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 earns 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 lead to an up to 5%-10% increase in range for Electric Vehicles (EVs) if reinvested in battery mass, along with benefits from improved aerodynamics, Noise, Vibration, and Harshness (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].

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 total, the Company has 18 awarded programs across six global OEMs, including seven programs in aftersales ⁵². Since its first OEM program commenced production in 2015, the Company has sold over 100,000 automotive wheels ⁵⁹. Its current production programs include those with Ford (GT, Mustang Shelby GT350R, GT500, Mustang Dark Horse), Ferrari (488 Pista/F8 Tributo & F8 Spider, SF90 Stradale, 812 Competizione, 296 GTB and GTS), General Motors (Chevrolet Corvette Z06/Z07, E-Ray, Corvette ZR1), Renault (Megane RS Trophy R), Jaguar Land Rover (Range Rover Sport SV), and Lamborghini (Temerario) ⁵².

For the fiscal year ended June 30, 2023, the Company did not conduct operations and therefore generated no revenue or expenses, reporting a profit of €0 ⁶⁷. Similarly, for the fiscal year ended June 30, 2022, the Company reported a net profit of €0 ⁶⁷. The Company had no cash and cash equivalents as of June 30, 2023 ⁶⁸.

During the reported period, the Company consummated a business combination on November 3, 2023, with Twin Ridge Capital Acquisition Corp., resulting in the Company becoming the direct parent of Carbon Revolution PL ⁶³. This transaction was accounted for as a capital reorganization, with Carbon Revolution PL deemed the accounting acquirer ⁶³. Concurrently, the Company entered into a securities purchase agreement with OIC Structured Equity Fund I Range, LLC and affiliated entities ("OIC Financing") on November 3, 2023, where OIC subscribed for Class A redeemable preferred shares and warrants for aggregate gross proceeds of US$35 million ⁶⁴. Between April and October 2024, the Company issued Class B Preferred Shares and Series 2024-A loan notes to OIC for US$35 million, replacing an original commitment ⁶⁴. In December 2024, further amendments facilitated US$25 million of the remaining US$40 million from the original OIC Financing, along with the release of US$2 million from a payment reserve fund under the New Debt Program ⁶⁵.

The Company's business outlook for the upcoming 12 months is centered on several key operational focus areas, including the successful launch of new production programs, with three programs having recently entered production and a further four awarded programs expected to commence production during CY25 ⁶⁶. These programs span performance, premium/luxury/SUV, and pick-up segments, covering both internal combustion engine and EV drivetrains ⁶⁶. The Company also anticipates winning new customer program awards to fill the capacity at its existing Australian manufacturing facility, which is being expanded progressively through 2025 to early 2026 in line with expected demand ⁶⁶.

A major growth area for the Company is the continued expansion of its production capacity, particularly the Mega-line, through efficiency gains and additional associated investments across the facility ⁶⁶. This expansion is designed to support expected future production requirements for awarded programs ⁶⁶. The Mega-line, whose initial phase commissioning was completed early in CY2024, including two new mold stations and an associated resin delivery unit, is replicable at other locations ⁵⁸. In the longer term, the Company plans to secure higher volume OEM wheel programs for production at potential new manufacturing facilities closer to OEM customers, aiming for higher volume and lower cost manufacturing to penetrate beyond the performance and premium/luxury vehicle segments ⁵⁸.

The Company expects to improve its gross margin through further efficiencies as more programs come online and volumes ramp up ⁶⁶. This includes reducing material costs by negotiating improved prices with suppliers due to increased volumes, substituting lower-cost materials, sourcing from lower-cost providers, shifting from spot purchases to long-term contracts, consolidating consumables suppliers, and implementing production processes and designs that use less material ⁶⁶. Labor costs are also expected to decrease through fixed labor operating leverage, automation via robotics and conveyor systems on the Mega-line, and lean process improvements ⁶⁶. Overheads are being closely managed to align with program development lifecycles ⁶⁶.

Planned capital allocation includes continued investment in research and development to improve product technology, industrialize production processes, and develop new customer programs ⁵⁸. R&D expenses for the financial year ending June 30, 2024, were A$36.1 million ⁵⁹. The Company's expansion of production capacity at the Australian facility through 2025 and early 2026 will involve capital expenditures, which are expected to reduce in the next 12 months as the capacity expansion will be substantially completed ⁶⁷.

The Company faces several structural headwinds and execution risks. It expects to continue incurring net losses and negative cash flows from operating activities over the next twelve months ⁶⁹. To address this, short-term liquidity measures include meeting conditions for the release of the remaining US$5 million ⁶⁹ of OIC funding and US$0.4 million ⁶⁹ from the payment reserve fund, along with a US$3 million ⁶⁹ cash interest waiver by existing lenders and an equivalent waiver by OIC investors ⁶⁶. The Company also needs to secure ongoing deferral of US$15.0 million ⁶⁹ (A$22.5 million ⁶⁶) in transaction costs from the capital reorganization, as a US$5 million ⁶⁹ (A$7.6 million ⁶⁶) payment due in November 2024 was not made, and a further US$10.0 million ⁶⁹ (A$15.0 million ⁶⁶) is payable within the next 12 months ⁶⁶. Other measures include securing ongoing bailment payments from key customers for working capital relief, pursuing claims against customers for under-ordered volumes or program cancellations, securing deferred payment terms from suppliers, and complying with the MMI grant to receive the remaining A$0.5 million ⁶⁶ funding ⁶⁶.

