20-F/A: LOBO EV Technologies Reports 2024 Net Loss Amid Soaring Expenses and Internal Control Weaknesses, Despite Strong EV Sales Growth

LOBO EV Technologies Ltd. reported a net loss of $845,841 for the fiscal year ended December 31, 2024, a significant decline from a net income of $986,471 in 2023, driven by a sharp increase in operating expenses and identified material weaknesses in internal financial controls.

Summary

• LOBO EV Technologies Ltd. reported a net loss of $845,841 for the fiscal year ended December 31, 2024, compared to a net income of $986,471 in 2023 and $1,115,260 in 2022.
• Total revenues increased by 37% to $21,188,606 in 2024 from $15,474,918 in 2023, primarily driven by a 48% increase in electric vehicles and accessories sales.
• The electric vehicles and accessories sales segment saw significant growth in 2024, with three-wheeled electric vehicle revenue increasing by 95.84% to $4,196,960 and four-wheeled electric off-highway shuttles revenue surging by 278.97% to $624,089.
• Revenue from batteries increased by 265.34% to $4,283,388, and parts and accessories revenue grew by 129.72% to $1,172,027 in 2024.
• The software royalties and development and design services segment experienced a 95% decrease in revenue, falling to $56,485 in 2024 from $1,175,951 in 2023, largely due to the sale of Guangzhou Lobo.
• Total operating expenses dramatically increased by 216.7% to $4,399,469 in 2024 from $1,389,049 in 2023, primarily due to higher general and administrative expenses and increased research and development activities.
• General and administrative expenses rose to $2,020,003 in 2024 from $516,187 in 2023, attributed to public company costs (audit and consulting fees) and the implementation of 5S methodology in factory management.
• Research and development expenses increased significantly to $1,663,445 in 2024 from $262,375 in 2023, reflecting increased research activities to meet future market demand.
• The company identified two material weaknesses in its internal control over financial reporting for 2024 and 2023: improper accounting records for property, plant, equipment, and common stock transactions, and insufficient financial reporting and accounting personnel with U.S. GAAP and SEC reporting knowledge.
• Net cash used in operating activities increased to $2,935,176 in 2024 from $1,416,618 in 2023, primarily due to increases in inventories and prepaid expenses.
• The company completed its Initial Public Offering (IPO) on March 25, 2024, issuing 1,380,000 ordinary shares at $4.00 per share, generating net proceeds of approximately $4.68 million.
• In December 2024, the company issued an unsecured convertible note for $1,635,000 and 850,000 pre-delivery ordinary shares to Streeterville Capital, LLC.
• The company disposed of Guangzhou LOBO and Wuxi Jinbang in December 2024, realizing a total gain on disposal of subsidiaries of $836,112.
• A plan to sell Beijing LOBO, a wholly-owned subsidiary, for RMB 27,000,000 (approximately $3,700,000) was decided in December 2024 and completed in March 2025.

Sentiment

Score: 4

Explanation: While the company achieved significant revenue growth in its core EV segment and successfully completed an IPO, the swing to a net loss, substantial increase in operating expenses, and identified material weaknesses in internal controls indicate significant operational and financial challenges. The strategic shift and capital raise provide some positive long-term potential, but the immediate financial performance and control issues are concerning.

Positives

• Total revenues increased by 37% in 2024, driven by strong performance in the electric vehicles and accessories sales segment.
• Electric vehicles and accessories sales revenue increased by 48% in 2024, with significant growth in three-wheeled electric vehicles (+95.84%), four-wheeled electric off-highway shuttles (+278.97%), batteries (+265.34%), and parts and accessories (+129.72%).
• The company successfully completed its Initial Public Offering (IPO) on March 25, 2024, raising approximately $4.68 million in net proceeds.
• Increased investment in research and development, with R&D expenses rising to $1,663,445 in 2024, indicating a commitment to future product innovation.
• The company maintains a diversified supply chain and close relationships with suppliers, enabling cost control and timely new product launches.
• Strategic focus on becoming a 'hidden champion' in intelligent urban tricycles and off-highway four-wheeled electric shuttles, supported by user-centered product design and innovative marketing strategies.
• The company realized a significant gain of $836,112 from the disposal of two subsidiaries, Guangzhou LOBO and Wuxi Jinbang, in 2024.

