TABLE OF CONTENTS

INTRODUCTION

We conduct our business through our subsidiary Sono Motors GmbH, a German limited liability company (Gesellschaft mit beschränkter Haftung) (the “Subsidiary”). Unless otherwise indicated or the context otherwise requires, the terms “Sono Motors,” “the Companies,” “we,” “our,” “ours,” “ourselves,” “us” or similar terms refer to Sono Group N.V. together with its subsidiary. The “Company” refers to Sono Group N.V. and the “Subsidiary” refers to Sono Motors GmbH.

The Self-Administration Proceedings

Through February 2023, the Subsidiary had primarily focused on, and incurred significant expenses for, the development of its Sion passenger car, which it had envisaged to become an affordable solar electric vehicle (the “Sion”). Due to a lack of available funding as a result of adverse market conditions and other factors, at the end of February 2023, the Companies decided to restructure the Subsidiary’s business model to focus exclusively on retrofitting and integrating solar technology into third-party vehicles going forward. At the same time, we decided to discontinue the Sion passenger car program with immediate effect and notified approximately 250 employees about the termination of their employment. A repayment plan was developed to handle customer claims arising from prior advance payments for Sion reservations.

Following the decision to change the Subsidiary’s business model, we continued to face challenges to obtain financing and, after other financing options failed to materialize, the Company’s management ultimately concluded that the Subsidiary was over-indebted and faced impending illiquidity (drohende Zahlungsunfähigkeit), with the Company, in turn, becoming over-indebted and also facing impending illiquidity. As a consequence, management decided to apply for the opening of the self-administration proceedings with respect to the Company and the Subsidiary (the “Self-Administration Proceedings”) with the goal of sustainably restructuring the Company and the Subsidiary in order to preserve Sono Motors’ business and the legal entities. Accordingly, on May 15, 2023, the Company applied to the insolvency court of the local court of Munich, Germany (the “Court”) to permit the opening of a self-administration proceeding (Eigenverwaltung) pursuant to Section 270 (b) of the German Insolvency Code (Insolvenzordnung). On the same day, the Subsidiary applied to the same Court to permit the opening of a self-administration proceeding in the form of a protective shield proceeding (Schutzschirmverfahren) pursuant Section 270 (d) of the German Insolvency Code.

The Self-Administration Proceedings applied for by the Company and the Subsidiary are debtor-in-possession type proceedings under German insolvency law, which are available to businesses in financial distress and typically aim to preserve the business and the entity that are the subject of the proceedings. In these proceedings, management retains control of the operation of the subject company’s business under the supervision of a custodian, who is initially appointed on a preliminary basis (vorläufiger Sachwalter) and is primarily responsible for monitoring the subject company’s compliance with German insolvency law.

On May 17 and May 19, 2023, respectively, the Court admitted the opening of Self-Administration Proceedings with respect to the Company and the Subsidiary on a preliminary basis (the “Preliminary Self-Administration Proceedings”). The Court also appointed preliminary custodians for each of the Company and the Subsidiary in their respective Preliminary Self-Administration Proceedings. On September 1, 2023, the Court opened the Self-Administration Proceedings with respect to the Subsidiary (the “Subsidiary Self-Administration Proceedings”).

The Company has retained SGP Schneider Geiwitz GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft and Schneider Geiwitz Management GmbH Wirtschaftsprüfungsgesellschaft (collectively, “SGP”) to act as advisors in connection with its Preliminary Self-Administration Proceedings, and the Subsidiary has retained Dentons GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft and Dentons Europe (Germany) GmbH & Co. KG (collectively, “Dentons”), to act as advisors in connection with the Subsidiary’s Preliminary Self-Administration Proceedings and the Subsidiary Self-Administration Proceedings.

The business operations of the Company are being continued on a provisional basis under the supervision of its preliminary custodian in the context of its Preliminary Self-Administration Proceedings, and the business operations of the Subsidiary are being continued on a provisional basis under the supervision of its custodian in the context of the Subsidiary Self-Administration Proceedings. Furthermore, a mergers and acquisitions process was initiated to find one or more potential investors to fund and/or acquire all or parts of the Subsidiary’s business and/or the Company’s business in one or more potential M&A transactions (the “M&A Process”).

Parallel to the M&A Process, the Company began discussions with YA II PN, Ltd. (“Yorkville”), the Company’s main creditor apart from the Subsidiary, regarding a new investment. In connection with those discussions, the Company and Yorkville entered into certain investment-related agreements that became effective on November 20, 2023, including a restructuring agreement (the “Restructuring Agreement”) and a funding commitment letter (the “Funding Commitment Letter” and together with the Restructuring Agreement and the ancillary agreements entered into in connection therewith, (the “Yorkville Agreements”), pursuant to which Yorkville has committed to provide financing to the Company subject to the satisfaction of certain conditions precedent (the “Yorkville Investment”). The aim of the Yorkville Agreements and the transactions contemplated therein (the “Transactions”)  is the planned restructuring of the Company and the Subsidiary, which is intended to enable the Company to withdraw its application for its Preliminary Self-Administration Proceedings and to enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via an insolvency plan, which was filed with the Court on December 7, 2023 for approval by the Subsidiary’s creditors and subsequent confirmation by the Court. The plan sets out how the Subsidiary intends to restructure its debt and procure the inflow of new money, including in connection with the Yorkville Investment, and subsequently exit the Subsidiary Self-Administration Proceedings. Approval by the creditors and confirmation by the Court was obtained in the creditors meeting on December 21, 2023. The 14-day appeal period started on December 21, 2023. Only one creditor with a claim of €500 declared an appeal during the creditors meeting. No successful appeal actions in regard to the Court’s confirmation are expected by the management.

The Companies expect the Yorkville Investment to position them to obtain sufficient funding for their business operations, with an initial focus on the Solar Bus Kit, through the end of 2024. Under the terms of the Yorkville Agreements, the financing will be provided by Yorkville at the closing of the Transactions (the “Closing”) by way of one or more new interest-bearing convertible debenture(s) that will be convertible into ordinary shares of the Company and will mature on July 1, 2025. The Closing is currently expected in late January 2024 and is subject to the satisfaction of certain conditions precedent, including the Company’s filing of this Annual Report on Form 20-F for the year ended December 31, 2022, the Company’s submission of its interim balance sheet and income statement as of June 30, 2023 on Form 6-K to the SEC (the "Interim Report"), the Subsidiary’s insolvency plan becoming legally binding, and the withdrawal of the Company’s application for its Preliminary Self-Administration Proceedings. On December 22, 2023, Yorkville waived the Company's submission of the Interim Report as a condition precedent to the Closing. Apart from the Subsidiary, Yorkville is the Company’s main creditor under convertible debentures that were issued by the Company to Yorkville in an aggregate principal amount of  $31.1 million in December 2022 (the “Existing Convertible Debentures”), see “Item 10. Additional Information—C. Material Contracts—Convertible Debentures”. For more information on the Transactions and the Yorkville Investment, see “Item 4. Information on the Company—B. Business Overview—The Planned Yorkville Investment”.

The Company believes that, subject to the satisfactions of the conditions precedent under the Yorkville Agreements, (other than the withdrawal of the Company’s Preliminary Self-Administration Proceedings), a successful implementation of the Yorkville Investment would (i) enable it to withdraw its application for Self-Administration Proceedings at the Court and (ii) enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via its plan under the German Insolvency Code, which was approved by its creditors and confirmed by the Court on December 21, 2023.

The Companies’ successful emergence from their respective Self-Administration Proceedings remains subject to a number of contingencies and risks, including, among others, (i) whether the Companies are able to successfully fulfill the conditions precedent to the Closing so as to gain access to the funding offered by Yorkville under the Yorkville Investment (ii) whether the Court’s confirmation of the plan under the German Insolvency Code remains unaffected by any appeals or other challenges that may be raised during the 14-day appeals period that began on December 21, 2023, and (iii) if the Court’s confirmation of the Subsidiary's plan under the German Insolvency Code remains unaffected, whether the plan can be successfully implemented. For more information see “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings” and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings—The Self-Administration Proceedings”.

The forward-looking information in this Annual Report is subject to, and qualified in its entirety by, the risk factors discussed herein. For more information see “Item 3. Key Information—D. Risk Factors”.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Our consolidated financial statements are reported in euros, which are denoted “euros,” “EUR” or “€” throughout this Annual Report and refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended. Also, throughout this Annual Report, the terms “dollar,” “USD” or “$” refer to U.S. dollars.

Financial information is presented in thousands or millions, and percentage figures have been rounded. Rounded total and subtotal figures in tables in this Annual Report may differ marginally from unrounded figures indicated elsewhere in this Annual Report or in the financial statements. Moreover, rounded individual figures and percentages may not produce the exact arithmetic totals and subtotals indicated elsewhere in this Annual Report.

MARKET AND INDUSTRY DATA

We obtained the industry, market and competitive position data in this Annual Report from our own internal estimates, surveys, and research as well as from publicly available information, industry and general publications and research, surveys and studies conducted by third parties, including, but not limited to, Bloomberg New Energy Finance (“BloombergNEF”), the International Energy Agency (IEA) and the German Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz).

Industry publications, research, surveys, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this Annual Report. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under “Item 3. Key Information.” These and other factors could cause results to differ materially from those expressed in our forecasts or estimates or those of independent third parties.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

We have proprietary rights to trademarks used in this Annual Report that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, the trademarks, service marks, logos and trade names referred to in this Annual Report are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

This Annual Report contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this Annual Report are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements that relate to our current expectations and views of future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, these forward-looking statements can be identified by words or phrases such as “believe,” “may,” “will,” “expect,” “estimate,” “could,” “should,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar or comparable expressions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements contained in this Annual Report include, but are not limited to, statements about:

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, many of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the risk factors set forth in “Item 3. Key Information”.

RISK FACTOR SUMMARY

The Self-Administration Proceedings we have applied for and our business are subject to numerous risks, as more fully described in “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings.”

The principal risks associated with the Self-Administration Proceedings include, but are not limited to, the following:

If we are able to successfully emerge from the Self-Administration Proceedings and are able to preserve our business, our business continues to be subject to numerous other risks, and we may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. Such risks include, but are not limited to, the following:

Part I.

Not applicable.

Not applicable.

Not applicable.

Not applicable.

Not applicable.

The following risks may have material adverse effects on our business, financial condition and results of operations. Additional risks and uncertainties of which we are not presently aware or that we currently deem immaterial could also materially affect our business operations and financial condition.

Risks Related to the Self-Administration Proceedings

We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for.

On May 15, 2023, based on management’s conclusion that the Company is over-indebted and faces impending illiquidity (drohende Zahlungsunfähigkeit), the Company applied to the Court, to permit the opening of a self-administration proceeding (Eigenverwaltung) with respect to the Company pursuant to Section 270 (b) of the German Insolvency Code (Insolvenzordnung). On the same day and for the same reason, the Subsidiary applied to the Court to permit the opening of a self-administration proceeding in the form of a protective shield proceeding (Schutzschirmverfahren) with respect to the Subsidiary pursuant Section 270 (d) of the German Insolvency Code. The applications, in each case, were made with the goal of sustainably restructuring the business of both Companies. On May 17, 2023 and May 19, 2023, the Court admitted the opening of the Preliminary Self-Administration Proceedings with respect to the Company and the Subsidiary, respectively. On September 1, 2023, the Court opened the Subsidiary Self-Administration Proceedings.

Self-administration proceedings under German insolvency law are debtor-in-possession type proceedings that are available to businesses in financial distress and typically aim to preserve the business and the entity that are the subject of the proceedings. In such proceedings, management retains control and operation of the company’s business. Following the filing of their respective applications, the Company and the Subsidiary have generally been prohibited from repaying any pre-application debt.

In mid-November 2023, the Company entered into the Yorkville Agreements in connection with the Yorkville Investment. Subject to the satisfaction of certain conditions precedent, Yorkville will provide financing to the Company at the Closing, which is currently expected in late January 2024. The Companies expect the Yorkville Investment to position them to obtain sufficient funding for their business operations, with an initial focus on the Solar Bus Kit, through the end of 2024. For more information on the Transactions and planned structure of the Yorkville Investment, see “Item 4. Information on the Company—B. Business Overview—The Planned Yorkville Investment”.

