Exhibit 99.1
CHIJET MOTOR COMPANY, INC. AND ITS SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
UNAUDITED
IN U.S. DOLLARS
INDEX
| F-1 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of US$, except for number of shares and per share data)
| Note | June 30, 2024 | December 31, 2023 | ||||||||
| Unaudited | ||||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 2(f) | $ | $ | |||||||
| Restricted cash | 2(g) | |||||||||
| Accounts and notes receivable, net | 2(h), 5 | |||||||||
| Accounts and notes receivable from related parties, net | 2(h), 22 (b)(i) | |||||||||
| Inventory, net | 2(i), 6 | |||||||||
| Amounts due from related parties | 2(h), 22 (b)(i) | |||||||||
| Other current assets | 2(h), 7 | |||||||||
| Other current assets from related parties | 22 (b)(i) | |||||||||
| Total current assets | ||||||||||
| Property, plant and equipment, net | 2(j), 8 | |||||||||
| Intangible assets, net | 2(k), 9 | |||||||||
| Land use rights, net | 2(l), 10 | |||||||||
| Long-term investments | 2(m) | |||||||||
| Goodwill | 2(n), 12 | |||||||||
| Other assets | 13 | |||||||||
| Total assets | $ | $ | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||
| Current liabilities | ||||||||||
| Accounts and notes payable | 14 | $ | $ | |||||||
| Accounts and notes payable to related parties | 22 (b)(i) | |||||||||
| Loans attributable to related parties | 22 (b)(i), 22(c) | |||||||||
| Contract liabilities | 2(q), 15 | |||||||||
| Contract liabilities to related parties | 22 (b)(i) | |||||||||
| Long-term payables, current | 17 | |||||||||
| Promissory note payable | 18 | |||||||||
| Accruals and other current liabilities | 16 | |||||||||
| Accruals and other current liabilities, related parties | 22 (b)(i) | |||||||||
| Total current liabilities | ||||||||||
| Accrued post-employment and termination benefits | 19 | |||||||||
| Loans attributable to related parties, non-current | 22(b)(i), 22(c) | |||||||||
| Other liabilities | ||||||||||
| Total liabilities | ||||||||||
| Commitments and contingencies | 23 | |||||||||
| Shareholders’ Deficit | ||||||||||
| Ordinary shares (US$ par value; shares authorized, both shares issued, both shares outstanding as of June 30, 2024 and December 31, 2023) (i) | 20 | |||||||||
| Treasury Stock (Both ordinary shares as of June 30, 2024 and December 31, 2023) (i) | 20(b) | ( | ) | ( | ) | |||||
| Additional paid-in capital | ||||||||||
| Statutory reserve | 20(c) | |||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive loss | ||||||||||
| Chijet Motor Company, Inc. shareholders’ deficit | ( | ) | ( | ) | ||||||
| Non-controlling interest | ||||||||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||||
| (i) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-2 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)
(Amounts in thousands of US$, except for number of shares and per share data)
| For the six months ended | For the six months ended | |||||||||
| Note | June 30, 2024 | June 30, 2023 | ||||||||
| Revenues | 2(q) | $ | $ | |||||||
| Revenues from related parties | 2(q), 22(b)(ii) | |||||||||
| Total revenues | ||||||||||
| Cost of revenues | 2(r) | ( | ) | ( | ) | |||||
| Cost of revenues - idle capacity | 2(s) | ( | ) | ( | ) | |||||
| Gross loss | ( | ) | ( | ) | ||||||
| Operating expenses: | ||||||||||
| Research and development | 2(t) | |||||||||
| Selling, general and administrative | 2(u) | |||||||||
| Total operating expenses | ||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| Other (expenses) income: | ||||||||||
| Other income | ||||||||||
| Interest income | ||||||||||
| Interest expense | ( | ) | ( | ) | ||||||
| Government grant | 2(w) | |||||||||
| Loss on equity investment | ( | ) | ( | ) | ||||||
| Other expenses | ( | ) | ( | ) | ||||||
| Total other expenses, net | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ||||||
| Provision for income tax | 21 | |||||||||
| Net loss | ( | ) | ( | ) | ||||||
| Net loss attributed to non-controlling interest | ( | ) | ( | ) | ||||||
| Net loss attributed to ordinary shareholders of Chijet Motor Company, Inc. | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per share attributable to ordinary shareholders (i)(ii) | ) | ) | ||||||||
| Basic and diluted weighted average ordinary shares (i)(ii) | ||||||||||
| (i) | ||
| (ii) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-3 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(Amounts in thousands of US$, except for number of shares and per share data)
For
the six months | For the six months ended | |||||||||
| Note | June 30, 2024 | June 30, 2023 | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income, net of tax | ||||||||||
| Changes in post-employment and termination benefits | 19 | ( | ) | ( | ) | |||||
| Foreign currency adjustments | 2(d) | |||||||||
| Comprehensive loss | ( | ) | ( | ) | ||||||
| Comprehensive loss attributed to non-controlling interest | ( | ) | ( | ) | ||||||
| Comprehensive loss attributable to ordinary shareholders of Chijet Motor Company, Inc. | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-4 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
(Amounts in thousands of US$, except for number of shares and per share data)
| Ordinary Share (i) | Common Stock in Treasury(i) | Additional Paid-in | Statutory | Accumulated | Accumulated Comprehensive | Non- Controlling | Total Shareholders’ | |||||||||||||||||||||||||||||||||||
| Note | Shares | Amount | Shares | Amount | Capital (i) | Reserve | Deficit | Income(Loss) | Interest | Equity(Deficit) | ||||||||||||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Impact from adoption of ASU 2016-13 | 2(h) | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Effect of reverse recapitalization, net of costs | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of rights to ordinary shares upon the reverse recapitalization | * | - | ||||||||||||||||||||||||||||||||||||||||
| Treasury Stock purchase | 20(b) | - | ( | ) | $ | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued to JWAC officers and directors(ii) | * | - | ||||||||||||||||||||||||||||||||||||||||
| Shares issued to Greentree (iii) | * | - | ||||||||||||||||||||||||||||||||||||||||
| Shares issued to Chijet Motor directors (iv) | * | - | ||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants(ii) | * | - | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 2(d) | - | - | |||||||||||||||||||||||||||||||||||||||
| Changes in post-employment and termination benefits | 19 | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | 2(d) | - | - | |||||||||||||||||||||||||||||||||||||||
| Changes in post-employment and termination benefits | 19 | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||||||||||
| * |
| (i) | |
| (ii) | |
| (iii) | |
| (iv) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-5 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UAUDITED)
(Amounts in thousands of US$, except for number of shares and per share data)
| For the six months ended | For the six months ended | |||||||||
| Note | June 30, 2024 | June 30, 2023 | ||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||
| Depreciation and amortization expense | 8,9,10 | |||||||||
| Share-based compensation expenses | ||||||||||
| Impairment of inventory | 2(i), 6 | |||||||||
| Bad debt expense | ( | ) | ||||||||
| Government grants | 2(w) | ( | ) | ( | ) | |||||
| Gain on disposal of property, plant and equipment | 2(j) | ( | ) | ( | ) | |||||
| Loss on equity investment | ||||||||||
| Interest expenses | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts and notes receivable | ||||||||||
| Accounts and notes receivable from related parties | ( | ) | ( | ) | ||||||
| Inventory | ( | ) | ||||||||
| Amounts due from related party | ||||||||||
| Other current assets | ( | ) | ||||||||
| Other current assets from related parties | ( | ) | ||||||||
| Other assets | ( | ) | ||||||||
| Accounts and notes payable | ( | ) | ||||||||
| Accounts and notes payable to related party | ( | ) | ( | ) | ||||||
| Accrual and other current liabilities | ( | ) | ||||||||
| Accruals and other current liabilities to related parties | ||||||||||
| Contract liabilities | ||||||||||
| Contract liabilities to related parties | ( | ) | ||||||||
| Accrued post-employment and termination benefits | ( | ) | ( | ) | ||||||
| Other liabilities | ( | ) | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||||
| Issuance of promissory notes | ( | ) | ||||||||
| Purchase of intangible assets | ||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Proceeds from short-term borrowings | ||||||||||
| Proceeds from short-term borrowings-related parties | ||||||||||
| Proceeds from exercise of warrants | ||||||||||
| Repayments of short-term borrowings | ( | ) | ||||||||
| Repayments of short-term borrowings-related parties | ( | ) | ( | ) | ||||||
| Cash acquired in the reverse recapitalization | ||||||||||
| Payments for reverse recapitalization and ordinary shares issuance costs | ( | ) | ||||||||
| Net cash provided by financing activities | ||||||||||
| Net change in cash, cash equivalents, and restricted cash | ( | ) | ( | ) | ||||||
| Effects of currency translation on cash, cash equivalents, and restricted cash | ( | ) | ||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | ||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | ||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||
| Cash paid for interest | $ | $ | ||||||||
| Non-cash investing and financing activities: | ||||||||||
| Unpaid deferred offering costs related to reverse recapitalization | $ | $ | ||||||||
| Deferred offering costs settled with ordinary shares | 1(c) | |||||||||
| Deferred offering costs reclassified to additional paid-in capital | 1(c) | $ | $ | |||||||
| Repurchase of treasury stock | 20(b) | $ | $ | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| F-6 |
CHIJET MOTOR COMPANY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
(a) Principal activities
Chijet Motor Company, Inc. (“Chijet Motor”) was incorporated on June 22, 2022 as a Cayman Islands exempted company. Chijet Motor, collectively with its subsidiaries (“the Company”, “Chijet”, “we”, “us” or “our”) is a high-tech enterprise, engaged in the development, manufacture, sales, and service of new energy vehicles (“NEV”) and traditional fuel vehicles in China. The main operating entities of the Company include Shandong Baoya New Energy Vehicle Co., Ltd. (“Shandong Baoya”) and its majority-owned holding subsidiary, FAW Jilin Automobile Co., Ltd. (“FAW Jilin”). The Company combines the innovative vitality of new car-making design and engineering forces with mature scale vehicle production capacity and is committed to building Chijet into a scenario-driven, technology-led and, experience-based, new energy vehicle enterprise with global market operation capability.
