Carbon Revolution Public Ltd Co

Carbon Revolution Public Limited Company (the "Company") operates in the global automotive industry, specializing in the design and manufacture of advanced carbon fiber wheels ⁵². The Company's core business model revolves around generating revenue primarily through the sale of these carbon fiber automotive wheels to global Original Equipment Manufacturers (OEMs) ⁵⁷. Additionally, it generates revenue from associated engineering services and customer-owned tooling related to the development of these wheel sales ⁵⁷. The Company also generates a small amount of revenue from non-OEM wheels sold in the aftermarket channel ⁵⁷.

The Company positions itself as a leader in the lightweight automotive carbon fiber wheel sector, being the first globally to successfully develop and manufacture single-piece carbon fiber wheels to OEM quality standards with commercial adoption ⁵⁹. Its competitive advantages stem from its technically advanced, high-performing, lightweight carbon fiber wheels, which offer a weight saving of up to 40%-50% compared to comparable aluminum wheels ⁵³. This weight reduction can translate to an up to 5%-10% increase in range for Electric Vehicles (EVs) if reinvested in battery mass, with further benefits from aerodynamic, NVH, and structural enhancements ⁵³. The Company's products and manufacturing processes are protected by an extensive Intellectual Property (IP) portfolio, including trade secrets and, as of April 24, 2025, 94 granted patents and 28 pending patents across 15 patent families in key jurisdictions [53, 59].

The Company's product offerings are centered on one-piece carbon fiber wheels. These wheels are designed and manufactured using proprietary "dry fiber" manufacturing processes, allowing precise control of fiber placement and material properties ⁵⁴. The manufacturing process involves fabrication, infusion/injection of resin, and finishing, including the patent-pending Diamond Weave Technology™ for aesthetic surface finish ⁵⁴. Each wheel undergoes rigorous quality checks, including 3D CT X-Ray scans and leak tests ⁵⁴. For high-performance applications, the Company has developed its own thermal barrier coating (TBC) technology to shield wheels from extreme brake temperatures ⁵⁵. The Company conducts extensive testing, including impact, biaxial fatigue, and real-world vehicle testing, often in conjunction with OEM partners ⁵⁵.

As of April 24, 2025, the Company has eleven active awarded programs with five global OEMs, with seven programs currently in production and four in the development phase ⁵². In addition, there are seven programs in aftersales, totaling 18 awarded programs across six global OEMs ⁵². Notable OEM programs include those with Ford, Ferrari, General Motors, Jaguar Land Rover, Renault, and Lamborghini ⁵². The Company has sold over 100,000 automotive wheels to six global OEMs across fourteen programs that have been in commercial production to date ⁵⁹.

For the fiscal year ended June 30, 2023, the Company reported a profit of €0 ⁶⁷. This is consistent with the fiscal year ended June 30, 2022, which also reported a net profit of €0 ⁶⁷. The Company did not generate any operating revenues until the closing of the Business Combination, which occurred after June 30, 2023 ⁶⁷. As of June 30, 2023, the Company had no cash and cash equivalents ⁶⁸.

The Company's financial statements for the fiscal years ended June 30, 2023, June 30, 2022, and June 30, 2021, show no operational revenue or expenses, as the Company did not conduct operations during these periods ⁶⁷. The Business Combination was accounted for as a capital reorganization, with Carbon Revolution PL deemed the accounting acquirer ⁶³. Under IFRS 2, the difference between the fair value of Ordinary Shares issued to Twin Ridge shareholders and the net liabilities of Twin Ridge is recognized as a listing expense ⁶³.

