture, dated May 23, 2023, by and between Carbon Revolution Operations and UMB Bank, National Association, as Trustee (incorporated by reference to Exhibit 99.2 of the Company’s Form 6-K, furnished
with the SEC on May 24, 2024).
|
|
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Second Supplemental Indenture, dated May 24, 2024, by and between Carbon Revolution Operations and UMB Bank, National Association, as Trustee (incorporated by reference to Exhibit 99.3 of the Company’s
Form 6-K, furnished with the SEC on May 24, 2024).
|
|
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Third Supplemental Indenture, dated June 21, 2024, by and between Carbon Revolution Operations and UMB Bank, National Association, as Trustee (incorporated by reference to Exhibit 99.2 of the Company’s
Form 6-K, furnished with the SEC on June 24, 2024).
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|
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Fourth Supplemental Indenture, dated December 20, 2024, by and between Carbon Revolution Operations and UMB Bank, National Association, as Trustee (incorporated by reference to Exhibit 99.2 of the
Company’s Form 6-K, furnished with the SEC on December 23, 2024).
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Form of Series 2024-A Note (included as Exhibit A to the Second Supplemental Indenture) (incorporated by reference to Exhibit 99.3 of the Company’s Form 6-K, furnished with the SEC on May 24, 2024).
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Form of Last Out Note (included as Exhibit A to the Third Supplemental Indenture) (incorporated by reference to Exhibit 99.2 of the Company’s Form 6-K, furnished with the SEC on June 24, 2024).
|
||
|
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Form of Series 2025-A Note (included as Exhibit A to the Fourth Supplemental Indenture) (incorporated by reference to Exhibit 99.3 of the Company’s Form 6-K, furnished with the SEC on December 23,
2024).
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Certificate of Designation of Series B Preferred Shares of Carbon Revolution plc (incorporated by reference to Exhibit 99.2 of the Company’s Form 6-K, furnished with the SEC on April 11, 2024).
|
||
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Business Combination Agreement, dated as of November 29, 2022, by and among Twin Ridge Capital Acquisition Corp., Carbon Revolution Limited, Poppetell Limited and Poppettell Merger Sub (incorporated by
reference to Annex A to the Registration Statement on Form F-4 (333-270047)).
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Amendment to the Business Combination Agreement, dated as of October 5, 2023, by and among Twin Ridge Capital Acquisition Corp., Carbon Revolution Limited, Poppetell Limited and Poppettell Merger Sub
(incorporated by reference to Annex A to Supplement No. 2 to the proxy statement/prospectus dated September 8, 2023 filed on October 5, 2023)).
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Scheme Implementation Deed, dated as of November 30, 2022, by and among Carbon Revolution Limited, Twin Ridge Capital Acquisition Corp. and Poppetell Limited (incorporated by reference to Annex B to
the Registration Statement on Form F-4 (333-270047)).
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Scheme Implementation Amendment (incorporated by reference to Annex E to Supplement No. 1 to the proxy statement/prospectus dated September 8, 2023 filed on September 25, 2023)).
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Warrant Agreement, dated March 3, 2021, by and among Twin Ridge Capital Acquisition Corp. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.3
to the Registration Statement on Form F-4 (333-270047)).
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Assignment and Assumption Agreement between Twin Ridge Capital Acquisition Corp., Carbon Revolution Public Limited Company (formerly known as Poppetell Limited), Computershare Inc. and Computershare
Trust Company, N.A. (incorporated by reference to Exhibit 4.6 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Warrant Amendment Agreement between Twin Ridge Capital Acquisition Corp., Continental Stock Transfer & Trust Company, Computershare Inc. and Computershare Trust Company, N.A. (incorporated by
reference to Exhibit 4.7 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Letter Agreement, dated March 3, 2021, by and among Twin Ridge Capital Acquisition Corp., Barclays Capital Inc. and Evercore Group, LLC (incorporated by reference to Exhibit 10.4 of Twin Ridge Capital
Acquisition Corp.’s Form 8-K, filed with the SEC on March 9, 2021).
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Sponsor Side Letter, dated as of November 29, 2022, by and among Twin Ridge Capital Sponsor, LLC, Twin Ridge Capital Sponsor Subsidiary, LLC, the independent directors party thereto, the other insiders
party thereto, Twin Ridge Capital Acquisition Corp., Carbon Revolution Limited, and Poppetell Limited (included as Annex E to the Registration Statement on Form F-4 (333-270047)).
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Proceeds Disbursing and Security Agreement, dated May 23, 2023 by and among UMB Bank, N.A., as trustee and disbursing Agent, Newlight Capital LLC, as servicer, collateral agent and security trustee and
Carbon Revolution Operations PTY LTD (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form F-4 (333-270047)).