(b) Reverse Stock Split
On
June 28, 2024, the Company announced a
Unless
otherwise indicated, all share and share-related information presented in these financial statements, including all ordinary shares,
treasury stock, warrants, per share data and share prices set forth in consolidated financial statements and notes, have been retroactively
equitably adjusted to reflect the decreased number of shares and the increased price per share resulting from the Reverse Stock Split.
For simplified understanding, the share-related information in the previous period or comparable period is simply converted according
to the
(c) Reverse Recapitalization
On June 1, 2023 (the “Closing Date”), the Company consummated the business combination described further below. A Business Combination Agreement (“BCA”) dated as of October 25, 2022, was entered into by and among Jupiter Wellness Acquisition Corp. (“JWAC”), a special purpose acquisition company, Chijet Inc., incorporated under the Combination laws of the Cayman Islands on July 2, 2021, Chijet Motor, a wholly-owned subsidiary of Chijet Inc., and Chijet Motor (USA) Company, Inc. (“Merger Sub”), a Delaware corporation and a wholly-owned subsidiary of Chijet Motor, and each of the holders of Chijet Inc.’s outstanding ordinary shares (collectively, the “Sellers”).
Pursuant to the BCA, the business combination was affected through the merger of the Merger Sub with and into JWAC, with JWAC as the surviving entity and wholly-owned subsidiary of Chijet Motor. On the Closing Date, Chijet Motor acquired all of the issued and outstanding capital shares of Chijet Inc. held by the Sellers in exchange for ordinary shares of Chijet Motor, and any shares Chijet Inc. held in Chijet Motor were surrendered for no consideration, such that Chijet Inc. becomes a wholly-owned subsidiary of Chijet Motor and the Sellers became shareholders of Chijet Motor and its subsidiaries (“Share Exchange”).
| F-7 |
On
the Closing Date, the Sellers holding ordinary shares of Chijet Inc. received of ordinary shares after giving effect
to the exchange ratio of
Following completion of the transactions contemplated by the BCA, there were an aggregate of ordinary shares issued and outstanding which include those shares issued to the Sellers, shares issued to JWAC’s public shareholders with one contingent value right (a “CVR”) of the Company for each share outstanding, shares issued to JWAC’s Class B Common Stock holders, shares issued to holders with JWAC’s right to receive (1/8) of ordinary shares, shares issued to
After giving the aforementioned effect, the number of ordinary shares issued and outstanding immediately following the consummation of the Business Combination was as follows:
| Shares | ||||
| Legacy Chijet Shares | ||||
| JWAC’s public shares, net of redemption | ||||
| JWAC public shares converted from (1/8) JWAC rights at closing | ||||
| JWAC sponsor shares | ||||
| Shares issued to private placed shareholders and rights, and share-based compensation | ||||
| Exercise of Greentree warrants | ||||
| Total shares of ordinary shares outstanding immediately after the Business Combination | ||||
The Business Combination was accounted for as a “reverse recapitalization” in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Under this method of accounting, although JWAC is the public entity as the legal acquirer, it was treated as the “accounting acquiree”. And Chijet Motor as the legal acquiree, was treated as the acquirer for financial reporting purposes. This determination was primarily based on the following factors: (i) Chijet Motor’s shareholders have a majority of the voting power of the Company after the consummation of the Business Combination; (ii) Chijet Motor and its subsidiaries represent the ongoing operations and a majority of the governing body of the Company, and (iii) Chijet Motor’s senior management is comprised of the senior management of the Company. Accordingly, for accounting purposes, the business combination was treated as the equivalent of Chijet Motor issuing stock for the net assets of JWAC, accompanied by a recapitalization. The net assets of JWAC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of Chijet Motor and its subsidiaries. Accordingly, the consolidated assets, liabilities and results of operations prior to the reverse recapitalization were those of Chijet Motor and its subsidiaries, and JWAC’s assets, liabilities and results of operations were consolidated with the Company beginning on June 1, 2023. Share data have been retroactively restated by the Exchange Ratio to give effect to the reverse recapitalization.
| F-8 |
Upon
the consummation of the reverse recapitalization, the assets and liabilities of JWAC were recognized at fair value. The fair value of
cash and short-term liabilities acquired approximates their historical costs attributable to their short maturity. After the redemption
of common stocks of JWAC before the closing of the business combination, the net assets acquired by the Company were in the amount of
US$
| June 1, 2023 | ||||
| US$’000 | ||||
| Cash | $ | |||
| Including repayment of extension note to Chijet Inc. | ( | ) | ||
| Accrued expenses | ( | ) | ||
| Bank charges | ( | ) | ||
| Net assets acquired by Chijet Motor as of June 1, 2023 | $ | |||
During
the year ended December 31, 2023, the Company incurred approximately US$
(d) History of the Company and Reorganization
Prior to the incorporation of the Company and starting in April 2009, the business was carried out under Shandong Baoya and its subsidiaries. Shandong Baoya and its subsidiaries were controlled by a group of shareholders, individual and institutional, with voting agreements to vote consensually concerning operation and development matters.
Prior to the business combination, Chijet Inc. completed a reorganization (the “Reorganization”) by June 2022, which involved the following steps:
| ● | On July 6, 2021, Chijet Inc. was established under the laws of the Cayman Islands. | |
| ● | On July 12, 2021, Baoya Technology Holdings Limited was incorporated in British Virgin Islands (“BVI”) as a wholly owned subsidiary of Chijet Inc. | |
| ● | On July 28, 2021, Baoyaev Group Limited was incorporated in Hong Kong as a wholly owned subsidiary of Baoya Technology Holdings Limited. | |
| ● | On October 21, 2021, Baoya New Energy (Shandong) Co., Ltd. (“WFOE”) was established in the People’s Republic of China (“PRC”) as a wholly owned subsidiary of Baoyaev Group Limited. |
| F-9 |
By
June 3, 2022, Chijet Inc. gradually acquired
Given no change in control, the transaction is accounted for as business combination under common control.
As of June 30, 2024, the subsidiaries of Chijet Motor were:
| Date of incorporation | Place of incorporation | Percentage of ownership | Principal activities | |||||||
| Subsidiaries | ||||||||||
| Baoya New Energy (Shandong) Co., Ltd | % | |||||||||
| Baoya New Energy Automobile Sale (Yantai) Co., Ltd. | % | |||||||||
| Baoya New Energy Automobile R&D (Xiangyang) Co., Ltd. | % | |||||||||
| Baoya New Energy Automobile R&D Institution (Yantai) Co., Ltd. | % | |||||||||
| Baoya Technology Holdings Limited | % | |||||||||
| Baoyaev Group Limited | % | |||||||||
| Bijie Yabei New Energy Automobile Co., Ltd. | % | |||||||||
| Chijet, Inc. | % | |||||||||
| Dezhou Yarui New Energy Automobile Co., Ltd. | % | |||||||||
| Dezhou Yitu New Energy Automobile Co., Ltd. | % | |||||||||
| Faw Jilin Automobile Co., Ltd. | % | |||||||||
| Faw Jilin Automobile Sale Co., Ltd. | % | |||||||||
| Jupiter Wellness Acquisition Corp. | % | |||||||||
| Shandong Baoya New Energy Vehicle Co., Ltd | % | |||||||||
| Xiangyang Yazhi New Energy Automobile Co., Ltd. | % | |||||||||
| Xiangyang Yazhi New Energy Automobile Sale Co., Ltd. | % | |||||||||
| F-10 |
(e) Liquidity and going concern
The
Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred net losses of US$
The Company is evaluating strategies to continue as a going concern including a) developing and continuously promoting a systematic financing plan including third-party financings and capital issuances, and the restructuring of existing loans to meet the Company’s future liquidity needs; b) increasing market acceptance of the Company’s products to boost its sales volume to achieve economies of scale; c) applying more effective marketing strategies including developing overseas markets; and d) implementing cost control measures. However, given the uncertainty of global economies and financing markets, the Company may be unable to access further equity or debt financing when needed. As such, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
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 the Company were unable to continue as a going concern.
| F-11 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP to reflect the financial position and results of operations of the Company.
Significant accounting policies followed by the Company in the preparation of its accompanying consolidated financial statements are summarized below.
Emerging Growth Company Status
The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
(b) Principles of consolidation
The accompanying consolidated financial statements include the financial statements of Chijet Motor and its subsidiaries. A subsidiary is an entity in which Chijet Motor, directly or indirectly, controls more than one half of the voting power (a) to appoint or remove the majority of the members of the board of directors (the “Board”), (b) to cast majority of votes at the meeting of the Board or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All inter-company transactions and balances between Chijet Motor and its subsidiaries have been eliminated in consolidation.
| F-12 |
(c) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s consolidated financial statements primarily include, but are not limited to, the fair value of the net assets of acquired subsidiaries, the determination of performance obligations, the determination of warranty cost, lower of cost and net realizable value of inventory, assessment for impairment of long-lived assets and intangible assets, recoverability of receivables as well as valuation of deferred tax assets, and other contingencies.
Management bases the estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
(d) Functional currency and foreign currency translation
The Company’s reporting currency is the United States dollars (“US$”). The functional currency of the Company and its subsidiaries which is incorporated in places other than Chinese Mainland is United States dollars. The functional currencies of the other subsidiaries are their respective local currencies (“RMB”, RMB are to the legal currency of China). The determination of the functional currency is based on the criteria set out by Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters.
Transactions denominated in foreign currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are measured using the exchange rates at the dates of the initial transactions. Exchange gains or losses arising from foreign currency transactions are included in the consolidated statements of comprehensive loss.
The financial statements of Chijet’s subsidiaries whose functional currency is not the US$ are translated from their respective functional currency into US$. Assets and liabilities denominated in foreign currencies are translated into US$ at the exchange rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into US$ at the appropriate historical rates. Income and expense items are translated into US$ using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in other comprehensive income or loss in the consolidated statements of comprehensive loss, and the accumulated currency translation adjustments are presented as a component of accumulated other comprehensive income or loss in the consolidated statements of changes in shareholders’ deficit.
(e) Fair value of financial instruments
Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
| F-13 |
The Company applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:
Level I — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.
Level II — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level II valuation techniques.
Level III — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.