Negatives

• The company reported a net loss of $845,841 for the fiscal year ended December 31, 2024, a reversal from net income in prior years.
• Total operating expenses increased substantially by 216.7% to $4,399,469 in 2024, significantly outpacing revenue growth.
• General and administrative expenses surged to $2,020,003 in 2024, largely due to costs associated with being a public company.
• The software royalties and development and design services segment saw a drastic 95% decrease in revenue and a negative gross profit margin of (912)% in 2024, primarily due to the disposal of Guangzhou Lobo.
• Net cash used in operating activities increased to $2,935,176 in 2024, indicating that core operations are not generating sufficient cash.
• The company identified material weaknesses in its internal control over financial reporting, specifically regarding accounting records for property, plant, equipment, and common stock transactions, and insufficient U.S. GAAP/SEC reporting personnel.
• Gross profit margin decreased to 12% in 2024 from 14% in 2023, indicating reduced profitability per unit of revenue.

Risks

• The company may incur future losses and be unable to achieve or maintain profitability due to increasing operating expenses.
• Success is dependent on continued innovation and successful launches of new products, with no assurance of anticipating or responding to changes in consumer preferences.
• Material weaknesses in internal control over financial reporting could lead to inaccurate financial reporting or fraud, potentially causing loss of investor confidence or delisting.
• Limited operating history as an integrated group may not provide an adequate basis to predict future prospects and results.
• Limited experience in high volume manufacturing could hinder the ability to meet quality, price, and production standards.
• Intense market competition, especially from low-cost models by industry leaders like AIMA Technology Group Co., LTD and Yadea Group Holdings Ltd., could adversely affect competitive position and revenues.
• Failure to adopt new technologies or adapt products to changing customer requirements or industry standards could materially and adversely affect the business.
• Inability to manage growth or execute strategies effectively could materially and adversely affect business and prospects.
• Product quality problems, design and manufacturing defects, and reliance on third-party component suppliers could result in decreased sales, warranty expenses, and harm to reputation.
• Reliance on dealers for sales and distribution, with risks of maintaining relationships and potential payment defaults by clients with large account receivable balances.
• Products are subject to safety and other standards issued by Chinese regulatory authorities (e.g., CCC certification), and failure to comply could prohibit sales and result in liabilities.
• Inability to prevent others from unauthorized use of intellectual property could harm business and competitive position.
• The COVID-19 pandemic and past COVID-Zero policy in China had material adverse effects, with potential for future impacts from labor shortages due to increased cases.
• Exposure to patent, trademark, or other proprietary rights infringement claims, which may be time-consuming and costly to defend.
• Negative publicity relating to products, management, or industry could materially and adversely affect brand image and demand.
• Failure to comply with legal or regulatory requirements or to obtain/adhere to relevant licenses, permits, registrations, or certificates.
• Continued expansion into new geographic markets or increased manufacturing capacity carries risks of establishing distribution networks, finding qualified dealers, and integrating new operations.
• Reliance on third-party logistic service providers exposes the company to risks of damage or disruption to distribution logistics.
• Operations may be interrupted by production difficulties due to mechanical failures, utility shortages, fire, natural disaster, or other calamities.
• Suppliers or dealers failing to use ethical business practices and comply with applicable laws and regulations could harm brand image.
• Dependence on the continued service and performance of core management team and other key personnel, with risks if they terminate employment.
• Higher employee costs and inflation in China may adversely affect profitability.
• Reliance substantially on external suppliers for certain components and raw materials, with risks of supply chain interruptions or price increases.
• Any significant cybersecurity incident or disruption of information technology systems could materially damage user relationships and subject the company to significant consequences.
• Changes in international trade policies, or the escalation of tensions in international relations (e.g., U.S.-China trade tensions, UFLPA), may adversely impact business and operating results.
• Business plans require significant capital, and future capital needs may require additional equity or debt securities that could dilute shareholder interests or restrict operations.
• An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for products.
• Lack of insurance coverage for product liability claims or business disruption could expose the company to significant costs.
• Risks associated with joint research arrangements, strategic alliances, or acquisitions, including sharing proprietary information and integration difficulties.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit legal protections.
• Reliance on dividends and other distributions from PRC subsidiaries, with limitations on their ability to make payments due to PRC regulations.
• Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect profitability.
• Fluctuations in exchange rates (Renminbi against the U.S. dollar) could have a material adverse effect on results of operations and investment value.
• PRC regulation of loans to and direct investment in PRC entities by offshore holding companies may delay or prevent the use of offshore offering proceeds.
• PRC regulations relating to offshore investment activities by PRC residents (SAFE Circular 37) may limit PRC subsidiaries' ability to increase capital or distribute profits.
• China's M&A Rules and other PRC regulations establish complex procedures for acquisitions of PRC companies by foreign investors.
• Classification as a PRC resident enterprise for PRC income tax purposes could result in unfavorable tax consequences.
• Uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• If custodians or authorized users of controlling non-tangible assets (e.g., corporate chops and seals) fail their responsibilities or misuse assets, business and operations could be adversely affected.
• Leased property interests may be defective, affecting the right to lease properties and causing business disruption.
• Increased Chinese government oversight and control over overseas offerings and foreign investment in China-based issuers could significantly limit or hinder the ability to offer shares.
• Risk of delisting under the HFCA Act if the PCAOB is unable to inspect auditors for two consecutive years.
• The trading price of Ordinary Shares may be volatile, leading to substantial losses for investors.
• If securities or industry analysts do not publish research or adversely change recommendations, the market price and trading volume could decline.
• Techniques employed by short sellers may drive down the market price of Ordinary Shares.
• No dividends are expected in the foreseeable future, requiring reliance on price appreciation for investment return.
• As a British Virgin Islands company, the company may adopt home country corporate governance practices that differ from Nasdaq standards, potentially affording less protection to shareholders.
• British Virgin Islands law provides less protection for minority shareholders than U.S. law.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• Principal shareholders have substantial influence, and their interests may not align with other shareholders.
• As a controlled company under Nasdaq rules, the company may choose to exempt itself from certain corporate governance requirements.
• Changing laws and regulations regarding regulatory matters, corporate governance, and public disclosure have increased costs and non-compliance risk.
• Exposure to liabilities under applicable anti-corruption laws (e.g., FCPA) could have a materially adverse effect.
• Failure to meet applicable Nasdaq listing requirements could lead to delisting, reducing liquidity and market price.

