S-1/A: Graphjet Technology Files Amendment No. 1 to Form S-1 Registration Statement for Class A Ordinary Shares Offering

Graphjet Technology files an amendment to its S-1 registration statement for offering Class A Ordinary Shares to raise capital for working capital and general corporate purposes.

Summary

• Graphjet Technology, a Cayman Islands-based company, has filed Amendment No. 1 to its Form S-1 registration statement with the SEC.
• The filing pertains to the offer and sale of Class A Ordinary Shares, with no minimum offering amount.
• The offering is a best efforts offering, with officers and directors using their best efforts to sell the shares at a fixed price of $ per share for 180 days.
• Proceeds from the sale will be used for working capital and general corporate purposes.
• The company's Class A Ordinary Shares are listed on the Nasdaq Global Market under the symbol GTI, and its Public Warrants are listed on the OTC under the symbol GTIW.
• Graphjet Technology is an emerging growth company and is subject to reduced public company reporting requirements.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While the company has promising technology and growth plans, there are significant financial risks and uncertainties, including a going concern warning and a lack of revenue.

Positives

• Graphjet Technology possesses a breakthrough technology that transforms renewable waste into valuable artificial graphene and graphite.
• The company has a patent for palm-based synthetic graphite and a pending patent for palm-based graphene production.
• The company plans to build a commercial artificial graphite production facility in Nevada, capable of supporting the production of batteries for over 100,000 electric vehicles per year.
• The company has a strategic new membership in the Industrial Liaison Program (ILP) of Massachusetts Institute of Technology (MIT).

Negatives

• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company has a limited operating history and has not recorded any revenue since inception.
• The company faces intense competition in the graphene and graphite industry.
• The company is dependent on the palm oil industry for the availability of raw materials.
• The company may be unable to obtain additional financing to fund its operations and growth.

Risks

• The company's business and growth strategy depend on its ability to maintain and expand a network of qualified providers.
• The company is dependent on third-party manufacturers to assist in the production of its products.
• The company may face intense competition, which could limit its ability to maintain or expand market share.
• The company may be subject to litigation or regulatory investigation, which could harm its business.
• The company is vulnerable to severe weather conditions and natural disasters, which could severely disrupt its operations.
• The company conducts business in a heavily regulated industry and may face penalties for non-compliance.
• The company faces uncertainty as to whether it will achieve its strategic initiatives, including construction of its manufacturing plant.
• The company depends on its talent to grow and operate its business, and if it is unable to hire, integrate, develop, motivate and retain personnel, it may not be able to grow effectively.
• The company may change its operational policies, investment guidelines, and business and growth strategies without stockholder consent.
• The market price of Class A Ordinary Shares may be affected by factors different from those that affected the prices of Energem Class A Ordinary Share.
• The market for the company's securities has been volatile and may continue to be volatile, which would adversely affect the liquidity and price of its securities.
• The company will be subject to financial reporting and other requirements as a public company for which its accounting and other management systems and resources may not be adequately prepared, adversely impacting stock price.

Future Outlook

Graphjet Technology plans to expand its manufacturing facilities and develop related products to deliver a desirable future return. The company expects to open its first manufacturing plant in the Kuantan district of Pahang State, Malaysia with an expected annual output of 10,000 tons of graphite, 60 tons of graphene, and the processing of 30,000 tons of dried palm kernel waste. The company also plans to build a commercial artificial graphite production facility in Nevada.

Management Comments

• Graphjet Technology management projects the capacity for graphite and graphene are approximately 10,000 to 50,000 tons and 60 to 200 tons per annum, varies by phases.
• Graphjet Technology management assumes the maximum capacity for graphite and graphene to fulfil customer contracts to increase to approximately 100,000 tons and 1,000 tons per annum, respectively.

Industry Context

The global graphite market is anticipated to grow at a CAGR of 8.5% over the period from 2021 to 2031, to $50 billion, from $22 billion in 2021. The global graphene market is expected to grow more rapidly from $821.2 million in 2021 to $7.56 billion in 2028, a CAGR of 37.3%.

Comparison to Industry Standards

• The market cost of a ton of graphite ranges between $8,000 and $11,000, depending on market conditions and the quality of the mineral in question.
• The price of artificial graphite is even higher, and given the volatility in the oil markets, is approximately $20,000 per ton.
• At an acceptable purity level, the market price of graphene ranges from $167 to $450 per gram.
• Graphjet's technology produces graphite at a cost of approximately $4,500 per ton, significantly lower than both natural and other sources of artificial graphite.
• Graphjet can sell graphene at a price of $15 per gram, an over 80% savings.

Related Party Transactions

• On September 20, 2021, Graphjet entered into a Contract of Commission Processing with ZhongHe Industries Sdn. Bhd., in which Liu Yu is a shareholder and director, pursuant to which Graphjet appointed ZhongHe Industries Sdn. Bhd. for the provision of services as further stipulated in such Contract of Commission Processing.
• On March 28, 2022, Graphjet entered into a Deed of Assignment, as supplemented by the Supplemental Deed dated July 29, 2022, with Zhong He Tiancheng Technology Development (Beijing) Co. Ltd., in which Liu Yu is a shareholder and director, pursuant to which Graphjet acquired all the intellectual property of Zhong He Tiancheng Technology Development (Beijing) Co. Ltd., as listed in the said Deed of Assignment and Supplemental Deed for $222.
• On March 10, 2022, Graphjet entered into Intellectual Property Sales Agreement with Liu Yu, as supplemented by the letter from Liu Yu to Graphjet dated July 29, 2022, pursuant to which Graphjet purchased the process for producing palm-based graphene, an intellectual property held by Liu Yu for RM29,000,000, payable within the 19th to 36th month period from July 29, 2022.
• On July 1, 2022, Graphjet entered into a Tenancy Agreement with ZhongHe Industries Sdn. Bhd., in which Liu Yu is a shareholder and director, with respect to the demised premises located at L4-E-8 Enterprise 4, Technology Park Malaysia, Bukit Jalil, 57000 Kuala Lumpur.

Stakeholder Impact

• Shareholders may experience dilution in the future.
• The market price of Class A Ordinary Shares may be affected by factors different from those that affected the prices of Energem Class A Ordinary Share.
• The market for the company's securities has been volatile and may continue to be volatile, which would adversely affect the liquidity and price of its securities.
• The company will be subject to financial reporting and other requirements as a public company for which its accounting and other management systems and resources may not be adequately prepared, adversely impacting stock price.

Next Steps

• The company intends to begin construction on a manufacturing plant.
• The company will continue to invest in research and development and build out its sales and marketing team.
• The company plans to sample its product to multinational companies within the industry for market acceptance and procurement purposes.

Key Dates

Keywords

Graphjet Technology, Class A Ordinary Shares, offering, graphene, graphite, palm kernel shells, manufacturing, SEC, Nasdaq, best efforts, working capital, general corporate purposes, emerging growth company