Significant operational developments include the consummation of the Business Combination on November 3, 2023, where Twin Ridge merged into MergerSub, and Carbon Revolution PL became a wholly-owned subsidiary of the Company ⁶³. Concurrently, the Company entered into the OIC Financing, issuing Class A redeemable preferred shares with a 12% fixed accumulating distribution and warrants for aggregate gross proceeds of US$35 million (equivalent to A$54.7 million) [63, 64]. Between April 2024 and October 2024, under the Escrow Tranche Amendments, the Company issued Class B Preferred Shares and Series 2024-A notes to OIC for US$35 million ⁶⁴. In December 2024, the Company and OIC agreed to further amendments (December 2024 Amendments) to facilitate US$25 million of funding from the remaining US$40 million of the original OIC Financing, in exchange for Series 2025-A Notes and the release of US$2 million from the payment reserve fund under the New Debt Program ⁶⁵.

The Company's 2025 business outlook is centered on several key operational focus areas. These include the successful launches of new production programs, with three programs having recently entered production and a further four awarded programs currently in development or launch phase expected to commence production during CY25 ⁶⁶. The Company also aims to win new customer program awards to fill the capacity at its existing Australian manufacturing facility, which is being expanded in line with expected demand ⁶⁶.

A major growth area involves the further expansion of the Mega-line production capacity and other plant areas through efficiency gains and additional investments, supporting expected future production requirements for awarded programs ⁶⁶. This expansion program is planned to complete progressively through 2025 and early 2026 ⁵². The Company expects demand to increase, particularly from late 2025, as new programs largely enter production ⁶⁶. In the longer term, the Company plans to secure higher volume OEM wheel programs with intended production at potential new manufacturing facilities closer to OEM customers, aiming for higher volume and lower cost manufacturing to penetrate a broader market beyond high-performance and luxury segments ⁵⁸.

Operationally, the Company anticipates improvements in gross margin, driven by further efficiencies as more programs come online and volumes ramp up ⁶⁶. It expects to leverage increased volumes in the Australian facility during the second half of the calendar year and realize benefits from automation and capacity increases ⁶⁶. Cost reduction initiatives include reducing material costs through improved supplier prices due to volume increases, substituting with lower-cost materials, sourcing from lower-cost providers, shifting to long-term contracts, consolidating consumables suppliers, and implementing production processes and designs that use less material ⁶⁶. Overheads are also being closely managed to align with program development lifecycles ⁶⁶.

Planned capital allocation includes continued investment to add incremental production capacity at the Australian facility, with Mega-line and associated capacity expansion equipment expenditures to date exceeding A$41 million ⁵⁸. The Company expects capital expenditure for the Australian manufacturing facility to reduce in the next 12 months from the filing date as capacity expansion will be substantially completed ⁶⁹. Research and Development (R&D) expenses for the financial year ending June 30, 2024, were A$36.1 million, including impairment of intangible assets of A$18.9 million ⁵⁹. R&D will continue to be incurred to deliver programs in development, ongoing production program development, and technology expansion ⁶⁷.

The Company's short-term liquidity measures include meeting conditions for the release of the remaining US$5 million ⁶⁹ (EUR 4.6 million ⁶⁹) of OIC funding and the remaining US$0.4 million ⁶⁹ (EUR 0.4 million ⁶⁹) from the payment reserve fund, along with the waiver of US$3 million ⁶⁹ (EUR 2.8 million ⁶⁹) cash interest by existing lenders and an equivalent amount by OIC investors ⁶⁶. Further deferral of US$15.0 million ⁶⁹ (A$22.5 million ⁶⁶, EUR 13.9 million ⁶⁹) in transaction costs from the capital reorganization is also being sought ⁶⁶. Other measures include securing ongoing bailment payments from key customers for working capital relief, pursuing claims against certain customers for payment for shipped wheels and program cancellations, and securing continued support from suppliers for deferred payment terms ⁶⁶. The Company also expects to receive a remaining milestone-based A$0.5 million ⁶⁶ funding amount under the MMI grant ⁶⁶. Potential additional funding sources include repurposing the remaining US$15 million ⁶⁶ (EUR 13.9 million ⁶⁹) of the original US$110 million ⁶⁶ (EUR 101.6 million ⁶⁹) OIC Financing, which was initially intended for a new manufacturing facility, to support existing Australian operations ⁶⁶. Access to capital through the issuance of other debt or equity securities via public or private placement or utilization of the Committed Equity Facility (CEF) with Yorkville Advisors is also a potential source ⁶⁶.