Future Outlook

The company aims to become a 'hidden champion' in intelligent urban tricycles and off-highway four-wheeled electric shuttles within the next decade. This will be achieved through continued innovation, launching new products like solar-powered e-bicycles, prioritizing strategic products such as intelligent electric urban tricycles and elderly scooters, and strengthening the development of intelligent products. The company plans to invest significant resources in R&D, recruit global talent, and establish strategic cooperation with industry leaders and research institutions. Customer relationship management, diversified marketing methods (including expanding dealer networks and participating in international exhibitions), and strengthening cost control through centralized ordering and supply chain optimization are also key strategies.

Management Comments

• Mr. Huajian Xu, Chief Executive Officer, and Ms. Tong Zhu, Chief Financial Officer, certified that the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made not misleading, and that the financial statements fairly present in all material respects the financial condition, results of operations, and cash flows of the company.
• Management stated responsibility for establishing and maintaining effective disclosure controls and procedures and internal control over financial reporting, concluding that disclosure controls and procedures were ineffective as of December 31, 2024, due to identified material weaknesses.

Industry Context

The company operates in the competitive electric vehicle (EV) and AI robotic products industries in China, focusing on two-wheeled, three-wheeled, and off-highway four-wheeled electric vehicles. The industry is characterized by evolving consumer preferences and rapid technological advancements. The company faces intense competition from established industry leaders like AIMA Technology Group Co., LTD and Yadea Group Holdings Ltd., which offer low-end and low-cost models. LOBO EV aims to differentiate itself through user-centered design and intelligent technology, while also employing a cost-leadership strategy. The company's focus on short-distance transportation and specific user segments (rural, delivery, elderly, female) reflects a niche strategy within the broader EV market. The disposal of its software segment subsidiary indicates a strategic shift to concentrate on its core EV manufacturing business.