On December 7, 2023, the Subsidiary submitted a plan under the German Insolvency Code to the Court for approval by the Subsidiary’s creditors and for subsequent confirmation by the Court as required under applicable German insolvency law in the context of the Subsidiary Self-Administration Proceeding. The plan sets out how the Subsidiary intends to restructure its debt and procure the inflow of new money, including in connection with the Yorkville Investment, and subsequently exit the Subsidiary Self-Administration Proceedings.

The Company believes that, subject to the satisfactions of the conditions precedent under the Yorkville Agreements (other than the withdrawal of the Company’s Preliminary Self-Administration Proceedings), a successful implementation of the Yorkville Investment would (i) enable it to withdraw its application for Self-Administration Proceedings at the Court and (ii) enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via its plan under the German Insolvency Code, which was approved by its creditors and confirmed by the Court on December 21, 2023.

However, the Companies’ successful emergence from their respective Self-Administration Proceedings remains subject to a number of contingencies and risks, including, among others.

Because of the risks and uncertainties associated with the Yorkville Investment and the Self-Administration Proceedings we have applied for, we cannot accurately predict or quantify the ultimate impact that events related to these proceedings may have on us and there is no certainty as to our ability to continue as a going concern. Any delays in the Self-Administration Proceedings are likely to increase the risk that we are unable to sustainably restructure our business and emerge from the proceedings and may increase our costs associated with the proceedings. Furthermore, we cannot at present predict the ultimate amount of payments that will have to be made to settle the liabilities resulting from the Self-Administration Proceedings. Even if we are able to successfully emerge from the Self-Administration Proceedings, we may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that has recently emerged from such proceedings.

The Company may not be able to successfully close and implement the Yorkville Investment, which would delay or prevent our emergence from the Self-Administration Proceedings.

In mid-November 2023, the Companies entered into the Yorkville Agreements in connection with the Yorkville Investment. Subject to the satisfaction of certain conditions precedent, Yorkville will provide financing to the Company at the Closing, which is currently expected in late January 2024. The Companies expect the Yorkville Investment to position them to obtain sufficient funding for their business operations, with an initial focus on the Solar Bus Kit, through the end of 2024. In addition to the Restructuring Agreement between the Company and Yorkville, there is (i) an agreement between the Company and the Subsidiary pursuant to which  a settlement amount was agreed for intercompany claims (the “Settlement Agreement”), (ii) an agreement between the Company and the Subsidiary relating to the satisfaction of intercompany claims, the further financing of the Subsidiary by the Company and key aspects of the Subsidiary Self-Administration Proceedings and the plan submitted by the Subsidiary to the Court under the German Insolvency Code (the “Continuation Agreement”), (iii) an agreement between the Company and Yorkville to provide the Company with sufficient financial resources to fund the business operations of the Companies pursuant to a budget agreed with Yorkville (the “Funding Commitment Letter”), (iv) an agreement between the Company and Yorkville to postpone the repayment date of the Existing Convertible Debentures to July 1, 2025, with the possibility of further extensions at Yorkville’s discretion (the “Prolongation Agreement”), and (v) an agreement between our founders, Laurin Hahn and Jona Christians (collectively, “the Founders”), the Company and the Subsidiary pursuant to which the Companies are entitled to request that each of the Founders enters into a sale and transfer agreement (each such sale and transfer agreement, a “Sale and Transfer Agreement” and, collectively, the “Sale and Transfer Agreements”) under the terms of which the respective Founder would sell and transfer, if so requested, a portion of their ordinary shares of the Company to a trustee to be appointed for the benefit of the Subsidiary’s creditors and a portion of their ordinary shares of the Company and all of their high voting shares in the Company to the new members of the management board to be appointed for the Company (the “Shareholders Commitment Letter”). In addition, the Yorkville Agreements envision the issuance of a hard back-to-back letter of comfort from the Company to the Subsidiary, to provide funding for the Subsidiary’s business operations, with an initial focus on the Solar Bus Kit, which the Companies currently expect to be sufficient  at least until, and including, December 31, 2024 (the “Back-to-Back Letter of Comfort”). The funds to be provided under the Back-to-Back Letter of Comfort will be provided by way of one or more intercompany loan(s) that will mature on July 1, 2025.

Under the Funding Commitment Letter, Yorkville would offer to secure the financing of the Companies’ expected operational costs, with an initial focus on the Solar Bus Kit during the period from December 1, 2023 until the end of the year 2024 (the “Funding Period”) up to a maximum amount of €9.0 million minus €2.048 million of cash left-over at the Company as of December 1, 2023 (the “Commitment Amount”). Cash available at the Company in excess of €2.048 million cash left-over as of December 1, 2023 will be needed and will be used by the Company to satisfy claims of creditors, with the exception of the amounts payable to Yorkville under the Existing Convertible Debentures and expected payments that relate to the preliminary insolvency. The financing would be provided by Yorkville by way of one or more new interest-bearing convertible debenture(s) that would mature on July 1, 2025. Such funds would be paid by the Company to the Subsidiary under the terms of the Continuation Agreement and the Back-to-Back Letter of Comfort by way of one or more intercompany loan(s) that will mature on July 1, 2025. In the event of a shortfall during the Funding Period, Yorkville would provide additional funds to the Company, provided that agreements are reached in good faith on an adjusted budget for the Funding Period.

The Closing of the Yorkville Investment, and Yorkville’s obligation to provide funding pursuant to the terms of the Funding Commitment Letter, are subject to the satisfaction of certain conditions precedent in, as well as our compliance with certain covenants and other obligations set forth in, the Yorkville Agreements, including the terms of the new convertible debenture(s) to be issued to Yorkville in connection with the Yorkville Investment. In addition, Yorkville’s funding commitment is subject to the absence of the following events (each a “Termination Event”):

The conditions precedent to the Closing include the Company’s regaining compliance with its periodic reporting requirements by filing this Annual Report on Form 20-F for the year ended December 31, 2022, the Company’s submission of the Interim Report to the SEC, the Subsidiary’s plan under the German Insolvency Code becoming legally binding, and the withdrawal of the Company’s application for its Preliminary Self-Administration Proceedings. On December 22, 2023, Yorkville waived the Company's submission of the Interim Report as a condition precedent to the Closing. The Yorkville Agreements also provide that, in order for the Company to withdraw its application for its Preliminary Self-Administration Proceedings, the Company’s management must update the assessment, at the date of the withdrawal, regarding whether the Yorkville Investment will cure its mandatory insolvency filing obligations (i.e. illiquidity and over-indebtedness). In addition, the Yorkville Agreements require the Company to convene an annual general meeting of shareholders by December 31, 2023 and to submit certain agenda items for shareholder vote. The Company’s annual general meeting of shareholders for 2023 (the “AGM”) has been convened for December 29, 2023. A subsequent general meeting of shareholders is currently anticipated in the first quarter of 2024 in order to propose certain required agenda items in connection with the Yorkville Investment. Under the terms of the Shareholders Commitment Letter, each Founder in his respective capacity as a shareholder of the Company agreed (i) to attend the AGM, either in person or represented by proxy, (ii) not to transfer any shares and/or voting rights such Founder holds in the capital of the Company prior to the AGM and (iii) to exercise the voting rights on all the shares in the capital of the Company held by such Founder in favor of all proposed resolutions. In addition, in the event that one or more subsequent general meetings are convened or deemed necessary to give full effect to the Yorkville Agreements and/or certain required agenda items, each Founder further agreed to comply with the requirements of (i) - (iii) above with respect to such subsequent general meeting(s) and to exercise his voting rights at such subsequent general meeting(s) so as to give effect to the Yorkville Agreements and/or certain required agenda items in the fullest possible manner.

In the event of a Termination Event, Yorkville would have the right, at its sole discretion, to cancel any funding commitments still available, meaning that the Company would no longer be able to draw down on unused portions of the Commitment Amount, and to exercise all of its rights under any of the new convertible debentures as if an event of default had occurred.

The Company believes that, subject to the satisfactions of the conditions precedent under the Yorkville Agreements, a successful implementation of the Yorkville Investment would (i) enable it to withdraw its application for Self-Administration Proceedings at the Court and (ii) enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via its plan under the German Insolvency Code, which was approved by its creditors and confirmed by the Court on December 21, 2023.

The successful conclusion and implementation of the Yorkville Investment is subject to certain risks, including, among others, (i) whether the Companies are able to successfully fulfill the conditions precedent to the Closing so as to gain access to the funding offered by Yorkville under the Yorkville Investment, (ii) whether the Court’s confirmation of the plan under the German Insolvency Code remains unaffected by any appeals or other challenges that may be raised during the 14-day appeals period that began on December 21, 2023, and (iii) if the Court’s confirmation of the Subsidiary's plan under the German Insolvency Code remains unaffected, whether the plan can be successfully implemented.

If the Yorkville Investment is not concluded and implemented as planned, it is unlikely that the Company will be able to withdraw its application for Self-Administration Proceedings and that the Subsidiary will exit from the Subsidiary Self-Administration Proceedings. Accordingly, there is a risk that the Companies will not be able to restructure and emerge successfully from the Self-Administration Proceedings, but rather will be liquidated.

If the Yorkville Investment closes, the new members of the management board to be appointed for the Company might decide to completely change the business setup, including abandoning our technology, turning the Company into a shell company and looking for a business combination candidate that is yet unknown, all of which may create substantial uncertainty.

If the Yorkville Investment closes, the new members of the management board to be appointed for the Company may be in a position to change our business setup, including abandoning our technology (subject to obtaining approval from the Company's general meeting to the extent required by applicable law). As a result, the Company may become a shell company. Yorkville may then look for a suitable business combination candidate. All of these potential developments and changes may lead to substantial uncertainty and may negatively impact our brand and reputation. There can be no assurance that any of the changes currently envisaged in connection with the Yorkville Investment will actually be implemented in the envisaged form or at all.

The Court’s confirmation of the Subsidiary’s plan under the German Insolvency Code is subject to any appeals or challenges that may be raised during the subsequent 14-day appeal period. If any appeal of the Court’s confirmation is successful,  there can be no assurance as to whether or when we will successfully restructure and emerge from the Self-Administration Proceedings.

To emerge successfully from the Subsidiary Self-Administration Proceedings, which were opened on September 1, 2023, the Subsidiary must (i) comply with statutory requirements regarding the disclosure in the plan it submitted to the Court under the German Insolvency Code, (ii) solicit and obtain the requisite acceptances of the plan under the German Insolvency Code, (iii) sufficiently demonstrate the feasibility of the plan under the German Insolvency Code to the Court and (iv) fulfill other statutory conditions under the German Insolvency Code, most of which have not yet occurred. Furthermore, the process of emerging from the Subsidiary Self-Administration Proceedings can be subject to numerous unanticipated potential delays. We cannot assure you that the plan submitted by the Subsidiary to the Court under the German Insolvency Code will become legally binding and there can be no assurance as to whether or when the Subsidiary will successfully restructure and emerge from the Subsidiary Self-Administration Proceedings.

The success of any restructuring will depend on approval by the Court of the Subsidiary’s plan under the German Insolvency Code. On December 21, 2023, the Subsidiary's plan was approved by the creditors and confirmed by the Court, at which time a 14-day appeal period started. Although only one creditor with a claim of €500 declared an appeal during the creditors meeting, we may receive objections to confirmation of the plan under the German Insolvency Code from various stakeholders in the Self-Administration Proceedings. We cannot predict the impact that any objection to, or third party motion during, the Subsidiary Self-Administration Proceedings may have on the Court’s decision to confirm the plan under the German Insolvency Code or our ability to implement such plan under the German Insolvency Code.

