LOBO EV Technologies Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone Q4 report. Filed April 30, 2024. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars. The company is a BVI holding company whose principal operations are in China, selling electric two-, three- and four-wheeled vehicles and providing automotive software services.
Key financial results
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $15.47 million | $18.30 million | Down 15% |
| Gross profit / margin | $2.21 million / 14% | $3.03 million / 17% | Margin down 3 percentage points |
| Operating income | $819,048 | $1.52 million | Down 46% |
| Net income | $986,471 | $1.12 million | Down 12% |
| Net income attributable to LOBO | $969,598 | $1.07 million | Down 10% |
| Operating cash flow | $(1.42) million | $(1.18) million | Greater cash use |
| Cash and cash equivalents, year-end | $470,335 | $182,829 | Up $287,506 |
| Working capital, year-end | $2.76 million | Not stated here | — |
| Total assets / liabilities, year-end | $19.67 million / $13.79 million | $16.94 million / $11.86 million | — |
Vehicle and accessories revenue fell 16% to $14.30 million; software royalties and development revenue fell 14% to $1.18 million. E-bicycle revenue grew 8%, while e-moped revenue fell 47%, four-wheeled vehicle revenue fell 85%, and battery revenue fell 57%. Reported gross margins were 12% for vehicles and accessories and 40% for software services, versus 13% and 57%, respectively, in 2022.
Cash, debt and liquidity
- Cash flow from investing activities was positive $614,673, principally reflecting repayments of interest-free related-party loans; financing activities provided $1.10 million.
- Operating cash use reflected higher prepaid expenses and inventory and lower accounts payable. Prepayments to vendors rose to $5.78 million; inventory increased to $5.74 million.
- Net accounts receivable was $2.53 million. The company recorded no allowance for credit losses, despite three customers accounting for about 80% of receivables.
- Year-end bank borrowing was $140,847, classified as long-term; the company also had $1.67 million due to related parties and $661,681 in operating lease liabilities. It reported no current bank loan at year-end.
- Management says it expects sufficient cash flows to fund operations and meet obligations for the next 12 months, conditional on successful execution of its business plans.
Material changes, outlook and risks
- Revenue and gross margin declined year over year, while operating expenses decreased 8%. Operating income fell substantially. Net income included $519,784 of net other income, compared with $27,949 in 2022; the filing does not clearly explain the full source of this FY2023 amount.
- Operating cash flow remained negative for a second consecutive year. Prepayments to vendors more than doubled, and inventory increased about 50%.
- The company identifies two material weaknesses in internal control over financial reporting: deficient property, plant and equipment and share-transaction records; and insufficient accounting and reporting personnel with appropriate U.S. GAAP and SEC expertise. Management says it will continue remediation; no auditor attestation on internal controls was provided.
- Management describes growth plans centered on new products, R&D, dealer expansion, manufacturing capacity and overseas markets. No quantified revenue or earnings guidance is provided. The company reported an April 2024 strategic agreement to establish an assembly line in Serbia.
- The March 2024 IPO raised approximately $4.68 million net, with $500,000 held in escrow. Planned use: 40% for manufacturing facilities, 10% for R&D and 50% for working capital. The filing states that proceeds had not been used through April 30, 2024.
- Key risks include concentrated customers and suppliers, dealer dependence, collection risk, reliance on Chinese operations and regulation, currency controls and exchange-rate exposure, product safety and liability exposure, and competitive and execution risks. The company states it had no product-liability or business-disruption insurance at year-end.
- The company reports no cash dividends and does not expect to pay them in the foreseeable future. Its auditor issued an unqualified opinion on the financial statements; the audit did not express an opinion on internal-control effectiveness.
Important facts for investors to verify
- Reconcile share counts: the filing reports 7,780,000 shares at December 31, 2023 on the cover, 6,400,000 in the year-end financial statements, and 8,180,000 outstanding as of April 30, 2024. Confirm the relevant dates and effects of share issuances and the IPO.
- Review the composition and sustainability of the $519,784 net other income, given the decline in operating income.
- Assess cash conversion, including the sharp rise in vendor prepayments and inventory, the reported zero credit-loss allowance, and receivable concentration.
- Evaluate related-party balances and controls. The company reports repayment of amounts due from related parties by year-end, but still reports $1.67 million due to related parties and substantial related-party loan activity during the year.
- Track remediation of the two material weaknesses and confirm whether reporting processes and supporting records improve.
- Confirm IPO proceeds, escrow status and actual use against the stated allocation. The filing’s wording on offering expenses and net proceeds is unclear: it reports approximately $4.68 million net proceeds but also describes expenses as totaling $5.52 million, while $5.52 million is the stated gross offering amount.