Comparison to Industry Standards

• The company acknowledges intense competition from industry leaders such as AIMA Technology Group Co., LTD and Yadea Group Holdings Ltd., which have developed low-end and low-cost models sold at approximately RMB 1,000 per two-wheel electric vehicle (without battery).
• LOBO EV's suggested retail prices for e-bicycles range from RMB 1,200 (USD $188) to RMB 3,000 (USD $471), and e-mopeds from RMB 2,000 (USD $310) to RMB 4,000 (USD $630), indicating a price point generally above the low-end models of major competitors, suggesting a focus on different market segments or higher-spec products.
• The company's gross profit margin for electric vehicles and accessories sales was 14% in 2024, which can be compared to industry averages for EV manufacturers to assess its competitive pricing and cost structure, though specific competitor margins are not provided in the document.
• LOBO EV's strategy of user-centered product design and continuous innovation, including solar-powered e-bicycles and intelligent urban tricycles, aims to differentiate it from competitors by focusing on specific user needs and advanced features, rather than solely competing on the lowest price point.

Management Changes

Corporate Governance

Legal Proceedings

• The company may be subject to certain legal proceedings, claims, and disputes that arise in the ordinary course of business, but does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations, or liquidity.

Related Party Transactions

• Amounts due from related parties (Jiancong Cai, Huiyan Xie, Xing Xia) were fully repaid as of December 31, 2023.
• As of December 31, 2024, amounts due to related parties totaled $712,410, including interest-free loans payable to shareholders such as Huiyan Xie ($27,729), Huajian Xu ($684,681), and Xing Xia ($0, reclassified due to disposal).
• The company had material related party transactions involving the sale of products to Xing Xia, amounting to $108,413 in 2024.

Stakeholder Impact

• Shareholders: Experienced a net loss in 2024, potential dilution from recent capital raises (IPO, convertible note), and face risks related to internal control weaknesses and potential stock price volatility. Shareholder rights under BVI law may offer less protection than U.S. law.
• Employees: Increased employee costs and stricter labor laws in China may affect the company's profitability. The company relies on retaining core management and key personnel for success.
• Customers: Benefit from continued innovation and new product launches (e.g., solar-powered e-bicycles, intelligent tricycles). However, product quality problems or failure to adapt to changing preferences could impact satisfaction.
• Suppliers: The company relies heavily on external suppliers for components and raw materials, and maintains close relationships for cost control. Risks include supply chain interruptions or price increases.
• Creditors: The company has short-term and long-term loan obligations, including a new convertible note issued in December 2024, which introduces new debt and potential conversion risks.

Next Steps

• Upgrade and expand manufacturing facilities, utilizing approximately 40% of IPO net proceeds.
• Invest in research and development, allocating approximately 10% of IPO net proceeds.
• Allocate approximately 50% of IPO net proceeds for working capital.
• Implement measures to remediate identified material weaknesses in internal control over financial reporting, including engaging financial and accounting advisory teams, hiring qualified personnel, and establishing a financial and system control framework.
• Continue to innovate and launch new products, including solar-powered e-bicycles and intelligent electric urban tricycles/elderly scooters.
• Strengthen the development of intelligent products and recruit global experts and talents for R&D.
• Establish and strengthen strategic cooperation and partnerships globally with industry leaders, design firms, and research institutions.
• Set up branches or representative offices in foreign target markets to better understand local needs.
• Increase marketing expenses on the Alibaba international platform and participate in industry international exhibitions (e.g., Canton Fair, Las Vegas AIMEXPO) in 2024 to expand the dealer network.
• Continue to optimize the supply chain through centralized ordering, internal management innovation, and process flow optimization.
• Complete the sale of Beijing LOBO Intelligent Machine Co., Ltd. to Guo Yafang for RMB 27,000,000, which was decided in December 2024 and completed in March 2025.

Key Dates

Recommendation

Keywords

Electric Vehicles, EV Technologies, E-bicycles, E-mopeds, E-tricycles, Electric Shuttles, AI Robotics, SEC Filing, 20-F/A, Financial Results, Net Loss, Operating Expenses, Internal Controls, Material Weaknesses, IPO, Convertible Note, Subsidiary Disposal, China Market, Supply Chain, Corporate Governance, Risk Factors