The Company faces significant financial and operational risks, including a material uncertainty regarding its ability to continue as a going concern due to recurring losses and negative operating cash flows, requiring additional capital that may not be available on acceptable terms or at all ⁷. The Company expects to need to refinance its long-term debt prior to June 2026 amortization payments under the New Debt Program, and failure to do so could lead to default and acceleration of payments ⁸. Operational risks include customer demand being lower than expected, as current OEM contracts are not take-or-pay, and sales volumes for programs may be lower due to various factors including vehicle sales, take rates for optional carbon fiber wheels, and macroeconomic impacts like tariffs or changes in EV incentives ¹³. The Company may also experience higher than anticipated costs per wheel due to manual labor, materials, supply chain issues, or failure to achieve manufacturing quality, volume, and cost targets ¹⁴. Delays in new wheel programs due to design, engineering, or validation challenges could adversely impact revenue and profitability [13, 14]. The Company is exposed to volatility in demand and short-notice changes to customer forecasts, which can disrupt operations, increase costs, and lower margins, as it often places raw material orders with longer lead times than firm customer orders ¹⁶. Furthermore, the Company relies on single suppliers for key material inputs, increasing exposure to price increases and supply shortages ¹⁷. Loss or failure of key manufacturing infrastructure or equipment at its single facility in Geelong, Australia, could cause significant disruption ¹⁸. The bespoke nature of much of its manufacturing equipment carries a higher risk of delays, cost overruns, and performance issues ¹⁹. The Company is also subject to inherent risks in developing and using new technology, product innovations, and manufacturing processes, which may lead to unexpected costs, production delays, and quality issues ¹⁹. Intellectual property infringement claims by third parties, or the inability to protect its own IP, could result in substantial costs, injunctions, damages, and loss of competitive advantage [27, 28]. The Company has identified material weaknesses in its internal control over financial reporting, which could lead to material misstatements or failure to meet reporting obligations [40, 41]. International operations expose the Company to geopolitical and economic instability, inflation, military conflicts, limited IP protection, and compliance with diverse local laws and regulations, including trade and foreign exchange restrictions and tariffs ³⁸.

Management's overall tone emphasizes a strategic focus on industrialization and scaling production to achieve profitability and meet increasing OEM demand. They highlight the initial Mega-line commissioning as a significant milestone, positioning the Company for expected demand from global OEMs ⁶⁶. Key strategic priorities for the upcoming 12 months include the successful launch of new production programs, with four awarded programs expected to commence production during CY25 ⁶⁶. Management also prioritizes winning new customer program awards to fully utilize the capacity of the Australian manufacturing facility ⁶⁶. A core theme is the continuous expansion of Mega-line production capacity through efficiency gains and additional investments, aiming to support future production requirements ⁶⁶. Furthermore, management is focused on improving gross margin through increased volumes and realizing benefits from automation and capacity increases, alongside reducing material and labor costs through various initiatives ⁶⁶. They explicitly state that overheads are being managed closely to align with program development lifecycles ⁶⁶. Short-term liquidity measures are critical, including meeting conditions for the release of the remaining US$5 million ⁶⁶ of OIC funding, the remaining US$0.4 million ⁶⁶ from the payment reserve fund, and securing waivers for US$3 million ⁶⁶ in cash interest from existing lenders and an approximately equivalent amount from OIC investors ⁶⁶. Management is also actively pursuing deferrals of US$15.0 million ⁶⁶ in transaction costs, securing ongoing bailment payments from customers, pursuing claims against customers, and ensuring continued supplier support through deferred payment terms ⁶⁶. Compliance with the MMI grant terms and receipt of the remaining A$0.5 million ⁶⁶ funding are also emphasized.