If any appeal of the Court’s confirmation of the plan under the German Insolvency Code is successful, the Court may convert the proceedings into regular (preliminary) insolvency proceedings under the administration of a (preliminary) insolvency administrator (Insolvenzverwalter) and it is unclear whether we would be able to restructure our business and what distributions, if any, the holders of claims against us, including the holders of our ordinary shares, would ultimately receive with respect to their claims. An insolvency administrator may also propose a plan with a view to restructuring the respective entities’ businesses and balance sheets. Such a plan is dealt with in the same manner as a plan proposed by a company in a self-administration proceeding. The insolvency administrator may also initiate a sale of the companies’ businesses in their entirety or sell the entities’ assets on an individual basis. If the envisaged restructuring of a company’s business by way of a plan fails, such company will eventually be liquidated in the course of the insolvency proceedings. In this scenario, the creditors will be paid from the liquidation proceeds in accordance with the rank of their respective claims in accordance with German insolvency law. Equity holders may only receive distributions from the liquidation proceeds after all prior-ranking debt has been settled in full.

We have substantial liquidity needs and we may not be able to obtain sufficient liquidity to successfully emerge from the Subsidiary Self-Administration Proceedings.

Although we have taken multiple measures to reduce our expenses and have significantly reduced the scale of our operations in connection with both the change of our business model announced on February 23, 2023 and the business changes and streamlined initial business focus on our Solar Bus Kit implemented in connection with the Yorkville Investment, we expect to require cash in an amount of approximately €9.0 million to fund our ongoing operations through the end of 2024. In addition, we have already incurred significant professional fees and other costs in connection with our efforts to sustainably restructure our business and expect that we will continue to incur significant professional fees and costs throughout the Self-Administration Proceedings. Although we currently believe that we will have sufficient liquidity to operate our business during the pendency of the Self-Administration Proceedings, in the event that the Yorkville Investment does not close, there can be no assurances that our liquidity will ultimately be sufficient to allow us to satisfy our obligations related the Self-Administration Proceedings and emerge successfully from the proceedings. Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to maintain adequate cash on hand, (ii) the Closing of the Yorkville Investment, (iii) our ability to raise additional external funding in the short term, (iv) our ability to consummate the Subsidiary’s plan under the German Insolvency Code and (v) the cost, duration and outcome of the Self-Administration Proceedings.

If we are unable to meet our liquidity requirements, our businesses and assets may become subject to liquidation in a regular insolvency proceeding under the German Insolvency Code, and we may cease to continue as a going concern.

The Subsidiary’s plan under the German Insolvency Code that was submitted to the Court in connection with the Subsidiary Self-Administration Proceedings is based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, such plan may not be successful in its execution.

The plan submitted to the Court under the German Insolvency Code in connection with the Subsidiary Self-Administration Proceedings addresses the structure and operation of our business going forward and reflects assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, which are highly uncertain, including but not limited to: (i) our ability to obtain adequate liquidity and access financing sources, including our ability to successfully fulfill the conditions precedent to the Closing so as to gain access to the funding to be provided by Yorkville under the Yorkville Investment, including the absence of any Termination Events, (ii) our ability to maintain customers’ confidence in our viability as a going concern and to attract sufficient business from them, (iii) our ability to retain key employees and (iv) the overall strength and stability of general macroeconomic conditions. Should actual future results and developments not be consistent with our expectations and assumptions, this could materially adversely affect the sustainable restructuring of our business.

In addition, the Subsidiary’s plan under the German Insolvency Code relies upon financial projections that are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts are not accurate. In our case, the forecasts will be even more speculative than normal because of the many uncertainties we face relating to the successful implementation and management of the pivot of our business to exclusively retrofitting and integrating our solar technology onto third party vehicles, with an initial focus in the short- to medium-term on our Solar Bus Kit, and our ability to raise the funding required to further develop and refine our solar technology and business and reach market readiness. Accordingly, we expect that our actual financial condition and results of operations will differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by the Subsidiary’s plan under the German Insolvency Code will occur or, even if they do occur, that they will have the anticipated effects on us or our business or operations. The failure of any such results or developments to materialize as anticipated could materially and adversely affect the successful execution of such plan.

In connection with the Self-Administration Proceedings, regular insolvency proceedings may be opened, which may eventually lead to the liquidation of the Company and/or the Subsidiary.

In the event that an appeal of the Court’s confirmation of the Subsidiary's plan under the German Insolvency Code is successful or the Subsidiary is unable to meet its liquidity requirements, the Court may appoint a preliminary insolvency administrator (vorläufiger Insolvenzverwalter) and order the opening of a regular insolvency proceeding (Insolvenzverfahren) under administration by an insolvency administrator (Insolvenzverwalter) with respect to the relevant entity. An insolvency administrator may also propose a plan with a view to restructuring the relevant entity’s businesses and balance sheets. Any such plan is dealt with in the same manner as a plan proposed by a company in a self-administration proceeding. The insolvency administrator may also initiate a sale of the Companies’ businesses in their entirety or sell the entities’ assets on an individual basis. If the envisaged restructuring of the relevant entity’s business by way of a plan fails, such Company will eventually be liquidated in the course of the insolvency proceedings. In the liquidation scenario, creditors will be paid from the liquidation proceeds in accordance with the rank of their respective claims in accordance with German insolvency law. Equity holders, including holders of our ordinary shares, may only receive distributions from the liquidation proceeds after all prior-ranking debt has been settled in full.

Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects.

It is difficult to predict with certainty the amount of time that we may spend on the Self-Administration Proceedings or to give assurances to interested parties that any challenges to the Court’s confirmation of the Subsidiary’s plan under the German Insolvency Code will be unsuccessful. We will attempt to minimize the potential adverse effect of the Self-Administration Proceedings on our relationships with creditors, customers, suppliers, service providers, employees and counterparties. Nonetheless, these relationships may be adversely impacted and our operations could be materially and adversely affected.

For instance, negative publicity associated with the proceedings may adversely affect our commercial relationships and our ability to negotiate favorable terms with important stakeholders and counterparties. Furthermore, our creditors will not receive complete recovery for their claims in the context of the proceedings. Public perception of our continued viability may also adversely affect our relationships with customers and their loyalty to us, as well as our ability to pursue new customer arrangements and projects. Strains in any of these relationships could materially and adversely affect us.

Our management will be required to spend a significant amount of time and effort focusing on these proceedings instead of focusing exclusively on our business operations. This diversion of attention may have a material adverse effect on the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the proceedings are protracted.

In addition, our employees will face considerable distraction and uncertainty during the pendency of the proceedings, and we may experience increased levels of employee attrition. Apart from negatively affecting our ability to retain existing high performing employees, executives and supervisory board members, the proceedings may also prevent us from attracting new employees, executives and supervisory board members. A loss of, or failure to attract, key personnel or a material erosion of employee morale could impair our ability to execute our strategy and implement operational initiatives, thereby adversely affecting us.

Even if the Self-Administration Proceedings were to be successfully completed, we may not be able to achieve our stated goals and continue as a going concern.

Even if the Subsidiary is able to consummate its plan under the German Insolvency Code, we will continue to face a number of risks in connection with our business and operations, financial condition and the industry we operate in or otherwise. Accordingly, we cannot guarantee that the Subsidiary’s plan under the German Insolvency Code will achieve our stated goals and permit us to effectively implement our strategy.

Furthermore, even if our debts are reduced or discharged through such plan, we will need to raise additional funds through public or private debt or equity financing or other means to fund our business beyond the Funding Period provided under the terms of the Yorkville Agreements, should the Yorkville Investment be concluded and implemented as planned. Our access to additional financing is, and for the foreseeable future will likely continue to be, limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms and we may not be able to continue as a going concern.

Any trading in our ordinary share during the term of the Self-Administration Proceedings is highly speculative and poses substantial risks.

Trading in securities of an issuer in insolvency proceedings is extremely speculative, and there is a very significant risk that investors will lose all or a substantial portion of their investment. We can provide no assurances regarding recovery for holders of equity, the consummation of the Subsidiary’s plan under the German Insolvency Code or the amount of any recoveries. Therefore it is impossible to predict at this time whether holders of our ordinary shares will receive any distribution with respect to, or be able to recover any portion of, their investments. Trading prices for our ordinary shares may bear little or no relationship to actual recovery, if any, by holders thereof during the term of the proceedings.

We caution and urge existing and future investors to carefully consider the significant risks with respect to investments in our ordinary shares.

The Company’s visibility, credibility, stock price, and trading volume, as well as investor confidence, may further decrease as a result of the Nasdaq Hearings Panel’s decision to delist the Company’s securities from Nasdaq and the anticipated completion of such delisting.

On December 11, 2023, the Company received a decision of the Panel advising the Company that the Panel has determined to delist the Company’s ordinary shares from Nasdaq.

The Company received a first delist determination letter on July 12, 2023 from the staff of the Listing Qualifications Department (the “Staff”) following the Company’s application for its Preliminary Self-Administration Proceedings pursuant to Section 270 (b) of the German Insolvency Code. The Staff’s delist letter additionally found that the Company failed to meet the filing requirement in Listing Rule 5250(c)(1), as it had failed to file its Annual Report on Form 20-F for the year ended December 31, 2022. On August 28, 2023, the Staff issued an additional delist determination letter for the Company’s failure to meet the minimum bid price requirement in Listing Rule 5450(a)(1) and the audit committee requirement in Listing Rule 5605(c)(2). The Company appealed the Staff’s determination and appeared before the Panel on September 14, 2023.

Trading of our ordinary shares has been suspended since July 21, 2023. Since then, our ordinary shares have been trading in over-the-counter markets, which are less visible, less accessible and less liquid markets. Although the delisting process has not been completed as of the date of this Annual Report, Nasdaq informed the Company that Nasdaq will complete the delisting by filing a Form 25 Notification of Delisting with the U.S. Securities Exchange Commission (the “SEC”) following the lapse of applicable appeal periods. We do not intend to appeal the Panel’s decision. The Panel’s final delist determination as well as the anticipated completion of the delisting of the Company’s securities from Nasdaq may result in a loss of investor confidence and further decrease our visibility, credibility and trading volume, all of which could adversely impact the market price of our shares.

We may have difficulty finding an independent registered public accounting firm to audit our financial statements for the year ended December 31, 2023.

As a public company, we are required to have our financial statements audited by a public accounting firm that is registered with the Public Company Accounting Oversight Board (“PCAOB”) under standards promulgated by the PCAOB and that meets SEC and PCAOB standards for independence. There are very few accounting firms active in our jurisdiction that meet these standards. Because of high demand for the services of such accounting firms, the accounting firms that meet the standards have limited capacity for taking on additional clients and, as a result of the Self-Administration Proceedings and/or our status as an early stage company, may find us to be too risky to take on as a client.

We have not yet mandated a public accounting firm for the audit of our financial statements for the year ended December 31, 2023, and any delays that result from our inability to find an independent registered public accounting firm for such audit could result in our failure to comply with SEC filing obligations, in particular our obligation to timely file our annual report on Form 20-F for the year ended December 31, 2023. In addition, our continuous operation and our ability to continue as a going concern will depend on our ability to obtain sufficient external financing. Any failure to stay current with financial reporting obligations will negatively affect our ability to raise capital and require us to curtail our operations, which could adversely affect our business, results of operations, financial position and cash flows and may ultimately lead to insolvency and liquidation

Risks Related to Our Industry

If we are able to successfully emerge from the Self-Administration Proceedings and avoid insolvency, our success and future growth will be dependent upon the market’s willingness to adopt solar-powered mobility solutions.

If we are able to successfully close and implement the Yorkville Investment, emerge from the Self-Administration Proceedings and avoid insolvency, we currently intend to focus in the short- to medium-term on our Solar Bus Kit. While we expect the Yorkville Investment to position us to obtain sufficient funding for our business operations, with the initial focus on our Solar Bus Kit, through the end of 2024, our pursuit of other solar integration projects will be dependent on the success of future capital raising efforts. The market for mobility-related solar solutions is still evolving, characterized by rapidly changing technologies, price and other competition, evolving government regulation and industry standards, as well as changing or uncertain consumer demands and behaviors. Factors that may influence the adoption of our solar technology solutions include:

Solar-powered e-mobility solutions largely remain commercially unproven. Our solar-powered mobility solutions may therefore not be as well accepted by the market as expected, or may not be accepted at all, and may not be able to claim the market position we hope for.