Financial assets and liabilities of the Company primarily consist of cash and cash equivalents, restricted cash, accounts and notes receivable, amounts due from related parties, accounts and notes payable, loans attributable to related parties, promissory note payable, accruals and other current liabilities, long-term payables. As of June 30, 2024 and December 31, 2023, the carrying values of these financial instruments approximated their respective fair values.
(f) Cash and cash equivalents
Cash and cash equivalents primarily consist of cash and demand deposits which are highly liquid. The Company considers highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase of three months or less to be cash equivalents. All cash and cash equivalents are unrestricted as to withdrawal and use.
(g) Restricted cash
Restricted
cash represents (a) the cash frozen relating to a court order; (b) the deposits held in designated bank accounts as security for the
repayment of notes payable. The restricted cash attributable to the court order primarily resulted a contract dispute. As of June 30,
2024 and December 31, 2023, the restricted cash amounted to approximate US$
| F-14 |
The restricted cash is presented separately on the consolidated balance sheets as follows:
June 30, 2024 | December 31, 2023 | |||||||
US$’000 (Unaudited) | US$’000 | |||||||
| Frozen amount | ||||||||
| Security amount | ||||||||
| Total restricted cash | ||||||||
(h) Current expected credit losses
On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), using the modified retrospective transition method.
The Company’s accounts and notes receivable, amounts due from related parties and other current assets are within the scope of ASC Topic 326. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns.
The Company estimates allowance for credit losses for the anticipation of future economic condition and credit risk indicators of customers. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.
The cumulative effect from the adoption as of January 1, 2023 was immaterial to the consolidated financial statements.
The following table summarizes the activity in the allowance for expected credit loss for the six months ended June 30, 2024 and 2023, respectively.
| For the six months ended | ||||
| June 30, 2024 | ||||
| US$’000 | ||||
| (Unaudited) | ||||
| Balance as of January 1, 2024 | ||||
| Current period provision | ||||
| Reversal | ( | ) | ||
| Write-offs | ||||
| Balance as of June 30, 2024 | ||||
| F-15 |
| For the six months ended | ||||
| June 30, 2023 | ||||
| US$’000 | ||||
| (Unaudited) | ||||
| Balance as of December 31, 2022 | ||||
| Adoption of ASC Topic 326 | ||||
| Balance as of January 1, 2023 | ||||
| Current period provision | ||||
| Write-offs | ||||
| Balance as of June 30, 2023 | ||||
(i) Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is calculated on the weighted average basis and includes all costs to acquire and other costs to bring the inventories to their present location and condition. The Company records inventory write-downs for excess or obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of future demand forecast, the excess amounts are written off. The Company also reviews inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of the vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
(j) Property, plant and equipment, net
Property,
plant and equipment are stated at cost less accumulated depreciation and impairment loss, if any. Property, plant and equipment are depreciated
primarily using the straight-line method over the estimated useful life of the asset. Salvage value rate range from
| Estimated
useful lives | ||
| Buildings | ||
| Machinery and equipment | ||
| Vehicles | ||
| Computer and electronic equipment | ||
| Mold and tooling |
The cost of maintenance and repairs is expensed as incurred, whereas the cost of renewals and betterment that extends the useful lives of property, plant and equipment is capitalized as additions to the related assets.
Construction in progress represents property, plant and equipment under construction and pending installation and is stated at cost less accumulated impairment losses, if any. Completed assets are transferred to their respective asset classes and depreciation begins when an asset is ready for its intended use. Interest expense on outstanding debt is capitalized during the period of significant capital asset construction. Capitalized interest expense on construction-in-progress is included within property, plant and equipment and is amortized over the life of the related assets.
| F-16 |
The
gain or loss on the disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount
of the relevant assets and is recognized in the consolidated statement of comprehensive loss. The gain on the disposal of property was
approximate US$
(k) Intangible assets, net
Intangible assets mainly consist of computer software, patent, trademark and manufacturing license. Intangible assets with finite lives are carried at acquisition cost less accumulated amortization and impairment, if any. Finite lived intangible assets are tested for impairment if impairment indicators arise.
Amortization of intangible assets with finite lives are computed using the straight-line method over the estimated useful lives as below:
| Estimated
useful lives | ||
| Patent | ||
| Computer software |
The estimated useful lives of intangible assets with finite lives are reassessed if circumstances occur that indicate the original estimated useful lives have changed.
Intangible
assets that have indefinite useful life are automotive manufacturing permission and trademark as of June 30, 2024 and December 31, 2023.
The Company evaluates indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue
to support indefinite useful lives. The value of indefinite-lived intangible assets is not amortized, but tested for impairment annually
or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. As such,
(l) Land use rights, net
Land use rights represent lease prepayments to local government authorities. Upon the adoption of ASC 842, Leases, on January 1, 2022, land use rights, net were identified as operating lease right-of-use assets, which is separately disclosed as “Land use rights” in the Company’s consolidated balance sheets. Land use rights are recorded at cost less accumulated amortization, amortization has been provided on a straight-line basis over 50 years and 40 years, the life of the land use right.
(m) Long-term investments
Long-term
investments consist of an investment in Jilin FAW Baosteel Auto Steel Parts Co., Ltd. (“Baosteel”) amounting to approximate
US$
| F-17 |
The Company uses the equity method of accounting for its investment in, and earning or loss of, the companies that it does not control but over which it has ability to exercise significant influence in accordance with ASC topic 323, Investment—Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Company initially records its investment at cost and is included in the long-term investments on the consolidated balance sheets. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into earnings after the date of investment. If an equity investment no longer qualifies to be accounted for under the equity method, the investment’s initial basis for which subsequent changes in value are measured should be the previous carrying amount of the investment.
The Company periodically reviews its equity investments for impairment. Under the equity method of accounting, an impairment loss would be recorded whenever the fair value of an equity investment is determined to be below its carrying value. The Company considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable. An impairment charge would be recorded when the decline in value is determined to be other-than-temporary. There was no impairment loss of long-term investments during the six months ended June 30, 2024 and 2023.
(n) Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognized for non-controlling interests and any fair value of the Company’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognized in profit or loss as a gain on bargain purchase.
The Company adopted Accounting Standards Update (“ASU”) 2017-04, Intangible – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. After adopting this guidance, the Company performs the quantitative impairment test by comparing the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized as impairment. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, allocation of assets, liabilities and goodwill to reporting units, and determination of the fair value of each reporting unit.
(o) Impairment of long-lived assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will affect the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company first determines the unit of account for testing the long-lived assets, and then identifies the indicators of impairment. When indicators of impairment at present, the Company must then proceed to the recoverability test. The recoverability test evaluates the impairment by comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. Fair value is determined using anticipated cash flows discounted at a rate commensurate with the risk involved.
| F-18 |
(p) Warranties
The Company provides a manufacturer’s standard warranty on all vehicles sold. The Company accrues a warranty reserve for the vehicles sold by the Company, which includes the Company’s best estimate of the projected costs to repair or replace items under warranties and recalls when identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. Changes to the Company’s historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within accruals and other liabilities, while the remaining balance is included within other non-current liabilities on the consolidated balance sheets. Warranty expense is recorded as a component of cost of sales in the consolidated statements of operations. The Company reevaluates the adequacy of the warranty accrual on a regular basis.
The Company considers the standard warranty is not providing incremental service to customers rather an assurance to the quality of the vehicle, and therefore is not a separate performance obligation and should be accounted for in accordance with ASC 460, Guarantees.
Accrued warranty is included in other liabilities and the movement of accrued warranty is as following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Audited) | |||||||
| Accrued warranty - beginning of period/year | ||||||||
| Warranty costs incurred | ( | ) | ||||||
| Provision for warranty | ||||||||
| Translation adjustment | ( | ) | ( | ) | ||||
| Accrued warranty - end of period/year | ||||||||
(q) Revenue recognition
Revenue is recognized when or as the control of the goods or services is transferred upon delivery to customers. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if our performance:
| ● | provides all of the benefits received and consumed simultaneously by the customer; | |
| ● | creates and enhances an asset that the customer controls as the Company performs; or | |
| ● | does not create an asset with an alternative use to the Company and the Company have an enforceable right to payment for performance completed to date. |
If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of the performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of goods and services.
| F-19 |
Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates overall contract price to each distinct performance obligation based on its relative standalone selling price in accordance with ASC 606, Revenue from Contracts with Customers. The Company generally determines standalone selling prices for each individual distinct performance obligation identified based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment approach, depending on the availability of observable information, the data utilized, and considering the pricing policies and practices in making pricing decisions. Assumptions and estimations have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may affect the revenue recognition. The discount provided in the contract is allocated by the Company to all performance obligations as conditions under ASC 606-10-32-37 are not met.
For new Master Service Agreements (“MSA”) or for Purchase Orders (“PO”) from new customers, a credit check is required, which establishes collectability of the considerations to which the Company expects to be entitled. Management also has controls in place for the review of credit limits with existing customers. Other considerations in determining collectability include the customer’s payment history, prior or existing customer disputes, if any, and market conditions.
When either party to a contract has performed, the Company presents the contract in the consolidated balance sheets as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment.
A receivable is recorded when the Company has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due.
If a customer pays consideration or the Company has a right to an amount of consideration that is unconditional, before the Company transfers a good or service to the customer, the Company presents the contract liability when the payment is made or a receivable is recorded, whichever is earlier. A contract liability is the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration, or an amount of consideration is due, from the customer. The Company’s contract liabilities are primarily resulted from the performance obligation identified in the vehicle sales contract, which is recorded as deferred revenue and revenue will be recognized when future goods or services are transferred. Besides, amounts received on behalf of third parties are recorded as other current liabilities.
Vehicle Sales
Vehicle sales revenue includes revenues related to deliveries of new vehicles under the definition of a performance obligation under ASC 606. The Company recognizes revenue on vehicle sales upon delivery to the customer, which is when the control of a vehicle transfers. For the obligations related to the vehicle sales, the Company estimates the standalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that may be available.