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Second Amendment to Proceeds Disbursing and Security Agreement, dated September 18, 2023, between UMB Bank, National Association, Newlight Capital LLC, Carbon Revolution Operations Pty Ltd, Carbon
Revolution Technology Pty Ltd and Carbon Revolution (incorporated by reference to Annex F to Supplement No. 1 to the proxy statement/prospectus dated September 8, 2023 filed on September 25, 2023).
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Third Amendment to Proceeds Disbursing and Security Agreement, dated October 18, 2023, between UMB Bank, National Association, Newlight Capital LLC, Carbon Revolution Operations Pty Ltd, Carbon
Revolution Technology Pty Ltd and Carbon Revolution (incorporated by reference to Exhibit 4.12 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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Fourth Amendment to Proceeds Disbursing and Security Agreement, dated March 4, 2024, between UMB Bank, National Association, Newlight Capital LLC, Carbon Revolution Operations Pty Ltd, Carbon Revolution
Technology Pty Ltd and Carbon Revolution (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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Fifth Amendment, dated May 24, 2024, to the Proceeds Disbursing and Security Agreement, dated May 23, 2023, by and among Carbon Revolution Operations, UMB Bank, National Association and the other parties
thereto (incorporated by reference to Exhibit 99.5 of the Company’s Form 6-K, furnished with the SEC on May 24, 2024).
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Sixth Amendment, dated June 21, 2024, to the Proceeds Disbursing and Security Agreement, dated May 23, 2023 (incorporated by reference to Exhibit 99.4 of the Company’s Form 6-K, furnished with the SEC on
June 24, 2024).
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Seventh Amendment, dated December 20, 2024, to the Proceeds Disbursing and Security Agreement, dated May 23, 2023 (incorporated by reference to Exhibit 99.4 of the Company’s Form 6-K, furnished with the
SEC on December 23, 2024).
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||
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Eighth Amendment, dated April 24, 2025, to the Proceeds Disbursing and Security Agreement, dated May 23, 2023 (incorporated by reference to Exhibit 4.17 of the Company’s Annual Report on Form 20-F filed
with the SEC on May 14, 2025).
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Equity Incentive Plan of the Company (incorporated by reference to Exhibit 4.11 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Service Agreement with Jacob Dingle, dated March 14, 2017 (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form F-4 (333-270047)).
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Service Agreement with Gerard Buckle, dated August 7, 2019 (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form F-4 (333-270047)).
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Form of Voluntary Escrow Deed (incorporated by reference to Annex H to the Registration Statement on Form F-4 (333-270047)).
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Securities Purchase Agreement, by and among the Company, Carbon Revolution Operations Pty Ltd and OIC Investors, dated September 21, 2023 (incorporated by reference to Annex B to Supplement No. 1 to the
proxy statement/prospectus dated September 8, 2023 filed on September 25, 2023)).
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Amendment No. 1, dated April 10, 2024, to the Securities Purchase Agreement, dated as of September 21, 2023, by and among the Company and the OIC Investors (incorporated by reference to Exhibit 99.1 of
the Company’s Form 6-K, furnished with the SEC on April 11, 2024).
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Amendment No. 2, dated May 24, 2024, to the Securities Purchase Agreement, dated as of September 21, 2023, by and among the Company and the OIC Investors (incorporated by reference to Exhibit 99.1 of the
Company’s Form 6-K, furnished with the SEC on May 24, 2024).
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Amendment No. 3, dated June 21, 2024, to the Securities Purchase Agreement, dated as of September 21, 2023, by and among the Company and the OIC Investors (incorporated by reference to Exhibit 99.1 of
the Company’s Form 6-K, furnished with the SEC on June 24, 2024).
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Amendment No. 4, dated December 20, 2024, to the Securities Purchase Agreement, dated as of September 21, 2023, by and among the Company and the OIC Investors (incorporated by reference to Exhibit 99.1 of the Company’s Form
6-K, furnished with the SEC on December 23, 2024).
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Amendment No. 5, dated April 24, 2025, to the Securities Purchase Agreement, dated as of September 21, 2023, by and among the Company and the OIC Investors (incorporated by reference to Exhibit 4.27 of the Company’s Annual
Report on Form 20-F filed with the SEC on May 14, 2025).
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Form of Company OIC Warrant to purchase Ordinary Shares (incorporated by reference to Annex C to Supplement No. 1 to the proxy statement/prospectus dated September 8, 2023 filed on September 25, 2023).
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Shareholder’s Agreement between the Company and OIC Investors, dated as of September 21, 2023 (incorporated by reference to Annex D to Supplement No. 1 to the proxy statement/prospectus dated September
8, 2023 filed on September 25, 2023).