The mobility market is highly competitive and even if we are able to successfully emerge from the Self-Administration Proceedings and avoid insolvency, we may not be able to successfully commercialize our proprietary solar technology in time or at all.

The market for alternative mobility solutions is highly competitive and continuously evolving. We are not the only company seeking to develop and offer solar-powered mobility solutions. Numerous competitors strive to offer mobility and e-mobility solutions to the mass market and several other market players are currently experimenting with or intend to commercialize solar charging technology, including manufacturers with established brands and significantly greater financial resources than us. Some of our competitors benefit from greater financial resources, more extensive development, manufacturing, marketing and service capabilities, owned manufacturing assets, greater brand recognition and a larger number of managerial and technical personnel. Smaller existing or future competitors may be acquired by larger companies with significant capital or other resources, thereby further intensifying competition with us. Competitors’ technologies may provide customers with material competitive (technological) advantages compared to our own offering, such as more attractive prices or better performance. As a result, even if we are able to successfully emerge from the Self-Administration Proceedings and avoid insolvency, we may experience a significant reduction in potential market share and expected revenue streams, which could impact our ability to successfully market our solar technology and adversely affect our business, results of operations, financial position and cash flows.

We expect competition in our industry to intensify in the future, particularly in light of increased demand for alternative fuel and a regulatory push for e-mobility (e.g., CO2 target emission regulations and tax or other monetary incentives), as well as declining battery prices. Continuing globalization may lead to additional potential competitors in emerging economies. Factors affecting competition include manufacturing efficiency, product prices and quality, performance and features, innovation and development time, reliability, safety, energy economy, charging options, customer service and financing terms. Increased competition may lead to lower product sales and increased inventory, which may result in price pressure. Even if we are able to emerge from the Self-Administration Proceedings and avoid insolvency, we may not be able to successfully compete in our markets. In addition, there can be no assurance that our intention to initially focus in the short- to medium-term on our Solar Bus Kits is a viable business setup.

Risks Related to Our Business and Operations

We are an early-stage company with a history of significant losses that recently adapted its business model and expects continuing losses for the foreseeable future, which means that our ability to prevent insolvency and continue as a going concern and, if we are successful in doing so, to accomplish any of our business plans depends on our ability to imminently raise significant external financing.

Our result for the year ended December 31, 2022 was a loss for the period of €183.7 million. We have incurred net losses since our inception in March 2016, resulting in an accumulated deficit of €330.8 million as of December 31, 2022 compared to an accumulated deficit of €147.1 million as of December 31, 2021.

Even if we are able to prevent liquidation and successfully emerge from the Self-Administration Proceedings, we expect to continue to generate operating losses for the foreseeable future until we complete the development of our solar technology and significantly scale our operations.

We already realized first revenues from certain of our solar technology products. However, such sales were, and at least in the short term are expected to remain, only marginal and will not be sufficient to support our operations and cash requirements until we will have significantly scaled our operations, currently expected in the second half of 2024. We are in the final development phase with respect to our Solar Bus Kit and aim to start commercial production in 2024. Although we are in discussions with several potential customers and have been building up a customer base by signing letters of intent and contracts for pilot fleets and prototypes, so far we have not concluded binding series sales contracts for our Solar Bus Kit. We seek to incrementally increase monetization of our technology, starting with our Solar Bus Kits in 2024. Although we have elaborated a new business plan in the context of the Self-Administration Proceedings, such business plan is subject to developments in the Self-Administration Proceedings and we therefore cannot provide any assurances that we will be successful in accomplishing such business plan. The current business plan foresees a clear focus on the bus industry and our Solar Bus Kit product in 2024, and additionally considers the refrigerated vehicle industry and the e-transporter industry as long-term business opportunities.

If we are able to successfully emerge from the Self-Administration Proceedings and continue as a going concern, we would expect to continue to incur significant expenses as we seek to further develop, expand and refine our solar technology. We would also expect to incur expenses related to preparations for the commercialization of our technology, starting with our Solar Bus Kits, increasing our sales and marketing activities with the goal of building our brand, and adding infrastructure and personnel to support our growth. In addition, we currently continue to incur various expenses from, for example, general administrative functions, our headquarters and costs relating to being a public company. We would not be able to cover our expenses with revenues at least until we complete the development and start the commercialization of our solar technology, starting with our Solar Bus Kits, and significantly increase the scale of our operations. We would expect to incur additional substantial expenses in the foreseeable future. The activities related to our solar technology and the development of our business may result in prolonged losses. There is no guarantee that we would ever reach meaningful revenue levels or profitability or even that we will be able to continue as a going concern, as discussed above. Our ability to reach profitability in the future will not only depend on our ability to successfully implement the change in our business to exclusively retrofitting and integrating our solar technology onto third party vehicles, with an initial focus on our Solar Bus Kits, and to successfully complete the development of and commercialize our solar technology but also on our ability to control our expenses and capital expenditures and manage our costs efficiently. If we are unable to achieve profitability, we may have to reduce the planned scale of our operations, which may impact our business growth and adversely affect our financial condition, results of operations, financial position and cash flows. In addition, our continuous operation and our ability to continue as a going concern will depend on our ability to obtain sufficient external equity or debt financing. If we do not succeed in doing so, we may need to curtail our operations, which could adversely affect our business, results of operations, financial position and cash flows and may ultimately lead to insolvency and liquidation.

There is no historical basis for reliably assessing the market potential and demand for our products, our ability to develop, manufacture, and deliver our products at commercial scales, or our future profitability. There can be no assurance that any of our products, including our Solar Bus Kits, will be commercially successful or that we will be able to scale our operations. We currently rely on a single product, our Solar Bus Kits, and if the market does not accept our Solar Bus Kits or does not develop as expected, we will have no other product to compensate for the shortfall. We have no reliable basis for the prediction of our future revenues and expenses, and we may have limited insight into future trends that may emerge and affect our business. We need substantial funding for capital expenditure and additional development activities until the start of commercial production. The estimated costs and timelines that we have developed to reach commercial production of our products are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on development activities to the commercial-scale manufacture and sale of our products. If we are able to successfully emerge from the Self-Administration Proceedings and continue as a going concern, we intend to initially focus in the short- to medium-term on our Solar Bus Kits. You should therefore consider our business and prospects in light of the risks and challenges we face as a new market entrant, including, but not limited to:

If we are able to successfully emerge from the Self-Administration Proceedings, our business will be restructured, which would include the release of significant liabilities, and will likely entail significant changes to our consolidated balance sheet and consolidated statement of operations. In addition, due to the opening of the Self-Administration Proceedings, the Company lost control of the Subsidiary on May 19, 2023. The effect of this loss of control is that in 2023, the results of the Subsidiary will be consolidated up until the loss of control and the assets and liabilities of the Subsidiary will be derecognized from the consolidated statement of financial position. It is expected that there will also be an impact recognized in the profit or loss attributable to the Company. It is expected that this loss of control will be temporary, with control being regained when the Subsidiary exits the Subsidiary Self-Administration Proceedings and is once again consolidated with the Company. As a result, our financial information going forward may in many respects not be comparable to our historical financial information. In addition, the financial information for the periods under review mainly include expenses related to the Sion project, which was terminated in February 2023. Accordingly, the financial information contained in this Annual Report is likely not indicative of any future financial information and has only limited value for purposes of assessing our solar-only business.

If we are able to successfully emerge from the Self-Administration Proceedings, we intend to use the financing that we obtain mainly to finance the operations of the Subsidiary. Accordingly, the Yorkville Agreements envision the issuance of a hard Back-to-Back Letter of Comfort from the Company to the Subsidiary to provide funding for the Subsidiary’s business operations, with an initial focus on the Solar Bus Kit. These arrangements mean that the Company may only hold a small fraction of our total liquidity, which means that creditors at the Company level are structurally subordinated to creditors at the Subsidiary level.

Management has concluded that there is substantial doubt about our ability to continue as a going concern in our financial reporting for past periods and if we are unable to successfully emerge from the pending Self-Administration Proceedings there is a material risk that we may be liquidated.

Management has concluded that there is substantial doubt about our ability to continue as a going concern in our financial reporting for past periods. As a result of our recurring losses from operations and the need for additional financing to fund our operating and capital requirements despite the change in our business model, we decided to apply for the Self-Administration Proceedings in May 2023, which are currently pending.

Because of the risks and uncertainties associated with the Yorkville Investment and the Self-Administration Proceedings, management cannot accurately predict or quantify the ultimate impact that events related to these proceedings may have on the Sono Group and thus there is no certainty as to the ability to continue as a going concern. Even if Sono Group N.V. and Sono Motors GmbH are able to successfully emerge from the Self-Administration Proceedings, the Company’s business plan is reliant on income from customers. As of the date of this Annual Report on Form 20-F, whilst there are several letters of intent, no contracts with regards to the Solar Bus Kit have been signed, and hence there is a risk that revenue will be less than expected in 2024. Similarly, there is a risk that the solar technology is not fully functional or available on the anticipated schedule or at all, which would result in a delay in realizing potential revenue. Finally, the Yorkville Agreements provide funding until December 2024. Sono will therefore have to either secure a sufficient number of future customer contracts or other additional financing in order to fund the business from January 2025 onwards. All the above can affect the Company’s ability to continue as a going concern.

It is uncertain if Sono Group N.V. and its subsidiary Sono Motors GmbH will successfully resolve Self-Administration Proceedings and regular insolvency proceedings may be opened, which may eventually lead to the liquidation of the Company and/or the Subsidiary. Moreover, even if the closing of the Yorkville Agreements will be successful (and conditions precedent are fulfilled) Sono Group’s access to required additional financing is, and for the foreseeable future will likely continue to be, limited, if it is available at all as of January 1, 2025 and beyond. Therefore, adequate funds may not be available when needed or may not be available on favorable terms and thus the Company might not be able to continue as a going concern.         

Based on the above, Sono Group will need to raise substantial additional capital to finance its planned future operations, which is not assured, and has consequently concluded that there is substantial doubt about its ability to continue as a going concern.

We have identified multiple material weaknesses in our internal control over financial reporting and, as a result, management has concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2022. If we are unable to remediate these material weaknesses, or if other control deficiencies are identified as a result of ongoing or future processes, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner.

Prior to our IPO on November 17, 2021, we operated as a private company that was not required to comply with the obligations of a public company with respect to internal controls over financial reporting under the Sarbanes-Oxley Act. Since our initial public offering in 2021, we have been a public company in the United States subject to the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F, starting with this annual report on Form 20-F for the year ended December 31, 2022. As a result, we are required to disclose changes made in our internal controls and procedures and our management is required to assess the effectiveness of these controls annually.

In connection with the audits of our consolidated financial statements for the years ended December 31, 2019, 2020 and 2021 and management’s assessment of the effectiveness of our internal controls and procedures for the year ended December 31, 2022, we identified multiple material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or condensed consolidated interim financial statements will not be prevented or detected on a timely basis. Due to the multiple material weaknesses identified, which had not been remediated as of December 31, 2022, our management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2022. While we are continuing to work on remediating the weaknesses identified, based on our limited financial and operational resources we cannot at this time predict when we will have remediated these material weaknesses. The remediation measures are time-consuming and costly and place significant demands on our financial and operational resources. For more information on the nature of the material weaknesses and the related ongoing remediation measures, see “Item 15. Controls and Procedures—B. Management's Annual Report on Internal Control over Financial Reporting.”

During the course of documenting and testing our internal control procedures in the future, we, or an outside advisor, may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

We are non-compliant with the Dutch financial reporting requirements with regard to the timely filing of our audited 2020, 2021 and 2022 Dutch statutory financial statements with the Dutch trade register. Dutch financial reporting rules require the timely filing of our audited Dutch statutory financial statements with the Dutch trade register. Non-compliance with these filing requirements exposes us to penalties and fines. Non-compliance with the requirements under Dutch law with respect to the preparation, audit and publication of our Dutch statutory financial statements could also lead to increased exposure for our management board and supervisory board members to direct liability under the standards of Dutch corporate law, which may negatively affect our reputation.

