Cenntro Electric Group Limited (CENN) Financial Report Summaries

Risks

• We have a limited operating history and face significant challenges in an emerging industry.
• We have historically incurred losses from our operations and may not be profitable in the future.
• Our ability to develop and manufacture ECVs of sufficient quality, on schedule and on a large scale is still evolving.
• Our future success depends on our ability to continue to introduce new models and we may experience delays in launching and ramping up production of our new ECV models.
• Our operating results may be more volatile due to a shift from only a high concentration of sales in relatively few channel partners to establishing our own distribution network.
• Our reliance on our new hybrid distribution model to market, sell and service (and in certain cases, assemble and/or homologate) our vehicles is subject to substantial risks because we do not maintain control over certain of our remaining channel partners and our newly established EV Center dealerships are relatively new.
• Our EV Center dealers and channel partners may reduce or cancel their orders at any time, which could adversely affect our business.
• Our EV Center dealers and channel partner network may not grow or develop as we currently expect, in current markets in which we sell ECVs or penetrate new markets, our revenue and financial condition would be adversely affected.
• We do not provide charging solutions for our channel partners or their customers.
• The battery capacity of our ECVs will decline over time, which may negatively influence purchasing decisions by our channel partners and end-users.
• Our business is subject to the risk of disruption in our supply chain.
• We are dependent on our suppliers, certain of which are single-source suppliers, and the inability of these suppliers to continue to deliver, or their refusal to deliver, necessary components of our ECVs at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.
• Changes in international trade policies, tariffs and rising political tensions, particularly between the U.S. and China, may adversely impact our business and operating results.
• We rely on third parties to manufacture substantially all of our components and vehicle kits for each of our new series of ECV models. Our qualified suppliers and manufacturing partners may fail to deliver components and vehicle kits, respectively, according to schedules, prices, quality and volumes that are acceptable to us.
• If our suppliers, channel partners or manufacturing partners fail to use ethical business practices and comply with applicable laws and regulations, our brand image and business could be harmed due to negative publicity.
• We heavily rely on our third-party logistics service providers for international shipping of our products, and if disruptions in our transportation network continue to occur or our shipping costs continue to increase, we may be unable to sell or timely deliver our products, and our gross margin could decrease.
• The commercial viability of our Cenntro iChassis relies on third-party hardware and software that may not be available, which could render our product less marketable and negatively impact our business, prospects and operating results.
• Our business depends substantially on the continuing efforts of our executive officers, and our business may be severely disrupted if we lose their services.
• Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events.
• Global economic conditions could materially and adversely affect our business, financial condition, operating results and prospects.
• Our financial results may vary significantly from period-to-period due to the seasonality of our business and fluctuations in our operating costs.
• Our distributed manufacturing methodology and channel partner network model is different from the predominant current distribution model for automotive manufacturers, which makes evaluating our business, financial condition, operating results and prospects difficult.
• Our business plans require will additional capital in the future, which may not be available to us on acceptable terms or at all.
• As we shift component and vehicle kit manufacturing to qualified suppliers and manufacturing partners, we may have to shorten the useful lives of any equipment to be retired as a result, and the resulting acceleration in our depreciation could adversely affect our financial results
• We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
• Our ECVs use lithium-ion battery cells, which have the potential to catch fire or vent smoke and flame and may lead to additional concerns about batteries used in automotive applications.
• We have identified a material weakness in our internal control over financial reporting that could materially harm our company. If we fail to remediate the material weakness, or if we experience material weaknesses in the future, we may not be able to accurately and timely report our financial condition or results of operations, which may adversely affect investor confidence in us.
• The unavailability or reduction of government and economic incentives or the elimination of regulatory policies which are favorable for ECVs could materially and adversely affect our business, financial condition, operating results and prospects.
• Our future growth is dependent upon end-users’ willingness to adopt ECVs.
• Continued elevated levels of inflation could adversely impact our business and results of operations.
• We could experience cost increases or disruptions in the supply of raw materials or components used in our vehicles, and a shortage of key components, such as semiconductors, can disrupt our production of ECVs.
• Increases in the cost, disruptions of supply or shortages of lithium-ion batteries could harm our business.
• Developments in alternative technologies or improvements in the internal combustion engine may materially and adversely affect the demand for our ECVs.
• The automotive market is highly competitive, and we may not be successful in competing in this industry.
• If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.
• Our business is subject to substantial regulations, which are evolving, and unfavorable changes or the failure by us or our channel partners to comply with these regulations could materially and adversely affect our business, financial condition, operating results and prospects.
• Our ECVs may be subject to product liability claims or recalls which could cause us to incur expenses, damage our reputation or result in a diversion of management resources.
• We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and could cause us to incur substantial costs.
• Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.
• We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition, prospects and reputation.
• We seek to continuously expand and improve our information technology systems and use security measures designed to protect our systems against breaches and cyber-attacks. If these efforts are not successful, our business and operations could be disrupted, and our operating results and reputation could be harmed.
• Data collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.
• Any unauthorized control or manipulation of our ECV’s information technology systems could result in loss of confidence in us and our ECVs and harm our business.
• Breaches in data security, failure of information security systems, cyber-attacks or other security or privacy-related incidents affecting us or our suppliers could have a material adverse effect on our reputation and brand, harm our business, prospects, financial condition, results of operations, and cash flows, and subject us to legal or regulatory fines or damages.
• Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, results of operations, financial condition and prospects.
• The PRC government may intervene or otherwise adversely affect our operations at any time, or may exert more control over foreign investment in issuers with operations in China, which could materially affect our operations.
• Uncertainties with respect to the Chinese legal system could materially and adversely affect us and may restrict the level of legal protections to foreign investors.
• We currently conduct a significant amount of our operations through our subsidiaries established in China. Adverse regulatory developments in China may subject us to additional regulatory review or regulatory approval, and additional disclosure requirements. Also, regulatory scrutiny in response to recent tensions between the United States and China may impose additional compliance requirements for companies like ours with significant China-based operations. These developments could increase our compliance costs or subject us to additional disclosure requirements.
• Increases in labor costs and enforcement of stricter labor laws and regulations in China may adversely affect our business and our profitability.
• Fluctuations in the value of the RMB and restrictions on currency exchange may adversely affect our business.
• We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.
• Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results.
• It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
• PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
• PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.
• Any failure to comply with PRC regulations regarding the registration requirements for employee share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
• You may experience difficulties in enforcing foreign judgments or bringing actions in China against us based on foreign laws.
• Risks Related to Our Common Stock
• Our Common Stock price may be volatile, and the value of our Common Stock may decline.
• Concentration of ownership among our executive officers, directors and their affiliates, may prevent new investors from influencing significant corporate decisions.
• Future sales of our Common Stock by us in the public market could cause the market price of our Common Stock to decline. The issuance of additional Common Stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other shareholders.
• If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our Common Stock could decline.
• We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Stock.
• There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market. Our failure to meet the continued listing requirements could result in a de-listing of our Common Stock.
• We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.
• The Nevada Revised Statutes contain anti-takeover provisions, which may discourage a third-party from acquiring us and adversely affect the rights of holders of our Common Stock.