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Form of Indemnification Agreement between Carbon Revolution Public Limited Company and each of its directors and officers (incorporated by reference to Exhibit 10.8 to the Registration Statement on Form
F-4 (333-270047)).
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Form of Lock Up Agreement (incorporated by reference to Exhibit 4.20 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Registration Rights Agreement, dated as of November 3, 2023, among the Company, Twin Ridge, DDGN Advisors LLC and the individuals listed on the signature pages thereto (incorporated by reference to
Exhibit 4.21 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Warrant dated November 3, 2023 (incorporated by reference to Exhibit 4.33 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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Amendment No. 1, dated April 10, 2024, to the Warrant dated November 3, 2023 (incorporated by reference to Exhibit 99.3 of the Company’s Form 6-K, furnished with the SEC on April 11, 2024).
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Amendment No. 2, dated June 21, 2024, to the Warrant dated November 3, 2023 (incorporated by reference to Exhibit 99.6 of the Company’s Form 6-K, furnished with the SEC on June 24, 2024).
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Warrant dated April 10, 2024 (incorporated by reference to Exhibit 99.4 of the Company’s Form 6-K, furnished with the SEC on April 11, 2024).
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Amendment No. 1, dated June 21, 2024, to the Warrant dated April 10, 2024 (incorporated by reference to Exhibit 99.7 of the Company’s Form 6-K, furnished with the SEC on June 24, 2024).
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Warrant dated May 24, 2024 (incorporated by reference to Exhibit 99.6 of the Company’s Form 6-K, furnished with the SEC on May 24, 2024).
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Amendment No. 1, dated June 21, 2024, to the Warrant dated May 24, 2024 (incorporated by reference to Exhibit 99.8 of the Company’s Form 6-K, furnished with the SEC on June 24, 2024).
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Form of Additional New Warrant (included as Exhibit A to Amendment No. 3 to the Securities Purchase Agreement) ) (incorporated by reference to Exhibit 99.1 of the Company’s Form 6-K, furnished with the
SEC on June 24, 2024).
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Registration Rights Agreement dated April 10, 2024 among the Company and the OIC Investors (incorporated by reference to Exhibit 99.5 of the Company’s Form 6-K, furnished with the SEC on April 11, 2024).
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List of Subsidiaries of the Company (incorporated by reference to Exhibit 8.1 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Insider Trading Policy (incorporated by reference to Exhibit 11.1 of the Company’s Form 20-F, filed with the SEC on November 13, 2023).
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Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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List of Relevant Territories for Irish Tax Purposes (incorporated by reference to Exhibit 15.1 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 of the Company’s Annual Report on Form 20-F filed with the SEC on May 14, 2025).
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† Filed herewith.
* Indicates a management contract or any compensatory plan, contract or arrangement.
# Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC.
+ Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish supplementally a copy of all omitted exhibits and
schedules to the SEC upon its request.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.
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Carbon Revolution Public Limited Company
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May 30, 2025
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By:
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/s/ Donald Hampton Jr
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Name:
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Donald Hampton Jr
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Title:
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Director and Authorized Signatory
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131
Exhibit 12.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Donald Hampton Jr, certify that:
1. I have reviewed this annual report on Form 20-F of Carbon Revolution Public Limited Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. [reserved];
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to
materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
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Date: May 30, 2025
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/s/ Donald Hampton Jr
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Name:
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Donald Hampton Jr
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Title:
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Chief Executive Officer
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Exhibit 12.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerard Buckle, certify that:
1. I have reviewed this annual report on Form 20-F of Carbon Revolution Public Limited Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
company as of, and for, the periods presented in this report;
4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. [reserved];
c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to
materially affect, the company’s internal control over financial reporting; and
5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board
of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process,
summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
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Date: May 30, 2025
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/s/ Gerard Buckle
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Name:
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Gerard Buckle
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Title:
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Chief Financial Officer
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Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is being submitted in connection with Carbon Revolution Public Limited Company’s annual report on Form 20-F for the year ended June 30, 2023 (the “Report”) for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
I, Donald Hampton Jr, the Chief Executive Officer of Carbon Revolution Public Limited Company, certify that:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Carbon Revolution Public Limited Company.
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Date: May 30, 2025
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/s/ Donald Hampton Jr
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Name:
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Donald Hampton Jr
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Title:
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Chief Executive Officer
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Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The certification set forth below is being submitted in connection with Carbon Revolution Public Limited Company’s annual report on Form 20-F for the year ended June 30, 2023 (the “Report”) for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
I, Gerard Buckle, the Chief Financial Officer of Carbon Revolution Public Limited Company, certify that:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Carbon Revolution Public Limited Company
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Date: May 30, 2025
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/s/ Gerard Buckle
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Name:
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Gerard Buckle
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Title:
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Chief Financial Officer
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