In addition, the Subsidiary is also non-compliant with the German financial reporting requirements with regard to the timely filing of its audited 2022 statutory financial statements with the German trade register and the German Federal Gazette, which has in the past led, and - until compliance is established - may in the future lead, to the imposition of penalties and fines. German financial reporting rules under the Securities Trading Act (“Vermögensanlagegesetz”) require the timely filing of the Subsidiary’s audited German statutory financial statements by June 30 of the year following the applicable financial period. Non-compliance with these filing requirements exposes us to penalties and fines.

Any failure on our part to discover and/or remediate existing material weaknesses, to discover and address any other control deficiencies and to achieve and maintain an effective internal control environment, could result in inaccuracies in our consolidated financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely basis, could cause investors to lose confidence in our reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements for prior periods. We cannot assure you that all of our existing material weaknesses have been identified, that we will not in the future identify additional material weaknesses and that we will be able to achieve and maintain an effective internal control environment.

Our ability to develop solar technology is unproven and we may fail to further develop and realize the commercialization of our solar technology within the intended timeframe, budget or at all.

Our future success will depend in large part on our ability to execute our plans to develop and commercialize our proprietary solar technology, starting with our Solar Bus Kits, at large scale. Our industry is characterized by rapid technological evolution and continuing technological changes, which could adversely affect demand for our products. Our development efforts may not be successful and we may not be able to realize all advertised specifications of our technology such as, for example, the effectiveness of our solar modules. We further have to secure the supply of necessary components and raw materials on acceptable terms. For example, lock-downs in China resulted in the limited availability of semiconductor chips, which could also impact our ability to meet any planned timelines. In addition, our maximum power point tracker central unit (“MCU”) is a key component of our solar kits and is still subject to ongoing development. Due to the early stage of the MCU development and our ongoing Self-Administration Proceedings, we are not yet in a position to order relevant components for the further development of the MCU from suppliers in advance, which may further delay the development of our solar technology. We may also have to change specifications of relevant components on short notice, which may make it impossible for suppliers to deliver required parts in time, at all or at pre-agreed costs, which may, in turn, put potential timelines or projects at risk. We would also need to engage in substantive field testing and safety activities, which is still in early stages. Our products also have to meet stringent and constantly evolving safety and certification requirements, potentially in various jurisdictions, and there is no guarantee that our products or vehicles equipped with our solar kits will receive the required certification from relevant authorities. For example, we plan to have our MCU certified according to automotive standards; there can be no assurance that we actually achieve this certification. There can be no assurance that our solar technology and specifications can be applied to production at commercial scale. Given the complexities involved in developing and preparing our solar technology for the mass market, there is no guarantee that we will be able to finalize its development within the intended timeframe or budget. Any delay in committed or planned timelines due to, for example, a delay in the financing, development or regulatory approval of our solar technology could materially damage our brand, business, prospects, financial condition, results of operations, and cash flows, and could lead to material liquidity constraints. Furthermore, any plans to develop and prepare our solar technology for the mass market are subject to developments with respect to the Self-Administration Proceedings. 

In early 2023, we decided that it is not feasible for us to further pursue the development and commercialization of our electric vehicle Sion. There is no guarantee that this change and emphasis of our business activities proves successful. We may conclude that the further development and commercialization of our solar technology is not feasible. We may decide to abandon this project, due to, for example, a change in the regulatory framework, lack of feasibility, engineering issues, lack of skilled research and development or other personnel, lack of supplier capacity or availability, lack of customer demand or our inability to secure sufficient capital. In such a case, we may not be able to amortize any investments made. We may have entered into contractual arrangements with suppliers or other partners, which may subject us to continuous payment or other obligations irrespective of a decision to abandon the relevant underlying project. Any such decision to discontinue the development or commercialization of our technology or any of our solutions would likely lead to significant losses. Furthermore, our plans regarding the future development and commercialization of our solar technology are subject to developments with respect to the Self-Administration Proceedings.

We may find engineering errors, defects or areas that need improvement in our products. Technological changes or changes in supplier components may require us to change our technology. There can be no assurance that we will be able to implement any such changes in a timely manner or that these changes will not trigger any follow-on issues. Our solar technology may not be as well received, functional or efficient as expected and we may face significant competition with respect to our solar technology. To the extent we may want to monetize our technology based on licensing arrangements with third parties and royalty payments, which requires patent-based or similar legal protection, there is no guarantee that we will obtain such protection in a timely manner, in the relevant jurisdictions or at all. Employees who we have terminated may challenge our ownership in relevant patents or other intellectual property; there is no guarantee that any such challenges will not be successful. We may fail to identify technical innovations that could be patentable and, accordingly, may fail to protect them via patents. Furthermore, any plans to monetize our technology based on license arrangements with third parties and royalty payments are subject to developments with respect to the Self-Administration Proceedings.

Our solar technology may not be fully functional or available on our anticipated schedule or at all, and may remain unproven and pose additional risks.

The functionality, usability and availability of our solar technology and other solutions in day-to-day use and at scale is largely unproven. Our technology has not yet been tested in industrial production. The relevant production machines that turn our solar technology into actual products at industrial scale have not yet been fully developed and will be custom made based on specifications that we define in order to meet the requirements of our complex solar module technology. There is no guarantee that our products will initially perform as expected under real conditions or that we will be able to detect and fix any potential weaknesses in our technology and solutions prior to commencing commercial production. For example, our solar module technology may not provide the expected efficiency advantage compared to traditional BEVs or may be less reliable or more expensive to produce than expected. In addition, our solar modules may be subject to accelerated corrosion due to the impact of thermal expansion. An early prototype version of our integrated solar modules rippled and showed optical deviations when intensely exposed to the sun for an extended period of time. While we believe that we have found the reason for these issues, we cannot guarantee that they will not recur. In addition, partial exposure of our solar modules to sun may cause sections not exposed to sun to become very hot, which may lead to bodily harm should persons touch these sections. Defects in our integrated solar modules may cause fires and injuries. Any of our hardware or software solutions may contain errors, bugs, vulnerabilities or design defects or may be subject to technical limitations that may compromise the functionality of our offering. Some errors, bugs, vulnerabilities, or design defects inherently may be difficult to detect and may only be discovered after industrial commercialization of our technology has begun. Additional risks may result from the use of any of our solutions in jurisdictions where such use is not lawful. For example, our solar module technology may be used or commercialized by any of our licensees in jurisdictions where the use of such a solution may not be lawful or subject to additional regulatory requirements, which may potentially expose us or individuals to significant liability risks or negatively affect our brand. Furthermore, any plans to prove the functionality, usability and availability of our solar technology and other solutions are subject to developments with respect to the Self-Administration Proceedings.

We depend on the adequate protection of our intellectual property, which can be difficult and costly.

We seek to sell and license our proprietary solar technology and other solutions to business customers and invest significant resources in their development. The protection of our proprietary solar technologies and other innovations is therefore critical to our business and the commercial success of our products. We hold several patents relating to our technological innovations, such as our solar module technology and our energy management system for vehicles. To establish and protect our rights in our technology, we rely on a combination of patents, trade secrets (including know-how), copyrights, trademarks, intellectual property licenses, employee and third-party nondisclosure agreements and other contractual rights. Any failure to obtain, maintain, protect, and monitor the use of our existing intellectual property rights could result in the loss of valuable technologies or material business opportunities.

The measures we take to protect our intellectual property from unauthorized use by others, including current or former suppliers, partners or employees, may not be effective for various reasons. Any patent applications we submit may not result in the issuance of patents, the scope of our issued patents may not be broad enough to protect our proprietary rights or our issued patents may be challenged and/or invalidated by our competitors. Any successful challenge to any of our intellectual property rights, including by competitors or current or former employees, could deprive us of rights necessary for the successful commercialization of our solar technology and innovations. Challenges to our patents could impair or eliminate our ability to collect future revenues and royalties. The patent prosecution process is expensive, time consuming and complicated, and we and our future licensors may not be able to file, prosecute or maintain all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous. It is also possible that we and our future licensors may fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We filed and intend to continue to file trademark applications in relevant jurisdictions but may be unable to register our trademarks or otherwise protect them. For example, we have failed in some jurisdictions to obtain protection for our circle with a dot in the middle, if it is not combined with other distinctive elements. In China, our trademark application for our circle with a dot in the middle, the Sono name, and the combination of the Sono name and our circle with a dot in the middle has been objected to. In the United States, our application to register “Driven by the Sun” as a trademark has been denied. In addition, we are in ongoing discussions with an American developer and manufacturer of audio products, who filed oppositions against various trademarks that were filed by us after a rebranding process, and a producer of telescopic sights has also filed oppositions against the same trademarks that were filed by us after the rebranding process. With both opponents, we are in negotiation to find an amicable solution. Therefore, for the oppositions that have been filed by these opponents, an extension of the cooling-off period has been filed. Our efforts to register a trademark may be subject to opposition and if a third-party were to register our trademarks, or similar trademarks, in a jurisdiction where we have not successfully registered such a trademark, it could create a barrier to the successful commercialization of our products. For example, in Europe, there are on-going attempts to register our slogan or other marks in relation to transport vehicles by land, air, or water. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage as well as a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.

Even if we hold valid and enforceable patents or other intellectual property rights, the legal systems of certain countries, including certain developing countries, may not favor the enforcement of these rights or otherwise offer the same degree of protection as do the laws in the EU or United States, which could make it difficult for us to stop the infringement, misappropriation, or other violation of our patents or other intellectual property rights. Further, policing the unauthorized use of our intellectual property in various jurisdictions around the world may be difficult and require significant resources.

We have applied for patent protection relating to our technological innovations in certain jurisdictions. While we generally consider applying for patents in those countries where we intend to make, have made, use, sell or license patented products, we may not accurately assess all the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, our pending patent applications may be challenged by third parties or such applications may not eventually be issued by the applicable patent offices as patents. The denial of our key patent applications or of a substantial portion of our patent applications could have a substantial negative impact on the value and strength of our intellectual property rights, our ability to execute our business plans and compete with others in our industry. In addition, the patents issued as a result of our foreign patent applications may not have the same scope of coverage as our patents in the EU or United States.

Changes in the patent laws or their interpretation in the relevant jurisdictions may reduce our ability to protect or commercialize our inventions and enforce our intellectual property rights. More generally, these changes could affect the value of our patents and other intellectual property. Our efforts in seeking patent protection for our solar technology and other innovations could be negatively impacted by any such changes, which could have a material adverse effect on our existing patent rights and our ability to protect, enforce or commercialize our intellectual property rights in the future. In particular, our ability to stop third parties from making, using, selling, offering to sell or importing products that infringe our intellectual property rights will depend in part on our success in obtaining and enforcing patent claims that cover our technology, inventions and improvements.

In some cases, we rely upon unpatented proprietary manufacturing expertise, continuing technological innovation, and other trade secrets to develop and maintain our competitive position. While we generally will enter into confidentiality agreements with our employees and third parties to protect our intellectual property, our confidentiality agreements could be breached and may not provide meaningful protection against improper use of our trade secrets or other proprietary information. There can be no assurance that third parties will not seek to gain access to our trade secrets or other proprietary information. In addition, adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets or other proprietary information. Violations by others of our confidentiality agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline as a result of increased competition.

Our patent applications may not lead to the granting of patents or desired protection in time or at all, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

We cannot be certain that we are the first inventor of the subject matter to which a particular patent application pertains. If another party has filed a patent application pertaining to the same subject matter as we have, we may not be entitled to the protection sought by our patent application. Patent applications in many jurisdictions are typically not published until several months after filing and we cannot be certain that we were the first to make the inventions claimed in any of our issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patents or patent applications. As a result, we may not be able to obtain or maintain protection for certain inventions and may face similar risks in other jurisdictions should we expand our operations, including in significant markets such as the United States and China.

Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may seek to bypass our issued patents, which may adversely affect our business, prospects, financial condition or operating results. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid or unenforceable or will be threatened by third parties.

We may not be able to develop manufacturing processes and capabilities within our projected costs and timelines.

Our asset-light business model provides for the outsourcing of the production of our solar modules and the sourcing of off-the-shelf components from suppliers, as well as outsourced logistics and delivery management based on low inventories. We have no experience to date in manufacturing processes, including through our production partner, or in supply chain management. We do not know whether we will be able to secure efficient, low-cost manufacturing capabilities and implement automated manufacturing processes.

We depend on our business partners, such as suppliers and logistics services providers, providing their products and services according to our needs and specifications. Many of our components are still at a prototype stage and have not undergone series production feasibility checks. Any failure to meet the required quality, price, engineering, design and production standards, as well as the production volumes, may negatively impact our ability to successfully mass market our products. The injection-molding based production process of our solar module technology or other relevant production technologies may not be as efficiently scalable as expected or, if scaled, may lead to a higher number of product defects than anticipated (due to, for example, increased breakage of solar cells during the injection molding process). Any negative perception of the long- and short-term durability of our proprietary solar module technology based on polymer technology, and other related components in the day-to-day wear and tear of the vehicles, may negatively affect our production and commercialization efforts.

Even if we are successful in developing our high volume manufacturing capability and processes and reliably source our component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers or logistics, or in time to meet our commercialization schedules or to satisfy the requirements of customers. Impacts of inflation, including an increase in energy costs, may negatively affect our cost base. Any failure to develop reliable manufacturing processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition.

Furthermore, our relationships with business partners such as suppliers and logistics services providers may be negatively impacted by our applications to open Self-Administration Proceedings and our plans to pursue relationships with such business partners are subject to developments with respect to these proceedings. See also “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, and adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects” and “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for”.

Some of our manufacturing equipment is customized and sole sourced.

The tooling equipment for our solar modules will be custom-made by one of our manufacturing partners according to our individual needs and production lines based on designs or specifications that we provide. As a result, our tooling equipment is not readily available from multiple vendors and would be difficult to repair or replace if it were to become delayed, damaged, or stop working. If any piece of such production equipment fails, production along the entire production line could be interrupted. In addition, the failure of the relevant manufacturing partner to supply equipment in a timely manner or on commercially reasonable terms could delay our commercialization plans, otherwise disrupt our production schedule, and/or increase our manufacturing costs, all of which would adversely impact our operating results.

Furthermore, our relationships with manufacturing partners may be negatively impacted by the Self-Administration Proceedings and our plans to pursue relationships with manufacturing partners are subject to developments with respect to these proceedings. See also “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, and adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects” and “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for”.

We depend on a limited number of suppliers for the sourcing of raw materials and components required for our solar technology and other innovations.

There are only a limited number of suppliers of solar technology components or raw materials. We currently depend on a single supplier for various raw materials or components required for the manufacturing of our solar technology products. This makes our supply chain and the production of our offering dependent on the performance of such suppliers and increases the risks of interruption. Our operations will be negatively affected if one of our suppliers experiences capacity constraints and is not in a position to deliver the required quantities of a certain raw material, component or part.

The solar industry is frequently subject to significant disruptions and resulting shortages of components or raw materials may impair our ability to commercialize our products at attractive margins or at all. Suppliers may decide to allocate relevant components or raw materials, particularly the ones with high demand or insufficient production capacity, to more profitable or established customers and our supply may be reduced as a result. Our dependency on a limited number of suppliers also increases the bargaining power of the relevant suppliers with respect to certain materials or components, which may expose us to abusive conduct, may prevent us from entering into long-term supply agreements with guaranteed pricing or may require us to accept disadvantageous economic or legal conditions. The acquisition of any supplier could limit our access to relevant raw materials or components and require material redesigns of our solar technology and impair our business prospects. We may also be forced to stop production should a supplier fail to provide required certifications for its products or should the supplier be accused of infringing or misappropriating third-party intellectual property rights. If we need to replace a supplier or if a supplier terminates its relationship with us, there is no guarantee that we will be able to find adequate substitute products or suppliers in time or at all. In addition, global events such as pandemics, war or crude oil shortages may negatively affect the availability, price levels, delivery times or minimum order quantities of products, components and materials, such as polymers for solar cells or microelectronic chips for MCUs. The vast majority of supplies of raw materials for the solar industry come from China, which makes our supply chains particularly vulnerable to intensifying political tensions with or trade sanctions or comparable limitations concerning China. As a result, we may be required to find replacement suppliers, which may prove difficult, increase our production cost and could lead to a delay in the envisaged start of commercial production.

Furthermore, we may ask for product changes or amendments of certain specifications of components or raw materials to be delivered by suppliers, sometimes on short notice, due to new development results or the insufficiency of previous specifications, which may increase the costs for relevant components or raw materials or may render the relevant supplier unable to accommodate relevant requests. It is also possible that the supplier does not have the right to sell the relevant product to us, for example, because the supplier lacks the intellectual property rights to the design or because the supplier has an exclusivity agreement with another manufacturer, which we could force us to discontinue production or sales of our products, to replace the part or to change the design of our technology, which could result in significant delays and costs or make the production of our products impossible altogether. Suppliers may change their products or may go out of business, resulting in limited or no availability of relevant parts and materials for the production and maintenance of our products. All of our sourced components and raw materials are subject to typical transportation risks, such as delivery delays, damage or theft in the course of transportation or fines resulting from the violation of customs or other transportation regulations.

Furthermore, our relationships with our suppliers may be negatively impacted by the Self-Administration Proceedings and our plans to intensify or modify relationships with suppliers or expand the number of our suppliers are subject to developments with respect to these proceedings. See also “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, and adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects” and “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for”.

We expect to depend on suppliers for production of a central component of our solar modules; quality concerns could delay our expected start of the industrial production and large-scale commercialization of our solar technology.

We currently have engaged a single supplier for engineering services for the manufacturing process and production of a central component of our solar modules, the photovoltaic labels. This supplier was also supposed to play a key role in our former passenger car program and adapted its own business model to our plans and expected needs. This supplier will have to adapt its operations to our revised business model and there is no guarantee that this supplier will be able to adapt its business model accordingly in time or at all. Therefore, we are in the process of identifying a second supplier of photovoltaic labels to mitigate our dependency on this single supplier but there is no guarantee that we will be successful in onboarding a second supplier in time or at all. Even if we are successful in onboarding a second supplier, we still face certain risks with respect to dependency and the sourcing of photovoltaic labels as a key component of our solar modules. Any delay or disruption in the engineering work or production of photovoltaic labels by our suppliers could significantly delay or disrupt our envisaged timelines or the production of our solar modules. We are in an ongoing dialogue with these suppliers concerning product quality. For example, the latest samples for our prototyping received from our first supplier did not conform to our technical requirements or quality expectations for the state of the current development. The suppliers may not be in a position to improve the quality so that it meets our expectations within the required timeframe or at all. Quality issues, including issues with performance and durability, may delay or reduce the chances of selling or licensing the technology following the termination of the Sion passenger car program. In addition, our dependence on these supplier means that any disruption in the suppliers’ ability to continue their business operations, or any change in the suppliers’ willingness to continue as our suppliers, may also delay or reduce the chances of selling or licensing the technology and require us to invest substantial time and resources to find replacement suppliers. Given the technology and hardware needed to produce photovoltaic labels, we may not be able to replace any of our suppliers in the short term if we decide to do so. There is no assurance that our suppliers or any replacement supplier have secured or will be able to secure access to sufficient funding.

Furthermore, our relationships with our suppliers may be negatively impacted by the Self-Administration Proceedings and our plans to pursue relationships with suppliers are subject to developments with respect to these proceedings. See also “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, and adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects” and “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for”.

Increases in costs, disruption of supply or shortage of raw materials or certain products could harm our business.

Once commercial production of our solar technology begins, our manufacturing partners who are expected to produce our solar modules, or any of our other suppliers, may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials required for the manufacturing of our products or certain parts or components used in them. Our solar technology depends on various raw materials and products. The prices for these materials and products may fluctuate depending on market conditions, inflation levels, energy prices, macroeconomic factors, and political developments. Some products may not be available at all in the short term. In addition, the imposition of new government regulations, duties or taxes, such as taxes on imported materials and components that are used in our solar modules or are otherwise necessary for production of our solar technology, could also affect the prices for these materials and products. Substantial increases in the prices for raw materials and/or increases in freight charges would increase our operating costs and could reduce our margins if the increased costs cannot be recouped through increased product prices. There can be no assurance that we will be able to recoup increasing costs of raw materials by increasing product prices.

We have yet to enter into contractual agreements with many of our prospective suppliers and business partners and may have to renegotiate these agreements as we scale our business.

We need to finalize our contractual arrangement with many of our prospective suppliers and business partners. Negotiations with our prospective suppliers and business partners may consume significant resources and time and there is no guarantee that such negotiations will be concluded successfully. In the negotiations, we may agree to terms and conditions that are less favorable to us than expected. We may be subject to unfavorable rules on the transfer of risk with respect to our solar modules or supplied components or disadvantageous payment terms. Any failure to finalize our arrangement with our manufacturing partners in a timely manner may lead to a delay in the production and delivery of our offering. Terms and conditions (including production cost) of any contractual arrangement, including any preliminary contractual arrangement, may have to be renegotiated due to a lapse of time or a change in material circumstances should we not be able to realize the anticipated timelines.

Prospective suppliers and business partners may end their relationship or negotiations with us for various reasons. Many of the suppliers we involve, or intend to involve, are well-known market players with significant bargaining power and whose position towards us is bolstered due to our dependency on such suppliers as there are only a limited number of suppliers for solar technology components and raw materials. We, on the other hand, are not an established business and have limited market power. Therefore, we may not be able to successfully assert our own interests and may have to enter into contracts with significantly disadvantageous terms and conditions, such as unfavorable prices, limitations on remedies in cases of breach of contract, unfair liquidated damages provisions or broad termination rights allowing our business partners to end their relationship with us at will. If we successfully produce and market our solar technology on an industrial scale, we will seek to further scale our operations. We may have to renegotiate, amend or extend our relationships with our business partners and there is no guarantee that we will be successful in doing so. We may incur substantial additional costs and expenses should we have to amend our business model to scaled operations and we may even fail to do so.

Furthermore, our relationships with prospective suppliers and business partners may be negatively impacted by the Self-Administration Proceedings and our plans to pursue relationships with prospective suppliers and business partners are subject to developments with respect to these proceedings. See also “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—Operating under the Self-Administration Proceedings for a long period may disrupt our business and may materially and adversely affect our operations, including by consuming a substantial portion of the time and attention of our management team, and adversely affecting our ability to maintain important relationships with creditors, customers, suppliers, service providers, employees and counterparties, and impacting our ability to pursue new customer arrangements and projects” and “Item 3. Key Information—D. Risk Factors—Risks Related to the Self-Administration Proceedings—We are subject to risks and uncertainties associated with the Self-Administration Proceedings we have applied for”.

We may not be able to obtain or agree on acceptable terms and conditions all or a significant portion of the government grants, loans and other incentives for which we may apply, which may negatively affect our ability to reach funding goals.

We may apply for federal and state grants, loans and tax incentives under various government programs designed to stimulate the economy or to support the development or production of electric vehicles and related technologies.  Our ability to obtain funds or incentives from these sources is subject to the availability of funds under applicable programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any grants, loans and other incentives.

In addition, as a result of our termination of the Sion passenger car program in February 2023 and the recent employee terminations in light of our intention to focus in the short- to medium-term on our Solar Bus Kits, we are in the process of withdrawing from and terminating certain grants and other incentives that we were previously awarded but no longer align with our current business model and staffing. For example, we exited the SCALE project, which related to the mass deployment of electric vehicles and the accompanying smart charging infrastructure/V2G (vehicle-to-grid) to demonstrate how AC bi-directional charging can support the electric grid (e.g. by reducing peak loads) using open standards, and will have to repay some of the funds received under the SCALE project if we emerge from the Self-Administration Proceedings. Furthermore, while the Subsidiary Self-Administration Proceedings are ongoing, the Subsidiary is prohibited from obtaining grants, loans or other incentives and our plans to obtain grants, loans and other incentives going forward are subject to developments with respect to the Self-Administration Proceedings. If we are not successful in obtaining any of these additional incentives and unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.