Geographic, regulatory, and macro factors also pose constraints. The Company's ability to obtain additional financing is critical, as its current cash and committed funding are insufficient to execute its business plan ⁶⁹. Failure to secure additional financing would materially and adversely impact operations, including developing and producing new wheel programs and satisfying obligations ⁶⁹. The Company's ability to continue as a going concern is contingent on successfully executing its liquidity and working capital plan ⁶⁹. Furthermore, the Company must comply with loan covenants under the New Debt Program and OIC Notes, and conditions of the Class A and Class B Preferred Shares ⁷⁰. Consent from the Servicer and OIC is required for new debt funding arrangements not classified as permitted indebtedness, and OIC's consent is needed for certain equity funding arrangements ⁷⁰.

The Company faces material risks across several categories. Financially, it is not yet profitable or cash flow positive and will need to raise additional capital, which may not be available on favorable terms or at all, leading to a material uncertainty about its ability to continue as a going concern ⁶. The Company expects to need to refinance its long-term debt by June 2026, and failure to do so could result in an inability to make payments, acceleration of debt, and enforcement of security rights ⁸. Operational risks include customers not ordering wheels as expected, lower than anticipated sales volumes, and delays in new program commencements, which could impact revenue and profitability ¹³. The margin for wheels may be lower than expected due to higher costs for labor, materials, or supply chain disruptions, and the Company may not be able to pass these costs on to customers [14, 16]. Manufacturing quantity and quality targets may not be met, leading to higher scrap rates, increased costs, late shipments, or customer claims ¹⁵. The Company's capacity expansion plans may take longer or cost more than anticipated, or may not achieve expected outcomes ¹⁵. Supply chain volatility and short-notice changes to customer forecasts can disrupt operations and increase costs, as the Company often places raw material orders with longer lead times than customer firm orders ¹⁶. The Company is exposed to claims from customers for late or non-conforming deliveries, while having limited recourse against its own suppliers for similar issues ¹⁶. Reliance on single suppliers for key material inputs makes the Company vulnerable to price increases and supply shortages ¹⁷. Product performance failures, recalls, or safety issues could lead to reputational harm, liability, and increased costs ²¹. The Company may be unable to retain and increase its workforce, or face higher labor costs, and industrial action or loss of key personnel could disrupt operations ²². Labor strikes in the U.S. automotive industry could reduce demand for products or lead to renegotiated pricing ²³. Force majeure events, including international conflicts like the Russian-Ukrainian and Israel-Hamas/Hezbollah conflicts, or pandemics, could disrupt supply chains, increase costs, and reduce demand ²⁴. Climate change and environmental regulations may increase operating and compliance costs, and the Company currently lacks a feasible recycling solution for carbon fiber wheels, which could lead to reputational damage ²⁵. Intellectual property risks include potential infringement claims by third parties, geographical limitations of patent protection, and the risk of unauthorized access or disclosure of confidential know-how and trade secrets [27, 28]. The Company has identified material weaknesses in its internal control over financial reporting, which could result in material misstatements or failure to meet reporting obligations ⁴¹. Non-compliance with anti-bribery, anti-corruption, export control, and economic sanctions laws, as well as privacy and data protection regulations, could lead to fines, sanctions, and reputational harm ⁴².

Management's overall tone emphasizes a strategic focus on industrialization and capacity expansion to meet expected OEM demand, while actively managing liquidity and cost structures. The Company expects to achieve successful launches of new production programs, with four awarded programs anticipated to commence production during CY25 ⁶⁶. A key strategic priority is the award of new customer programs to fully utilize the capacity of the Australian manufacturing facility, which is undergoing further expansion through 2025 and early 2026 ⁶⁶. Management is also prioritizing improvement in gross margin through efficiency gains, volume ramps, and material cost reductions, including negotiating improved supplier prices and implementing production process improvements ⁶⁶. Short-term liquidity measures are critical, including meeting conditions for the release of the remaining US$5 million ⁶⁹ of OIC funding and US$0.4 million ⁶⁹ from the payment reserve fund, securing a US$3 million ⁶⁹ cash interest waiver from existing lenders, and deferring US$15.0 million ⁶⁹ (A$22.5 million ⁶⁶) in transaction costs ⁶⁶. The Company also plans to pursue claims against customers for under-ordered volumes and program cancellations, secure favorable payment terms from suppliers, and ensure compliance with the MMI grant to receive the remaining A$0.5 million ⁶⁶ funding ⁶⁶.