The Company provides a manufacturer’s limited warranty on all new vehicles sold to customers, ensuring that the vehicles comply with agreed-upon specifications. As the manufacturer’s limited warranty is not separately sold to the customers, the Company does not consider the warranty as a separate performance obligation under the ASC 606-10-55-31.
| F-20 |
Sales of vehicle parts and accessories
The Company recognizes revenue upon transfer of control to the customer which occurs at a point in time. When the Company performs shipping and handling activities after the transfer of control to the customer, they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.
Practical expedients and exemptions
The Company follows the guidance on immaterial promises when identifying performance obligations in the vehicle sales contracts and concludes that labor related to assurance-type warranties is not a performance obligation considering this service is value-added service to enhance customer experience rather than critical items for vehicle driving and forecasted that usage of this service will be very limited. The Company also performs an estimation on the stand-alone fair value of the promise applying a cost-plus margin approach and concludes that the standalone fair value of the service is insignificant, if it represents less than 5% of vehicle gross selling price and aggregate fair value of each individual promise.
Revenue consists of the following:
| For the six months ended | ||||||||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||||||||
| US$’000 | US$’000 | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Related Parties | Third Parties | Related Parties | Third Parties | |||||||||||||
| Vehicle sales | $ | $ | $ | $ | ||||||||||||
| Sales of vehicle parts and accessories | $ | $ | $ | $ | ||||||||||||
| Others | $ | $ | $ | $ | ||||||||||||
| Total revenues | ||||||||||||||||
All of the property and equipment of the Company is physically located in the PRC. The geographical location of the Company’s customers is also the PRC and all of the Company’s revenue is derived from operations in the PRC for the six months periods ended June 30, 2024 and 2023.
(r) Cost of revenues
Cost of revenue includes direct parts, material, labor cost and manufacturing overhead (including depreciation of assets associated with the production) and reserves for estimated warranty cost. Cost of revenue also includes charges to write-down the carrying value of the inventories when it exceeds its estimated net realizable value and to provide for on-hand inventories that are either obsolete or in excess of forecasted demand.
(s) Cost of revenues – idle capacity
Idle
capacity consists of production-related costs in excess of charges allocated to the Company’s finished goods in production. The
costs include direct and indirect labor, production supplies, repairs and maintenance, rent, utilities, insurance and property taxes.
The costs allocated to the Company’s finished goods are determined on a daily basis which is lower than its actual costs incurred.
Costs in excess of production allocations are expensed in the period incurred rather than added to the cost of finished goods produced.
Idle capacity expenses amounted to US$
| F-21 |
(t) Research and development expenses
All
costs associated with research and development (“R&D”) are expensed as incurred. R&D expenses consist primarily of
employee compensation for those employees engaged in R&D activities, design and development expenses with new technology, materials
and supplies and other R&D related expenses. For the six months ended June 30, 2024 and 2023, R&D expenses were US$
(u) Selling, general and administrative expenses
Sales
and marketing expenses consist primarily of employee compensation, transportation cost, and packaging fee. Selling costs are expensed
as incurred. For the six months ended June 30, 2024 and 2023, total sales and marketing expenses were US$
General
and administrative expenses consist primarily of employee compensation for employees involved in general corporate functions and those
not specifically dedicated to R&D activities, share-based compensation, depreciation and amortization expenses, legal, and other
professional services fees, lease and other general corporate related expenses. For the six months ended June 30, 2024 and 2023, general
and administrative expenses were US$
(v) Employee benefits
Full-time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, work-related injury benefits, maternity insurance, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiaries of the Company make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. The PRC government is responsible for the medical benefits and the pension liability to be paid to these employees and the Company’s obligations are limited to the amounts contributed and there is no legal obligation beyond the contributions made. The total amounts of such employee benefit expenses, which were expensed as incurred, were approximately US$ thousand and US$ thousand for the six months ended June 30, 2024 and 2023, respectively.
(w) Government grants
The
Company’s PRC based subsidiaries received subsidies from certain local governments. The Company’s government subsidies consist
of subsidies which are provided by the local governments for a specific purpose, such as land fulfillment costs and production and capacity
subsidies related to the manufacturing plant construction. The Company recognizes government subsidies until there is reasonable assurance
that the Company will comply with conditions attaching to them and the grants will be received. Hence, the Company recorded specific
subsidies as other non-current liabilities when received and the specific subsidies are recognized as other income at each stage when
the Company is entitled to the amount or the required performance is met. The Company currently recognizes government subsidies 1) using
a systematic basis over the periods in which the Company recognizes the related expenses or losses that the grants are intended to compensate
and 2) when the grant becomes receivable if it compensates for expenses or losses already incurred. For the six months ended June 30,
2024 and 2023, the Company recognized subsidies of approximately US$
| F-22 |
See below for the nature of each government subsidy received and the related accounting treatment:
| For the six months ended June 30, 2024 (Unaudited) | ||||||||
| No. | US$’000 | Type of Subsidies | Accounting Treatment | |||||
| 1 | ||||||||
| 2 | ||||||||
| TOTAL | ||||||||
| For the six months ended June 30, 2023 (Unaudited) | ||||||||
| No. | US$’000 | Type of Subsidies | Accounting Treatment | |||||
| 1 | ||||||||
| 2 | ||||||||
| TOTAL | ||||||||
(x) Income taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the consolidated financial statements and their respective tax basis, and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of operations in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assets will not be realized.
| F-23 |
Uncertain tax positions
An
uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. For tax positions not meeting the “more likely than not”
test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax
expense in the period incurred. Interest and penalties related to uncertain tax positions, if any, are recorded under accrued expenses
and other current liabilities on its consolidated balance sheets and under other expenses in its consolidated statements of operations.
The Company did not recognize any significant interest and penalties associated with uncertain tax positions for the six months ended
June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, the Company did
(y) Warrants
The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares. The Company classifies as liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares.
The Company accounts for its currently issued warrants in conjunction with the Company’s ordinary shares in equity. These warrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC 815-40. Warrants classified as equity are initially measured at fair value, and subsequent changes in fair value are not recognized so long as the warrants continue to be classified as equity.
The details for warrants are disclosed in note 20(a).
(z) Value-added tax
The
Company is subject to statutory value-added tax (“VAT”) of
(aa) Statutory reserves
The Company’s subsidiaries established in the PRC are required to make appropriations to certain non-distributable reserve funds.
In accordance with the laws applicable to PRC’s Foreign Investment Enterprises, the Company’s subsidiaries registered as wholly owned foreign enterprises have to make appropriations from its after-tax profit (as determined under the Accounting Standards for Business Enterprises as promulgated by the Ministry of Finance of the People’s Republic of China (“PRC GAAP”) to reserve funds including general reserve fund, and staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered capital of the Company. Appropriation to the staff bonus and welfare fund is at the Company’s discretion.
The use of the general reserve fund, statutory surplus fund and discretionary surplus fund is restricted to the offsetting of losses or increasing capital of the respective company. The staff bonus and welfare fund is a liability in nature and is restricted to fund payments of special bonus to staff and for the collective welfare of employees. No reserves are allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor can they be distributed except under liquidation.
| F-24 |
(bb) Comprehensive income (loss)
The Company applies ASC 220, Comprehensive Income, with respect to reporting and presentation of comprehensive loss and its components in a full set of financial statements. Comprehensive loss is defined to include all changes in equity of the Company during a period arising from transactions and other events and circumstances except those resulting from investments by shareholders and distributions to shareholders. For the periods presented, the Company’s comprehensive loss includes net loss and other comprehensive loss, which primarily consists of the foreign currency translation adjustments and actuarial loss arising from changes in financial assumptions on the Company’s defined contribution plan that has been excluded from the determination of net loss.
(cc) Leases
Operating lease
The Company adopted the ASC 842, Leases as of January 1, 2022 using modified retrospective transition approach. Upon adoption, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. In addition, the Company also elected the practical expedient to apply consistently to all of the Company’s leases to use hindsight in determining the lease term and in assessing impairment of the Company’s right-of-use assets.
The Company includes a right-of-use asset and lease liability related to substantially all of the Company’s lease arrangements in the consolidated balance sheets. All of the Company’s leases are operating leases. As the existing operating leases are short-term leases, right-of-use assets and the corresponding lease liabilities are nil and nil in the consolidated balance sheets as of June 30, 2024 and December 31, 2023.
The Company has elected not to present short-term leases on the consolidated balance sheets as these leases have a lease term of 12 months or less at commencement date of the lease and do not include options to purchase or renew that the Company is reasonably certain to exercise. The Company recognizes lease expenses for such short-term lease generally on a straight-line basis over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses the Company’s incremental borrowing rate based on the information available at adoption date or lease commencement date in determining the present value of lease payments.
The land use right (note 2(l),10) acquired represents lease prepayments to the local government authorities which is separately presented in the consolidated balance sheets. The Company determines whether the land use right agreement contains an operating lease. Land use rights are carried at cost less accumulated amortization and impairment losses.
Basic loss per share is computed by dividing net loss attributable to holders of ordinary shares by the weighted-average ordinary shares outstanding for the period. Potentially dilutive shares, which are based on the weighted-average ordinary shares underlying outstanding stock-based awards, warrants, or options using the treasury stock method or the if-converted method, if applicable, are included when calculating diluted net loss per share attributable to holders of ordinary shares when their effect is dilutive.
| F-25 |
Since the Company has incurred losses for the six months ended June 30, 2024 and 2023, the potential shares issuable related to outstanding warrants have been excluded from the calculation of diluted loss per share as the effect of such shares is anti-dilutive. Therefore, basic and diluted loss per share amounts is the same for each period presented.
Earnout/Contingent Value Rights
Pursuant
to the BCA, ordinary shares (valued as US$
| (i) | The first tranche (along with earnings thereon) shall |
| (ii) | The second tranche (along with earnings thereon) will likewise either |
| (iii) | Any remaining Earnout Shares (along with earnings thereon) not vested or surrendered in the first or second tranches are eligible either to |
| F-26 |
Any Earnout Shares and earnings thereon that are surrendered to Chijet will be promptly reissued and delivered by Chijet to the CVR rights agent on behalf of the holders of the CVRs, to be t pro rata among the holders of the CVRs.