We depend on the acceptance of our brand and any negative publicity relating to any of our business partners and their products or services could have a significant negative impact on our business and reputation.

Our business and prospects heavily depend on our ability to develop, maintain, and strengthen our Sono brand. Our current and potential competitors often have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. Establishing our brand and offering requires substantial resources and we may not succeed in establishing, maintaining and strengthening our brand. Our brand and reputation could be severely harmed by negative publicity with respect to us, our directors, officers, employees, shareholders, peers, business partners, customers or our industry in general. For example, the German prosecutor has opened an investigation against our CEOs Laurin Hahn and Jona Christians alleging that we misled the German state about the extent of a working hour reduction in 2020 and, accordingly, the extent of public subsidies our employees were entitled to. While most of the allegations have been clarified, we cannot rule out that a conviction of Laurin Hahn and/or Jona Christians may damage our reputation. Any actual or alleged misconduct by, or negative publicity relating to, any of our business partners and their products or services could have a significant negative impact on our business and reputation whether or not such publicity is directly related to their collaboration with us. Our ability to successfully build our brand could also be adversely affected by any negative perception about the quality of our business partners’ products or services.

If our solar modules or any other of our solutions fail to perform as expected, our ability to market our products could be harmed.

Our solar modules or any other of our solutions, including our Solar Bus Kits, may not perform as expected or may require repair. Our solar modules will consist of, and their performance depends on, various complex components supplied by various suppliers and assembled by a third-party manufacturer. There is no guarantee that all product specifications of our solar modules, which partly reflect our current expectations and development targets, will actually be realized if and when the commercial production and delivery of our solar modules begins or at all. Our asset-light business model and the intended production of our solar modules by an external manufacturing partner pose particular challenges to our quality management processes. Our quality management system may not be effective or sufficient and the number of defective products may be substantially higher than anticipated. The risk that we do not detect defects before the commencement of large-scale sales of our products and that our products will not comport with previously defined product specifications is heightened by our limited experience in designing, developing and manufacturing solar modules. We may experience product recalls in the future, which could result in the incurrence of substantial costs relating to, for example, return shipping for defective products and costs associated with the repair of the underlying product defect. Any product recall may consume a significant amount of our resources. Any product defects or any other failure of our products to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.

Our advertisements may not have complied in the past and may not comply in the future with all relevant legal requirements and may be subject to misperception.

We cannot guarantee that all of our public statements that qualify as advertisements, or whole advertising campaigns, comply with legal requirements under competition law or other laws, rules or regulations. Any non-compliance could lead to administrative fines and may result in us being required to discontinue a campaign. We may also be forced to publicly correct incorrect statements. In addition, our public communications also may have contained, or may contain in the future, incorrect information or statements or may be subject to misperception. We often advertise our products with rather general characteristics and specifications that are subject to interpretation, such as “green,” or “environmentally friendly” and any statement relating thereto may spark discussions, challenges or legal claims should any of our customers or other third party have an understanding of these characteristics and specifications that differs from ours. Any of the foregoing could adversely affect our reputation and brand and our business.

We intend to market and sell our products via direct business-to-business channels and will not maintain a network of physical presences.

If and when our products reach commercial production, we intend to sell them to our customers via customary business-to-business channels rather than through physical sales offices, company-owned retail stores or another form of physical presences. This distribution model subjects us to various risks as it requires, in the aggregate, significant expenditures and provides for slower expansion of our distribution and sales systems than may be possible by utilizing a network of physical presences. Moreover, we will be competing with other market players who may have well established distribution channels. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies and our inability to successfully implement such a distribution model could adversely affect our business, reputation, results of operations, financial condition and prospects.

If we are unable to establish a network for aftersales customer service or otherwise successfully address the service and maintenance requirements of our customers, our business, reputation, results of operations, financial condition and prospects will be materially and adversely affected.

If and when our products reach commercial production, we intend to offer our own aftersales service and also maintain our own network of cooperating service partners for the provision of aftersales customer service. We still have to identify and enter into negotiations with one or several potential business partners maintaining a suitable network of physical workshops to implement our concept of aftersales customer service for some industries and there can be no assurance that we will be able to achieve our goal of establishing a service network that offers repair, servicing, maintenance and warranty service to our customers in time or at all. Even if we successfully manage to partner with relevant service partners, they will initially only have limited experience in servicing our solar modules and solutions for our customers. If our cooperation partners do not render the desired results, we may need to find further suitable external partners and enter into service arrangements with them on terms and conditions acceptable to us in order to offer our customers adequate service and maintenance offerings. If we are unable to successfully address the service and maintenance requirements of our customers, our business, reputation, results of operations, financial condition and prospects will be materially and adversely affected.

Product recalls could materially adversely affect our business, prospects, operating results and financial condition.

Our solar module technology and other solutions are complex products whose reliability and durability in the day-to-day wear and tear remains untested. In the future, we may, voluntarily or involuntarily, initiate a recall if any of our products prove to be defective or noncompliant with applicable relevant regulatory or safety standards. Relevant defects may include, for example, a lack of durability of our solar modules, intense heat development as well as thermal expansion of our modules. Any product recall in the future may result in adverse publicity and damage our brand. Such recalls could involve significant expense and diversion of management attention and other resources and could adversely affect our business, prospects, financial condition and results of operations.

Our solar modules pose certain health and safety risks.

Our solar modules, including our Solar Bus Kits, may pose various risks to the environment. Solar modules include components and complex systems that can fail, such as switches, fuses and wiring feeding the solar modules’ power into a vehicle’s systems. In addition, chemical and potentially toxic materials are used in the production of solar cells, in a process that generates many toxic byproducts such as hexafluoride. These products are dangerous for the environment as well as for humans. Even if our production partner has implemented safety procedures related to the handling of such toxic materials, a safety issue, contamination or fire related to the solar modules could disrupt operations. Furthermore, solar modules may catch fire due to, for example, spontaneous combustion, either from the parts within the modules or in the surrounding environment, due to the high levels of heat produced by the device. Solar modules that catch fire may produce heat, smoke and toxic byproducts, may lead to the destruction of the vehicle or may cause bodily harm. In addition, excessive heat may significantly reduce the power output of our solar modules and negatively affect the additional solar range or targeted reduction in fuel consumption. Excessive heat may also lead to thermal expansion and deformation of solar modules, which can negatively affect their functionality or damage the exterior of vehicles. Any of the foregoing could adversely affect our business, harm our brand, prospects, financial condition and operating results.

Interruption or failure of information technology and communications systems could disrupt our business and affect our ability to effectively provide our services.

We utilize information technology systems and networks as well as cloud computing services to process, transmit and store electronic information in connection with our business activities. We manage and maintain our applications and data utilizing a combination of on-site systems as well as externally managed data centers and cloud-based data centers. We utilize third-party security and infrastructure service providers to manage our information technology systems and data centers. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information, and business and financial information as well as personal data of customers, community members or employees. In addition, we also rely on independent third-party service providers, such as Google, which play an important role for our offering, marketing channels and overall presence. Our data of any kind stored on the cloud services and on individual devices could be lost due to improper handling, insufficient commissioning of third parties to create backup copies, or due to damage or accidental or intentional deletion by our employees. Our data could also fall into the hands of third parties, whether through espionage, hacking or due to incorrect operation of the systems. Any unauthorized access to our data or any asset could result in its leakage, loss, manipulation or fraud or materially impair our business operations.

Despite the implementation of security measures by us or our service partners, our or our service partners’ systems as well as any relevant third-party service provider will be vulnerable to damage or interruption from, among others, fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. The relevant data centers could also be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of our or our service providers’ systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities.

Any problems with or insufficiencies of our or our service providers’ data centers or services could result in lengthy interruptions of our or our service providers’ information technology systems. Cyber threats are persistent and constantly evolving. Such threats have increased in frequency, scope and potential impact in recent years. Information technology evolves rapidly and we or our service providers may not be able to address or anticipate all types of security threats, and may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies. There can be no assurance that we or our service providers, contractors or consultants will be successful in preventing cyberattacks or successfully mitigating their effects. Similarly, there can be no assurance that any third-party service provider will be successful in protecting our confidential and other data that is stored on their systems. In addition, we may suffer reputational harm or face litigation or adverse regulatory action as a result of cyberattacks or other data security breaches and may incur significant additional expense to implement further data protection measures. Any disruption of the networks and services of independent third-party service providers could also negatively affect our operations, accessibility or offering.

If we are able to successfully emerge from the Self-Administration Proceedings, we may face risks associated with international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.

If we are able to successfully emerge from the Self-Administration Proceedings, we expect that our initial market will be central Europe, but our geographic coverage could exceed these markets. As a result, we would face risks associated with such growth, including possible unfavorable regulatory, political, tax and labor conditions, which could harm our business, as well as incurring significant expenditures necessary for satisfying relevant regulatory requirements or obtaining product certification in such new markets. Our operations will be subject to the local legal, political, regulatory and social requirements and economic conditions in the relevant jurisdictions. There is no guarantee that we will obtain relevant certifications for our products in the relevant markets or at all. We have not yet checked the feasibility of a rollout of our products in all the markets we may tap in the future and may identify political, regulatory, operational or practical hurdles, which may render an expansion into such a market unfeasible.

We have no experience to date selling our products. Any international sales would require us to make significant expenditures, including the potential hiring of local employees and potential establishment of local offices or facilities, in advance of generating any revenues. We may become subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our products as planned and require significant management attention. If we fail to successfully address such risks, our business, prospects, operating results and financial condition could be materially harmed.

If we are unable to attract and retain key employees and hire qualified management, technical and engineering personnel, our ability to compete could be harmed.

Our success and financial performance depend on technological innovation and resources. Our success in such an environment depends, to a large extent, on our management and the ability to retain our key personnel. We benefit from the expertise and knowledge of our research and development team and our competitiveness could be significantly impaired should we be unable to retain the key employees in our research and development team or any other team member. Any temporary or permanent unavailability or any unexpected loss of one or more of our management members or key employees could adversely affect our business and competitiveness. In connection with the Yorkville Investment, our founders, Laurin Hahn and Jona Christians, may resign from our management board. Any such change may have a significant impact on our operations and the loyalty and motivation of our employees.

Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop highly qualified personnel. In light of our decision to terminate the Sion program in February 2023, as of the end of March 2023, we had notified 254 employees about the termination of their employment with us and, in this context, additional employees decided to leave us. Thereafter, in connection with the corporate structure and future business model currently envisioned in the planned Yorkville Investment, including the streamlined initial business focus on the Solar Bus Kit, in September 2023, we terminated the contracts of 40 employees, including the contracts of the four managing directors of the Subsidiary. In addition, in late October 2023, we gave notice to all of our remaining employees. In November 2023, we agreed on the Yorkville Investment and offered to reinstate these employees. While more than 80% of these employees accepted our offer to stay, these events may have damaged our reputation as an employer and may significantly negatively affect our ability to hire and retain employees. Further, the significant reduction in headcount in 2023, as well as the planned change in management at both the Company and Subsidiary levels in connection with the Yorkville Investment, which in both cases will result in smaller management teams, expose us to the risk that employees with relevant knowledge and know-how may have left us and that the remaining employees may not be able, or may not have the adequate skills or time, to successfully perform all of the functions that are necessary for us to manage, develop or grow our business.