The accounting for the Earnout Shares was first evaluated under ASC 718 to determine if the arrangement represents a share-based payment. Considering that the Earnout Shares were issued to the Chijet Inc. sellers, and there are no service conditions nor any requirement of the participants to provide goods or services, we determined that the Earnout Shares are not within the scope of ASC 718. In reaching this conclusion, we focused on the fact that the Earnout Shares are not provided to any holder of options or unvested stock but rather the arrangement is provided only to vested equity holders.
Next, we determined that the Earnout Shares represent a freestanding equity-linked financial instrument to be evaluated under ASC 480. Based upon the analysis, we concluded that the Earnout Shares should not be classified as a liability under ASC 480.
We next considered the conditions in ASC 815-10-15-74 and ASC 815-40 and concluded that the Earnout Shares are not within the scope of ASC 815. Therefore, the Earnout Share arrangement is appropriately classified in equity. As the business combination was accounted for as a reverse recapitalization, the fair value of the Earnout Share arrangement as of the Closing Date was accounted for as an equity transaction. Therefore, contingent value rights do not give any effect in calculation of the earnings per share as of June 30, 2024.
(ee) Segment reporting
The Company operates in one operating segment in accordance with ASC 280, Segment Reporting. The Company has a common basis of organization, and the products and services are offered mutually. The Company’s Chief Executive Officer has been identified as Company’s Chief Operating Decision Maker (“CODM”) and makes decisions with regards to business operations and resource allocation based on evaluation of Chijet Motor as a whole. Accordingly, the Company operates and makes decisions as one business segment. As the Company’s long-lived assets are substantially located in the PRC and sales are made exclusively in the PRC, no geographical segments are presented.
| F-27 |
3. RECENT ACCOUNTING PRONOUNCEMENT
Recently adopted accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company adopted ASU 2020-06 within annual reporting period of January 1, 2024. There was no significant impact resulting from these disclosures on the consolidated financial statements.
In December 2022, the FASB issued ASU No. 2022-06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848) (ASU 2022-06). ASU 2022-06 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2022-06 deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. ASU 2022-06 is effective as of December 21, 2022 through December 31, 2024. The Company adopted this ASU within annual reporting period of January 1, 2024 and the adoption did not have a material impact on the Company’s consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification to align with the SEC’s regulations. The ASU also makes those requirements applicable to entities that were not previously subject to the SEC’s requirements. The ASU is effective for the Company two years after the effective date to remove the related disclosure from Regulation S-X or S-K. The Company does not expect the adoption of ASU 2023-06 will have a material effect on its consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. ASU No. 2023-07 requires an enhanced disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of this guidance should be applied retrospectively to all prior periods presented. Early adoption is permitted. The Company will adopt this ASU in fiscal 2024 and does not expect the adoption to have a material impact on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2025. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on its consolidated financial statements.
| F-28 |
4. CONCENTRATION OF RISK
(a) Credit risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, restricted cash, accounts and notes receivable, and accounts and notes payable. The maximum exposure of such financial instruments to credit risk is their carrying amounts as of the balance sheet dates. As of June 30, 2024 and December 31, 2023, substantially all of the Company’s cash and cash equivalents and restricted cash was placed with banking institutions in the PRC. Management chose these institutions because of their reputations and track records for stability, and their known large cash reserves, and management periodically reviews these institutions’ reputations, track records, and reported reserves. Management expects that any additional institutions that the Company uses for its cash and bank deposits would be chosen with similar criteria for soundness. Bank failure is uncommon in PRC and based on publicly available information, management believes that those Chinese banks that hold the Company’s cash and cash equivalents and restricted cash are financially sound.
For the credit risk related to accounts and notes receivable, the Company performs ongoing credit evaluations of its customers and, if necessary, maintains reserves for potential credit losses.
(b) Customer risk
As
of June 30, 2024, four third-party customers accounted for more than 10% of total accounts and notes receivable at
As
of December 31, 2023, one customer, determined to be a related party under ASC 850, accounted for
During
the six months ended June 30, 2024, two customers accounted for more than 10% of total revenue at
During
the six months ended June 30, 2023, three customers accounted for more than 10% of total revenue at
(c) Foreign currency exchange rate risk
The revenues and expenses of the Company’s entities in the PRC are generally denominated in RMB and their assets and liabilities are denominated in RMB. The Company’s overseas financing activities are denominated in U.S. dollars. The RMB is not freely convertible into foreign currencies. Remittances of foreign currencies into the PRC or remittances of RMB out of the PRC as well as exchange between RMB and foreign currencies require approval by foreign exchange administrative authorities and certain supporting documentation. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other currencies.
| F-29 |
5. ACCOUNTS AND NOTES RECEIVABLE, NET
Accounts and notes receivable and allowance for doubtful accounts consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable | ||||||||
| Notes receivable | ||||||||
| Less: allowance for credit losses | ||||||||
| Accounts and notes receivable, net | ||||||||
Notes receivable represents bank acceptance drafts that are non-interest bearing and due within six to twelve months.
The Company has developed a CECL model based on historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. There was allowance for credit losses on June 30, 2024 and December 31, 2023, respectively.
6. INVENTORY, NET
Inventory consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Finished goods | ||||||||
| Raw materials | ||||||||
| Work-in-process | ||||||||
| Inventory, subtotal | ||||||||
| Less: inventory impairment provision | ( | ) | ( | ) | ||||
| Inventory, net | ||||||||
Finished goods primarily consist of vehicles ready for transit at production factories, vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at its delivery and service centers, vehicle parts and charging piles.
Raw materials primarily consist of materials for volume production.
Work-in-process primarily consist of vehicles in production which will be transferred into finished goods inventory when completed.
For
the six months ended June 30, 2024 and 2023, write-downs of inventories to net realizable value were US$
| F-30 |
7. OTHER CURRENT ASSETS
Other current assets consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Prepayments for materials | ||||||||
| Prepayments for R&D | ||||||||
| Prepayments for utilities | ||||||||
| Other prepayments | ||||||||
| Deductible value-added tax input | ||||||||
| Other receivables | ||||||||
| Subtotal | ||||||||
| Less: allowance for bad debts | ( | ) | ( | ) | ||||
| Net balance | ||||||||
On March 21, 2022, the Ministry of Finance and State Administration of Tax released Announcement (2022) No.14 to issue China’s VAT rebates to eligible industries. Companies in these industries can now apply for monthly refunds of incremental VAT credits and a one-time refund of remaining VAT credits from April 1, 2022 onward. Given that Chijet falls within the scope of the eligible industry, the deductible value-added tax input is classified as other current assets.
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| At cost: | ||||||||
| Buildings | ||||||||
| Mold and tooling | ||||||||
| Computer and electronic equipment | ||||||||
| Machinery and equipment | ||||||||
| Vehicles | ||||||||
| Other logistic equipment | ||||||||
| Construction in progress(i) | ||||||||
| Property, plant and equipment, subtotal | ||||||||
| Less: accumulated depreciation(ii) | ( | ) | ( | ) | ||||
| Less: accumulated impairment(iii) | ( | ) | ( | ) | ||||
| Property, plant and equipment, net(iv) | ||||||||
| (i) |
| F-31 |
| (ii) |
| (iii) |
| (iv) |
The carrying amounts of nine vehicles pledged
by Shandong Baoya in April 2024 to secure the borrowings was US$
The carrying
amounts of buildings, machines and equipment pledged by Dezhou Yarui to secure the borrowings were US$
During the six months ended June 30, 2024, all the machinery and equipment
of Bijie Yabei that were frozen were sold to repay the loan principal and partial interests owed to Bijie Jinhaihu New District Management
Committee. Therefore, no frozen assets remained as of June 30, 2024. The details are disclosed in note 18. The carrying amount of the
machinery and equipment of Bijie Yabei that were frozen was US$
9. INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
| June 30, 2024 | ||||||||||||
| Gross Carrying | Accumulated | Net Carrying | ||||||||||
| Amount | Amortization | Amount | ||||||||||
| US$’000 | US$’000 | US$’000 | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Finite-lived intangible assets: | ||||||||||||
| Computer software | ( | ) | ||||||||||
| Patent | ( | ) | ||||||||||
| Total finite-lived intangible assets | ( | ) | ||||||||||
| Indefinite-lived intangible assets: | ||||||||||||
| Trademark and manufacturing license | ||||||||||||
| Total indefinite-lived intangible assets | ||||||||||||
| Total intangible assets | ( | ) | ||||||||||
| F-32 |
| December 31, 2023 | ||||||||||||
| Gross Carrying | Accumulated | Net Carrying | ||||||||||
| Amount | Amortization | Amount | ||||||||||
| US$’000 | US$’000 | US$’000 | ||||||||||
| Finite-lived intangible assets: | ||||||||||||
| Computer software | ( | ) | ||||||||||
| Patent | ( | ) | ||||||||||
| Total finite-lived intangible assets | ( | ) | ||||||||||
| Indefinite-lived intangible assets: | ||||||||||||
| Trademark and manufacturing license | ||||||||||||
| Total indefinite-lived intangible assets | ||||||||||||
| Total intangible assets | ( | ) | ||||||||||
Amortization
expenses of intangible assets were US$
As of June 30, 2024, the estimated amortization expense relating to the existing intangible assets with finite lives for future periods is as follows:
| US$’000 | ||||
| (Unaudited) | ||||
| Six months ending December 31, 2024 | ||||
| 2025 and thereafter | ||||
| Total | ||||
10. LAND USE RIGHTS, NET
Land use rights consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Land use right | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Land use right, net | ||||||||
During
the year ended December 31, 2019, the Company obtained three operating lease arrangements for land use rights with a fair value of US$
| F-33 |
As
discussed in Note 17, the Company was unable to meet the conditions to apply for the government subsidies to repay the loans. As a result,
Xiangyang Yazhi and Dezhou Yarui pledged land use rights with the carrying amount of US$
Amortization
expenses of land use rights were US$
11. OPERATING LEASES (EXCLUDING LAND USE RIGHTS)
Operating leases of the Company mainly consist of short-term leases of plants, warehouses and machinery. Short-term lease cost is recognized as rental expenses in the consolidated statements of operations.
Supplemental cash flows information related to leases are as follows:
| For the six months ended | For the six months ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows payments for operating leases | ||||||||
| Right-of-use assets obtained in exchange for lease liabilities: | ||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||
The components of lease cost for operating leases were as follows:
| For the six months ended | For the six months ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating lease cost | ||||||||
| Short-term lease cost | ||||||||
| Total lease cost | ||||||||
As of June 30, 2024 and December 31, 2023, the lease related assets and liabilities recorded in the unaudited consolidated balance sheets were both nil.
| F-34 |
12. GOODWILL
Goodwill
represents the excess of the purchase price over the fair value of the net assets acquired from FAW Jilin on December 27, 2019 (the “Acquisition
Date”). Pursuant to the related agreement and plan of merger, the purchase price was US$
The Company accounted for the acquisition using the purchase method of accounting for business combinations under ASC 805, Business Combinations. The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on their estimated fair value as of the Acquisition Date.
| US$’000 | RMB’000 | |||||||
| Assets acquired: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts and notes receivable | ||||||||
| Other receivable | ||||||||
| Inventory | ||||||||
| Property, plant and equipment, net | ||||||||
| Equity investment | ||||||||
| Intangible assets | ||||||||
| Land use right | ||||||||
| Prepayments and other assets, current and non-current | ||||||||
| Total assets acquired | ||||||||
| Liabilities and equity assumed | ||||||||
| Short-term borrowing | ( | ) | ( | ) | ||||
| Accounts and notes payable | ( | ) | ( | ) | ||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Accounts and other liabilities | ( | ) | ( | ) | ||||
| Long-term payables | ( | ) | ( | ) | ||||
| Accrued post-employment and termination benefits | ( | ) | ( | ) | ||||
| Other payable, current and non-current | ( | ) | ( | ) | ||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Total liabilities and equity assumed | ( | ) | ( | ) | ||||
| Net assets acquired | ||||||||
| Goodwill | ||||||||
| Total purchase price | ||||||||
Changes in the carrying amount of goodwill consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Beginning balance | ||||||||
| Addition during the period/year | ||||||||
| Impairment during the period/year | ||||||||
| Translation adjustment | ( | ) | ( | ) | ||||
| Goodwill | ||||||||
| F-35 |
Goodwill
of US$
13. OTHER ASSETS
Other assets consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Long-term deferred expenses | ||||||||
| Total | ||||||||
Long-term
deferred expenses of US$
14. ACCOUNTS AND NOTES PAYABLE
Accounts and notes payable consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Accounts payable | ||||||||
| Notes payable | ||||||||
| Total | ||||||||
Notes payable consisted of bank notes provided by the Company to its suppliers. These short-term bank notes can be endorsed and assigned to suppliers as payments for purchases. The bank notes payable are generally payable within six months. These notes payable are guaranteed by the bank for their full face value. In addition, the banks usually require the Company to deposit a certain amount of funds at the bank as a guaranteed deposit, which is classified on the consolidated balance sheets as restricted cash.
| F-36 |
15. CONTRACT LIABILITIES
Contract liabilities primarily consisted of advance payments from customers prior to the transfer of goods or services by the Company. The payment amounts and timing vary depending on the vehicle model, the energy product and the location of delivery. Contract liabilities are included in current liabilities until refunded or until they are applied towards the revenue.
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Contract liabilities - beginning of period/year | ||||||||
| A change in time frame for a performance obligation satisfied | ( | ) | ( | ) | ||||
| Advance received | ||||||||
| Translation adjustment | ( | ) | ( | ) | ||||
| Contract liabilities - subtotal | ||||||||
| Less: contract liabilities to related parties | ( | ) | ( | ) | ||||
| Contract liabilities - end of period/year | ||||||||
16. ACCRUALS AND OTHER CURRENT LIABILITIES
Accruals and other current liabilities consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Payroll payable | ||||||||
| Accrued post-employment and termination benefits - current portion | ||||||||
| Business and other taxes payable | ||||||||
| Accrued expenses | ||||||||
| Other payable secured by acceptance draft | ||||||||
| Other payable | ||||||||
| Total | ||||||||
17. LONG-TERM PAYABLES, CURRENT
In May 2016, the Company entered into two loans with government entity (Xiangyang High tech Industrial Development Zone Management Committee). The purpose of the borrowing was solely for the development of the Electric Vehicle industry in Xiangyang, PRC, and the funds cannot be used for any other purpose. The loans bear no interest and the maturity date will depend on the development status.
Because
of the nature of these loans, the Company was subject to the fulfillment of covenants relating to the Company’s consolidated statement
of financial position performance and results. However, due to the Covid-19 pandemic and the specific regulations issued, the Company
was unable to meet the conditions in the loan agreements and, therefore, was unable to apply for the government subsidies to repay the
US$
The
carrying value of the borrowings approximates their fair value as of June 30, 2024 and December 31, 2023. As of June 30, 2024 and December
31, 2023, the outstanding principal of the loans were US$
| F-37 |
Management has performed a detailed analysis of the potential loss and determined the outcome is uncertain as of September 30, 2024. The Company also is proactively negotiating with the lenders to extend the terms of the loans. At the same time, the Company plans to expand production to meet the conditions described in the loan agreements.
In
June 2023, the Company pledged machinery and equipment, molds and tooling with a carrying amount of approximately US$
18. PROMISSORY NOTE PAYABLE
19. ACCRUED POST-EMPLOYMENT AND TERMINATION BENEFITS
The Company pays post-employment obligations to its retired employees. In addition, the Company is committed to make periodic benefits payments to certain former employees, who were terminated or early retired. These benefits are only applicable to the qualifying employees.
The Company has three defined benefit, non-contributory retirement or termination plans that cover qualifying employees. These defined benefit plans provide benefits to covered individuals satisfying certain age and/or service requirements. The three benefit plans are as follows:
(i) Plan 1: Post-employment benefits for participants in 2019 restructure;
(ii) Plan 2: Termination benefits for participants in 2019 restructure;
(iii) Plan 3: Post-employment benefits for participants granted after 2019;
The Company’s net obligation in respect to defined benefit retirement plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value and the fair value of any plan assets is deducted. The actuarial valuation of the present value of the defined benefit obligations as of June 30, 2024 and December 31, 2023 were prepared by an independent firm of actuaries, a member of China Association of Actuaries.
| F-38 |
In accordance with ASC 715-30, Benefit Plans-Pension, the following components have been included in the net obligation recognized for a period by the Company: (i) service cost; (ii) interest cost; (iii) expected return on plan assets, if any; (iv) amortization of any prior service cost or credit included in accumulated other comprehensive income; and (v) gain or loss (including the effects of changes in financial assumptions), which includes, to the extent recognized, amortization of the net gain or loss included in accumulated other comprehensive income. The present value of the defined benefit obligations, and the related service costs were measured using the projected unit credit method.
The principal assumptions used for the purposes of the actuarial valuations are as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Discount rate | % | % | % | |||||||||
| Mortality rate | ||||||||||||
| Annual withdrawal rate | % | % | % | |||||||||
| Annual increase rate of supplemental medical benefits | % | % | % | |||||||||
| Annual increase rate of social insurance, housing fund and EAP | % | % | % | |||||||||
| * |
Movements in the present value of the retirement and supplemental benefit obligations during the six months ended June 30, 2024 and June 30, 2023 are as follows:
| For the six months ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Beginning of period | ||||||||
| Service costs | ||||||||
| Interest costs | ||||||||
| Benefits paid | ( | ) | ( | ) | ||||
| Actuarial loss arising from changes in financial assumptions | ( | ) | ||||||
| Past service costs | ||||||||
| Translation adjustment | ( | ) | ( | ) | ||||
| End of period | ||||||||
The amount of retirement and supplemental benefit obligations recognized in the consolidated balance sheets are determined as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| End of period/year | ||||||||
| Less: net amount due within one year | ( | ) | ( | ) | ||||
| Net amount due after one year | ||||||||
As
of June 30, 2024 and December 31, 2023, the non-current liabilities were US$
| F-39 |
As
of June 30, 2024 and December 31, 2023, the current portion of the accrued post-employment and termination benefits were US$
The following amounts were recorded in the consolidated statements of operations as components of the net periodic benefit cost:
| For the six months ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Service costs | ||||||||
| Interest costs | ||||||||
| Amortization of actuarial losses | ||||||||
| Net periodic benefit cost | ||||||||
The following amounts were recorded in the consolidated statements of comprehensive loss:
| For the six months ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Actuarial loss arising from changes in financial assumptions | ||||||||
| Past service costs | ||||||||
| Amortization recognized in net period benefit cost | ( | ) | ( | ) | ||||
| Total | ||||||||
During
the six months ended June 30, 2024 and 2023, the Company made cash payments of US$
On
June 1, 2023, pursuant to the BCA, Chijet Motor, a wholly-owned subsidiary of Chijet Inc. merged with JWAC such that JWAC became a wholly-owned
subsidiary of the Chijet Motor. With the completion of share exchange, Chijet Inc. became a wholly-owned subsidiary of Chijet Motor and
the Chijet Inc. shareholders received of Chijet Motor’s ordinary shares, par value US$ per share. As of June 30,
2024 and December 31, 2023, Chijet Motor had issued ordinary shares of both , of which outstanding ordinary shares of both .
Share data as of June 30, 2024 and December 31, 2023 have been retroactively restated to give effect to the
| F-40 |
(a) Warrants
GT Warrants
The following table summarizes the changes in the number of warrants outstanding during the six months ended June 30, 2024:
Weighted average | Total | |||||||||||
| Number | unit price | price | ||||||||||
| US$’000 | ||||||||||||
| Balance of warrants - December 31, 2023 | $ | | $ | |||||||||
| Balance of warrants - June 30, 2024 | $ | $ | ||||||||||
| Balance of warrants exercisable - June 30, 2024 | $ | $ | ||||||||||
On
February 15, 2022, pursuant to a financial advisory agreement, Shandong Baoya issued a common stock purchase warrant to Greentree to
purchase
The Company used the following assumptions to estimate the fair value of warrants granted under the financial advisory agreement as of December 31, 2022:
| At February 15, 2022 | ||||
| Risk-free interest rate | | % | ||
| Expected volatility | % | |||
| Expected term (in years) | ||||
| Expected dividend yield | % | |||
| F-41 |
I-Bankers Warrants
The following table summarizes the changes in the number of warrants outstanding during the six months ended June 30, 2024:
| Weighted average | Total | |||||||||||
| Number | unit price | price | ||||||||||
| US$’000 | ||||||||||||
| Balance of warrants - December 31, 2023 | $ | | $ | |||||||||
| Balance of warrants – June 30, 2024 | $ | $ | ||||||||||
On
December 9, 2021, JWAC issued to I-Bankers warrants to purchase
The Company used the following assumptions to estimate the fair value of warrants as of December 31, 2021:
| At December 9, 2021 | ||||
| Risk-free interest rate | | % | ||
| Expected volatility | % | |||
| Expected term (in years) | ||||
| Expected dividend yield | % | |||
(b) Treasury stock
Chijet
Inc. entered into unsecured promissory notes (the “Promissory Notes”) in the principal amount of US$
| F-42 |
(c) Statutory Reserves and Restricted Net Asset
The Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in the PRC is subject to limitations, procedures, and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in PRC.
The Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with PRC GAAP. Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business expansion, production, or increase in registered capital but are not distributable as cash dividends.
For
the six months ended June 30, 2024 and 2023, the Company’s PRC subsidiaries did
In
accordance with the safety production regulations, the Company’s subsidiaries in China have to make appropriations as a special
reserve which will only be used for the enhancement of safety production environment and improvement of facilities. As of June 30, 2024
and December 31, 2023, the accumulated balance of special reserves, which is included in the accumulated deficit, was approximately US$
Because
the Company’s entities in the PRC can only pay dividends out of distributable profits reported in accordance with PRC accounting
standards, the Company’s entities in the PRC are restricted from transferring a portion of their net assets to the Company. The
restricted amounts include the paid-in capital, statutory reserves, special reserve and additional paid-in capital of the Company’s
entities in the PRC. The aggregate amount of paid-in capital and additional paid-in capital, which is the amount of net assets of the
Company’s entities in the PRC not available for distribution, were US$
21. INCOME TAXES
Enterprise income tax
Cayman Islands
Under the current laws of the Cayman Islands, Chijet Motor is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
British Virgin Islands
The Company’s subsidiary, Baoya Technology Holdings Limited is incorporated in the BVI and under the current laws of the BVI, Baoya Technology Holdings Limited is not subject to tax on income or capital gain. In addition, payments of dividend by the subsidiary to their shareholders are not subject to withholding tax in the BVI.
| F-43 |
Hong Kong
Under
the current Hong Kong Inland Revenue Ordinance, the Company’s Hong Kong subsidiary, Baoyaev Group Limited, is subject to
The PRC
The
Company’s subsidiaries that are incorporated in the PRC are subject to Corporate Income Tax (“CIT”) on the taxable
income as reported in their respective statutory financial statements adjusted in accordance with the new PRC Enterprise Income Tax Laws
(“PRC Income Tax Laws”) effective from January 1, 2008. Pursuant to the PRC Income Tax Laws, the Company’s PRC subsidiaries
are subject to a CIT statutory rate of
Composition of income tax benefits for the periods presented are as follow:
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current income tax expenses (benefits) | ||||||||
| Deferred income tax expenses (benefits) | ||||||||
| Income tax expenses | ||||||||
Reconciliations
of the income tax expenses (benefits) computed by applying the PRC statutory income tax rate of
| June 30, 2024 | June 30, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Loss before income tax expenses | ( | ) | ( | ) | ||||
| Income tax benefits computed at the PRC statutory income tax rate of | ( | ) | ( | ) | ||||
| Use of NOL | ( | ) | ||||||
| Effect of additional deduction for qualified R&D expenses | ( | ) | ( | ) | ||||
| Effect of changes in asset value | ||||||||
| Non-deductible expenses | ||||||||
| Changes in valuation allowance and others | ||||||||
| Income tax expenses | ||||||||
| F-44 |
The
Company considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more-likely-than-not
realized. This assessment considers, among other matters, the nature, frequency and severity of recent loss and forecasts of future profitability.
These assumptions require significant judgment, and the forecasts of future taxable income are consistent with the plans and estimates
the Company is using to manage the underlying businesses. The statutory income tax rate of
The Company’s deferred tax assets (liabilities) consisted of the following components:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | ||||||||
| Accrued warranty | ||||||||
| Accrued expenses | ||||||||
| Investment loss | ||||||||
| Inventory impairment | ||||||||
| Fixed assets impairment provision | ||||||||
| Bad debts | ( | ) | ||||||
| Accrued payroll | ||||||||
| Subtotal | ||||||||
| Fair value change of fixed assets | ( | ) | ( | ) | ||||
| Fair value change of intangible assets | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net of valuation allowance | ||||||||
A valuation allowance is provided against deferred tax assets when the Company determines that it is more-likely-than-not that the deferred tax assets will not be utilized in the future.
The
Company has tax losses arising in Mainland China of US$
| F-45 |
22. RELATED PARTIES
The principal related parties of which the Company as of June 30, 2024 presented are as follows:
(a) Relationship:
| Name of Entity or Individual | Relationship with the Company | |
| Jilin FAW Baosteel Auto Steel Parts Co., Ltd. | Significantly influenced by the Company | |
| Jilin Jiqi-Longshan Automobile Chassis Co., Ltd | Significantly influenced by the Company | |
| Zhang Jiannong | Shareholder | |
| Wang Qingjun | Shareholder | |
| Euroamer Kaiwan Technology Company Limited | Shareholder | |
| Mu Hongwei | Principal Owner/Director | |
| John Chiang | Shareholder | |
| Simon Pang | Shareholder | |
| Wen Li | Shareholder | |
| Ying Liu | Shareholder/Independent Director | |
| Wang Wenbo | Independent Director | |
| Li Huimin | Independent Director | |
| China FAW Co., Ltd. | Non-controlling interest shareholder | |
| Dezhou Economic and Tech Development Zone Jingtai Investment Co., Ltd. | Non-controlling interest shareholder | |
| Yantai Guofeng Investment Holding Group Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| Nanjing Shengnuo Biotechnology Industry Company Ltd | Affiliate of non-controlling interest shareholder | |
| Qiming Information Technology Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW Bestune Car Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW-Volkswagen Automobile Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW Mould Manufacturing Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW Logistics (Changchun Lushun) Storage and Transportation Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW Logistics Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| Changchun FAW International Logistics Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| China FAW Technology Center | Affiliate of non-controlling interest shareholder | |
| China FAW Group Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| China FAW Group Import & Export Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| FAW Finance Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| Changchun Wisdom Bus Branch of FAW Jiefang Automobile Co., Ltd. | Affiliate of non-controlling interest shareholder | |
| Shandong Zhanpuce Management Consulting | Significantly influenced by non-controlling interest shareholder | |
| Shandong Jiankangdadi Enterprise Management Consulting Co., Ltd | Significantly influenced by non-controlling interest shareholder | |
| Jinan Haiyun Investment Consulting Co., Ltd | Significantly influenced by non-controlling interest shareholder | |
| Machinery Industry Ninth Design and Research Institute Co., Ltd. | Significantly influenced by non-controlling interest shareholder | |
| FAW Bus (Dalian) Co., Ltd. | Significantly influenced by non-controlling interest shareholder |
| F-46 |
(b) The following tables indicate the transactions that have been entered into with related parties:
| i) | Balance Sheets |
| As of June 30, 2024 (Unaudited) | ||||||||||||||||||||||||||||
| US$’000 | ||||||||||||||||||||||||||||
| Accounts receivable | Other current assets | Amounts due from related parties | Accounts payable | Contract liabilities | Accruals and other current liabilities to related parties | Loans attributable to related parties | ||||||||||||||||||||||
| Significantly influenced by the Company | ||||||||||||||||||||||||||||
| Jilin FAW Baosteel Auto Steel Parts Co., Ltd. | ||||||||||||||||||||||||||||
| Jilin Jiqi-Longshan Automobile Chassis Co., Ltd | ||||||||||||||||||||||||||||
| Non-controlling interest shareholder | ||||||||||||||||||||||||||||
| China FAW Co., Ltd. | ||||||||||||||||||||||||||||
| Dezhou Economic and Tech Development Zone Jingtai Investment Co., Ltd. | ||||||||||||||||||||||||||||
| Affiliate of non-controlling interest shareholder | ||||||||||||||||||||||||||||
| Yantai Guofeng Investment Holding Group Co., Ltd. | ||||||||||||||||||||||||||||
| Nanjing Shengnuo Biotechnology Industry Company Ltd | ||||||||||||||||||||||||||||
| Qiming Information Technology Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Bestune Car Co., Ltd. | ||||||||||||||||||||||||||||
| FAW-Volkswagen Automobile Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Mould Manufacturing Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Logistics (Changchun Lushun) Storage and Transportation Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Logistics Co., Ltd. | ||||||||||||||||||||||||||||
| Changchun FAW International Logistics Co., Ltd. | ||||||||||||||||||||||||||||
| China FAW Group Co., Ltd. | ||||||||||||||||||||||||||||
| China FAW Group Import & Export Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Finance Co., Ltd. | ||||||||||||||||||||||||||||
| Changchun Wisdom Bus Branch of FAW Jiefang Automobile Co., Ltd. | ||||||||||||||||||||||||||||
| Significantly influenced by non-controlling interest shareholder | ||||||||||||||||||||||||||||
| Shandong Jiankangdadi Enterprise Management Consulting Co., Ltd | ||||||||||||||||||||||||||||
| Jinan Haiyun Investment Consulting Co., Ltd | ||||||||||||||||||||||||||||
| Machinery Industry Ninth Design and Research Institute Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Bus (Dalian) Co., Ltd. | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| F-47 |
| As of December 31, 2023 | ||||||||||||||||||||||||||||
| US$’000 | ||||||||||||||||||||||||||||
| Accounts receivable | Other current assets | Amounts due from related parties | Accounts payable | Contract liabilities | Accruals and other current liabilities to related parties | Loans attributable to related parties | ||||||||||||||||||||||
| Significantly influenced by the Company | ||||||||||||||||||||||||||||
| Jilin FAW Baosteel Auto Steel Parts Co., Ltd. | ||||||||||||||||||||||||||||
| Jilin Jiqi-Longshan Automobile Chassis Co., Ltd | ||||||||||||||||||||||||||||
| Independent Directors | ||||||||||||||||||||||||||||
| John Chiang | ||||||||||||||||||||||||||||
| Simon Pang | ||||||||||||||||||||||||||||
| Wen Li | ||||||||||||||||||||||||||||
| Ying Liu | ||||||||||||||||||||||||||||
| Non-controlling interest shareholder | ||||||||||||||||||||||||||||
| China FAW Co., Ltd. | ||||||||||||||||||||||||||||
| Dezhou Economic and Tech Development Zone Jingtai Investment Co., Ltd. | ||||||||||||||||||||||||||||
| Affiliate of non-controlling interest shareholder | ||||||||||||||||||||||||||||
| Yantai Guofeng Investment Holding Group Co., Ltd. | ||||||||||||||||||||||||||||
| Nanjing Shengnuo Biotechnology Industry Company Ltd | ||||||||||||||||||||||||||||
| Qiming Information Technology Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Bestune Car Co., Ltd. | ||||||||||||||||||||||||||||
| FAW-Volkswagen Automobile Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Mould Manufacturing Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Logistics (Changchun Lushun) Storage and Transportation Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Logistics Co., Ltd. | ||||||||||||||||||||||||||||
| Changchun FAW International Logistics Co., Ltd. | ||||||||||||||||||||||||||||
| China FAW Group Co., Ltd. | ||||||||||||||||||||||||||||
| China FAW Group Import & Export Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Finance Co., Ltd. | ||||||||||||||||||||||||||||
| Changchun Wisdom Bus Branch of FAW Jiefang Automobile Co., Ltd. | ||||||||||||||||||||||||||||
| Significantly influenced by non-controlling interest shareholder | ||||||||||||||||||||||||||||
| Shandong Jiankangdadi Enterprise Management Consulting Co., Ltd | ||||||||||||||||||||||||||||
| Jinan Haiyun Investment Consulting Co., Ltd | ||||||||||||||||||||||||||||
| Machinery Industry Ninth Design and Research Institute Co., Ltd. | ||||||||||||||||||||||||||||
| FAW Bus (Dalian) Co., Ltd. | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| F-48 |
| ii) | Operations |
| For the six months ended June 30, 2024 (Unaudited) | For the six months ended June 30, 2023 (Unaudited) | |||||||||||||||||||||||
| US$’000 | US$’000 | |||||||||||||||||||||||
| Sales of goods | Purchase of goods | Interest Expense | Sales of goods | Purchase of goods | Interest Expense | |||||||||||||||||||
| Significantly influenced by the Company | ||||||||||||||||||||||||
| Jilin FAW Baosteel Auto Steel Parts Co., Ltd. | ||||||||||||||||||||||||
| Jilin Jiqi-Longshan Automobile Chassis Co., Ltd | ||||||||||||||||||||||||
| Non-controlling interest shareholder | ||||||||||||||||||||||||
| China FAW Co., Ltd. | ||||||||||||||||||||||||
| Dezhou Economic and Tech Development Zone Jingtai Investment Co., Ltd. | ||||||||||||||||||||||||
| Affiliate of non-controlling interest shareholder | ||||||||||||||||||||||||
| Yantai Guofeng Investment Holding Group Co., Ltd. | ||||||||||||||||||||||||
| Nanjing Shengnuo Biotechnology Industry Company Ltd | ||||||||||||||||||||||||
| Qiming Information Technology Co., Ltd. | ||||||||||||||||||||||||
| FAW Bestune Car Co., Ltd. | ||||||||||||||||||||||||
| FAW-Volkswagen Automobile Co., Ltd. | ||||||||||||||||||||||||
| China FAW Technology Center | ||||||||||||||||||||||||
| FAW Finance Co., Ltd. | ||||||||||||||||||||||||
| Changchun Wisdom Bus Branch of FAW Jiefang Automobile Co., Ltd. | ||||||||||||||||||||||||
| Significantly influenced by non-controlling interest shareholder | ||||||||||||||||||||||||
| Shandong Zhanpuce Management Consulting | ||||||||||||||||||||||||
| Shandong Jiankangdadi Enterprise Management Consulting Co., Ltd | ||||||||||||||||||||||||
| Jinan Haiyun Investment Consulting Co., Ltd | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||
| F-49 |
(c) The following table indicates the financings that have been entered into with related parties:
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Affiliate of non-controlling interest shareholder | ||||||||
| Yantai Guofeng Investment Holding Group Co., Ltd.(i) | ||||||||
| Nanjing Shengnuo Biotechnology Industry Company Ltd. (ii) | ||||||||
| FAW Finance Co., Ltd. (iii) | ||||||||
| Non-controlling interest shareholder | ||||||||
| Dezhou Economic and Tech Development Zone Jingtai Investment Co., Ltd. (iv) | ||||||||
| Significantly influenced by non-controlling interest shareholder | ||||||||
| Shandong Jiankangdadi Enterprise Management Consulting Co., Ltd (v) | ||||||||
| Jinan Haiyun Investment Consulting Co., Ltd (vi) | ||||||||
| Total | ||||||||
| (i) |
| (ii) |
| (iii) |
| F-50 |
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Collateralized by the FAW Jilin factory and land use right with the carrying value of US$ | ||||||||
| Collateralized by the machinery and equipment, molds and tooling, other logistic equipment of FAW Jilin with carrying value of US$ | ||||||||
| Credit loan, no collateralized items. | ||||||||
| Total | ||||||||
| Maturity date | The
loans mature gradually from |
| Interest Rate and default rate | The
loans bear an annual interest rate of |
| Interest expense | The
interest expenses were US$ |
(iv)
In 2016, Dezhou Yarui entered into a related party pledged loan with Dezhou Economic and Tech Development Zone Jingtai Investment Co.,
Ltd. (“Dezhou Jingtai”). The loan was originally due on October 31, 2026. In March 2022, pursuant to the loan agreement,
Dezhou Jingtai filed in court to request the Company to repay the loan in advance. As a result, in April 2022, the Company reached a
settlement agreement with Dezhou Jingtai. Pursuant to the settlement agreement, the outstanding balance of US$
| June 30, 2024 | December 31, 2023 | |||||||
| US$’000 | US$’000 | |||||||
| (Unaudited) | ||||||||
| Collateralized by buildings, machinery and equipment, land use right of Dezhou Yarui. The carrying amounts of machinery and equipment pledged to secure the borrowings as of June 30, 2024 and December 31, 2023 were US$ | ||||||||
| F-51 |
| Maturity date | The
outstanding balance was due on |
| Interest Rate | The
loans bear an annual interest rate of |
| Interest expense (One loan thus no weighted average rate) | The
interest expenses were US$ |
| Others | For the six months ended June 30, 2024, the Company has paid . |
(v)
In August and October 2023, Shandong Baoya entered two loans totaling US$
(vi)
In August and September 2023, Shandong Baoya entered two loans amounting to US$
(d) Compensation to independent directors
The following table consists of the number of shares and the total amount of compensation to independent directors:
| June 30, 2024 (Unaudited) | ||||||||
| Issued shares | Cash | |||||||
| US$’000 | ||||||||
| John Chiang | $ | |||||||
| Simon Pang | $ | |||||||
| Wen Li | $ | |||||||
| Ying Liu | $ | |||||||
| Total | $ | |||||||
The
Company appointed four independent directors and offered each of the directors compensation amounting to US$
thousand for one year. US$
thousand of the compensation payable in cash
and US$
thousand payable by the issuance of the Company’s
ordinary shares. On March 31, 2023, the offer letter took effect. The compensation is payable in arrears on a semi-annual basis, with
the payment of US$
thousand in cash and ordinary shares of the
Company valued at US$
thousand. On June 1, 2023, the Company issued
to each independent director ordinary shares of Chijet under the award plan.
With the mutual understanding between the Company and the four independent directors, the share price of the awarded ordinary shares was US$
per share. As of June 30, 2024, the Company
had paid US$
| F-52 |
23. COMMITMENTS AND CONTINGENCIES
Commitments
| (a) | Capital commitments |
As
of June 30, 2024, the Company had several capital commitments with a total contract amount of US$
| (b) | Parts purchase commitment |
During
the six months ended June 30, 2024, the Company entered into various trial production and development agreements for a total of US$
As
of June 30, 2024, the Company had various agreements with various suppliers for production and development. The balance of the contractual
commitments was approximately US$
Contingencies
| (a) | Legal proceedings |
As of June 30, 2024, the Company is subject to legal proceedings and regulatory actions in the ordinary course of business, such as disputes with suppliers, employees, etc. The proceedings are in the early stages. As of September 30, 2024, the amount of any single litigation was immaterial. Accordingly, there is considerable uncertainty regarding the timing or ultimate resolution of such matters. Especially, for the contracts with suppliers of molds, as the condition of payment in the contracts has not been reached. Therefore, the probability of an outflow is remote. The Company does not anticipate that the final outcome arising out of any of such matters will have a material adverse effect on the consolidated balance sheets, comprehensive loss, or cash flows on an individual basis or in the aggregate.
The Company has learned that there are four threatened lawsuits naming the Company and its transfer agent alleging breach of a Non-Redemption Agreement by the Company and the breach of a Contingent Value Rights Agreement by the Company and its transfer agent. The Company has not been served with a complaint.
24. SUBSEQUENT EVENT
Management performed an evaluation of the Company’s activity through the date the financial statements were issued (September 30, 2024), noting the following subsequent events:
(a) Reverse Stock Split
On
June 28, 2024, the Company held its Annual General Meeting of Shareholders, where the Company’s shareholders approved a reverse
stock split at a ratio of
Beginning on July 8, 2024, the Company’s ordinary shares began trading on Nasdaq on a split adjusted basis. No fractional shares were issued as a result of the reverse stock split. Instead, any fractional shares that would have resulted from the split were rounded up to the next whole number.
Prior
to the Reverse Stock Split the Company had ordinary shares issued. As a result of the
(b) Form F-3: Public marketing funding
On
August 6, 2024, the Company has filed with the Securities and Exchange Commission a shelf registration statement on Form F-3 (File No.
333-281314), containing a base prospectus covering the offering, issuance, and sale by the Company of up to $
| F-53 |