We may have to hire additional employees in order to maintain our daily operations, corporate functions and be able to complete the development of our solar technology in order to start its commercial production according to our currently envisioned timelines. We may not succeed in hiring employees in sufficient numbers or at all, as our technological solutions are complex and innovative and individuals with sufficient experience with solar technology, particularly solar technology used in vehicles, are scarce, and as a result, we will need to expend significant time and money to train available employees. Competition for qualified employees is intense, and our ability to hire, attract and retain them depends, among others, on our ability to provide competitive compensation. Even if we are able to successfully emerge from the Self-Administration Proceedings, these proceedings and the events leading up to them are likely to have damaged our reputation as an employer. Furthermore, we have a limited operating history and our brand and reputation as an employer are not as developed as that of established market players. We have not yet generated any material revenues, significantly depend on external financing and may not be able to offer potential employees attractive or competitive remuneration.

We may therefore not be able to attract, integrate, develop or retain qualified personnel in sufficient quantities or at all. Any failure to do so could adversely affect our business, including the execution of our global business strategy. Unqualified or unreliable personnel may also expose us to various risks not directly related to our operations, such as violations against insider trading laws, the misappropriation of trade and business secrets or personal data from our technology infrastructure, material incorrect entries in our accounting systems, weak management of our customer or supplier relationships or logistics management.

We are exposed to various liability risks resulting from past or existing employment relationships and labor laws.

In light of our decision to terminate the Sion program in February 2023 and our financial situation, we terminated the vast majority of our employees. Thereafter, in connection with the corporate structure and future business model envisioned in the Yorkville Investment, including the streamlined initial business focus on the Solar Bus Kit, in September 2023, we terminated the contracts of 40 employees, including the contracts of the four managing directors of the Subsidiary. We may also decide to terminate further employment relationships in the foreseeable future. We are exposed to substantial liability and other risks related to former employees, who may initiate legal proceedings and assert that the termination of their employment relationship by us was not justified under applicable law and may seek re-employment, monetary compensation or damages. Therefore, we may be exposed to substantial financial and other liabilities should employees be successful in challenging terminations. As of December 1, 2023, 13 employees had initiated legal proceedings against us in connection with their termination due to our changes in business model, 11 of which have already been resolved as of the date of this Annual Report. In addition, despite their termination, former employees may still claim to be, fully or partially, entitled to certain benefits granted to them while they were still employed with us, such as, for example, certain incentives, bonuses or pension entitlements. We may also be liable for substantial social security contributions with respect to terminated employees for a prolonged time. We also continue to face the risk of additional employees, including key personnel, deciding to leave and pursue new employment opportunities in light of the uncertainty created by the pendency of the Self Administration Proceedings.

Workforce management poses various risks and challenges, particularly in the EU and Germany, where the vast majority of our workforce is located. The labor laws in Germany are complex and rather employee-friendly. For example, the German Working Time Act (Arbeitszeitgesetz) sets out a strict framework for, among others, the length of working shifts and resting breaks, the definition of working days and holidays, work on holidays, compensation and the obligation of employers to record working times of employees. There can be no assurance that we have complied or will comply in all material aspects with applicable labor laws, which may lead to the imposition of material fines or even criminal liability and may significantly negatively affect our reputation.

Our operations could be adversely affected as a result of disasters or unpredictable events.

Our operations could be disrupted, among others, by natural disasters such as earthquakes, fires or explosions, pandemics and epidemics, power outages, terrorist attacks, cyberattacks, war or other critical events. This also applies to the operations of our suppliers and other business partners. Disruptions may also result from possible regulatory or legislative changes in the relevant jurisdictions of our, our suppliers’ or our business partners’ operations.

In February 2022, Russia invaded Ukraine across a broad front. In response to this aggression, governments around the world have imposed severe sanctions against Russia. These sanctions disrupted manufacturing, delivery and supply chains at a global scale. In addition, the recent war between Israel and Hamas may also disrupt or otherwise negatively impact manufacturing, delivery and supply chains at a global scale and may also have a material impact on business relationships with customers in the region. We cannot yet foresee the full extent of the impact that these wars and the sanctions imposed as a result thereof, as well as any future sanctions that may be imposed in connection with these wars, will have on our business and operations. Such impact will depend on future developments of the wars, which are highly uncertain and unpredictable. The wars could have a material impact on our results of operations, liquidity, and capital management. We will continue to monitor the situation and the effect of these developments on our liquidity and capital management. At the same time, we have taken actions to maintain operations and to secure our supply chain.

Regulatory, Legal and Tax Risks

We are subject to substantial regulation and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.

We are subject to substantial regulation under international, national, regional, and local laws. We expect to incur significant costs in complying with these regulations. In addition, additional regulatory costs or hurdles may materialize in the future as we expand our operations, as we have not yet assessed all relevant legal aspects of our operations and current business model with respect to the relevant legal framework of all jurisdictions we may conduct business in. Regulations related to the mobility and e-mobility industry and alternative energy are evolving and we face risks associated with changes to these regulations. We are unable to predict future legislative or regulatory changes, initiatives or interpretations and any such changes, initiatives or interpretations may increase costs and competitive pressure on us. The adoption of new or amendment of existing regulations or frameworks regarding the promotion of alternative fuel concepts could negatively affect demand for e-mobility solutions in general and, in turn, our products in particular. To the extent laws change, our products may not comply with applicable international, national, regional or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.

We are subject to various environmental laws and regulations that could impose substantial costs upon us.

Our operations, are or will be subject to international, national, regional and/or local environmental laws and regulations, including, in the jurisdictions in which we intend to sell our products, laws relating to the use, handling, storage, disposal and human exposure to hazardous materials (including the German Federal Soil Protection Act (Bundes-Bodenschutzgesetz), and Regulation (EC) no. 1907/2006 (REACH)). Furthermore we will be affected by the Extended Producer Responsibility, an EU policy approach under which producers are given a significant responsibility  -  financial and/or physical  -  for the treatment or disposal of post-consumer products. We may be or become subject to various environmental, social and governance-related regulations in the future, such as the EU Corporate Sustainability Reporting Directive, EU Taxonomy for sustainable activities or the Act on Corporate Due Diligence Obligations in Supply Chains (“Lieferkettensorgfaltspflichtengesetz”, LkSG) including as a result of recent legislative or regulatory initiatives. Environmental and health and safety laws and regulations can be complex. We expect that we will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations, which may require us to change our operations, potentially resulting in a material adverse effect on our business, prospects, financial condition and operating results.

These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production or a cessation of our operations.

We may be involved in legal proceedings based on the alleged violation of intellectual property rights either by us or third parties, such as patent or trademark infringement claims, which may be time-consuming and cause us to incur substantial costs.

Technological innovation will be a crucial aspect of our potential success. We have been granted several patents for our technologies and intend to continue to file additional patent applications in the future. As the number of competitors in our market increases, and as the number of patents issued in the area of mobility and e-mobility grows, the possibility of patent infringement claims against us or by us increases. While we are not aware that our technologies infringe the proprietary rights of any third party or that technologies of a third party infringe our proprietary rights, we do not regularly conduct freedom to operate searches. Policing violations of our intellectual property rights or unauthorized use of our proprietary technology can be difficult and result in substantial costs. Litigation may be necessary to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of others. We cannot ensure that the outcome of such potential litigation will be in our favor, and such litigation may be costly and may divert management attention and other resources away from our business. We may not be able to manufacture or commercialize our technology as planned and our freedom to operate may be impaired, absent a license, which may not be available on reasonable terms or at all, should we fail to successfully identify or challenge any patents or patents applications that cover our technology or innovations. This risk is more pronounced against the background that it is difficult for industry participants, including us, to identify all third-party patent rights that may be relevant to our product candidates and technologies because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. We may in-license patents and other intellectual property from third parties, including suppliers and service providers, and we may face claims that our use of this in-licensed technology infringes the intellectual property rights of others. In such cases, we will seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses.

We may be required to participate in interference, derivation or opposition proceedings that concern disputes regarding priority of inventions disclosed in our patents. Determining patent infringement by a product, as well as priority of inventions and other patent-related disputes, involves complex legal and factual issues and the outcome is often uncertain. We have not conducted any significant search of patents issued to third parties, and third-party patents containing claims covering our technology or methods that predate our patents may exist. Because of the number of patents issued and patent applications filed in our technical areas or fields (including some pertaining specifically to electric vehicles), we may identify third party technologies that infringe our patents or our competitors or other third-parties may assert that our technology and the methods we employ in the use of products incorporating our technology are covered by patents held by them. In addition, because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, we may not be aware of certain patent applications that are currently pending, which applications may result in issued patents that our technology or other future products would infringe. Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications that may ultimately issue with claims that we infringe.

Our ability to successfully commercialize our solar technology, and therefore our ability to potentially generate meaningful revenue streams, may be significantly impaired should it or any of its components violate third parties’ intellectual property rights. The scope of patent claims is subject to construction based on interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect. Established vehicle manufacturers, technology companies or other market players may invest significant resources and capital to protect their intellectual property and scan the market for potential violations. There is a heightened risk that inquiries or legal proceedings based on the alleged violation of intellectual property rights are initiated by established vehicle manufacturers or technology companies that develop and test technologies similar to ours and that have much more resources and funds than us. Other companies owning patents or other intellectual property rights relating to technologies relevant for us, such as solar modules or electronic power management systems may also allege infringement of such rights. In addition, we may also be exposed to claims from individuals who were or are engaged in the design and development of our technologies or previously developed vehicles. We initiated mass layoffs of former employees in connection with the change in our business model, which increases the risk for retaliatory actions. Former employees who left us or were terminated may seek to assert ownership in or otherwise challenge intellectual property rights that we claim or are crucial for our plans. The publicity interest we receive as a public company draws significant attention to us and likely generally increases the risks of such claims and legal proceedings, no matter whether such claims lack the required merits or not or are of merely fraudulent nature. 

In addition, we may be required to indemnify our customers and distributors against claims relating to the infringement of intellectual property rights of third parties related to our products. Third parties may assert infringement claims against our customers or distributors. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers or distributors, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers or distributors, or may be required to obtain licenses for the products or services they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our distributors may be forced to stop distributing our products or services, and our customers may be forced to stop using our products or services.

The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. Because of the substantial amount of discovery required in certain jurisdictions in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. If we are required to obtain a license from any third party in order to use the infringing technology and continue developing, manufacturing or marketing our products, we may not be able to obtain such required license on commercially reasonable terms or at all, including due to competitors being unwilling to provide us a license under any terms. A successful claim of infringement of intellectual property against us could therefore materially adversely affect our business, prospects, operating results and financial condition. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources and we have not yet created any reserves for litigation related to intellectual property.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, which may adversely affect our business.

Our trademark registrations and applications are valuable assets and may be challenged, infringed, circumvented or declared generic or determined to infringe a third party’s trademarks. In March 2022, we filed eight new trademarks with the European Union Intellectual Property Office. Each of those new trademarks has been opposed by two separate opponents. We may not be able to protect our rights to these trademark registrations or applications, which may be necessary to build name recognition among potential collaborators or customers in our markets of interest. For example, we have failed in some jurisdictions to obtain protection for our circle with a dot in the middle, if it is not combined with other distinctive elements. Equally, there can be no assurance that we will be successful in registering additional or replacement trademarks if we were to engage in a rebranding. At times, competitors may adopt trademarks or trade names similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our trademark registrations or applications. We have not conducted any availability searches for trademarks to assess whether our trademark registrations would not infringe a third party’s trademarks, or whether our trademark applications would be successfully registered. We can provide no assurance that our pending trademark applications will be approved. Successful third-party challenges to the use of any of our trademarks may require us to rebrand our business or certain products or services associated therewith.

Over the long term, if we are unable to establish name recognition based on our trademarks, then we may not be able to compete effectively and our business may be adversely affected. We may fail to adequately maintain the quality of our products and services associated with our trademarks, and any loss to the distinctiveness of our trademarks may cause us to lose certain trademark protection, which could result in the loss of goodwill and brand recognition in relation to our name and products. In addition, we may license our trademarks to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks may be used, a breach of these agreements or misuse of our trademarks by these licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks. Our efforts in enforcing or protecting our trademarks may be ineffective and could result in substantial costs and diversion of resources and adversely affect our business.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers or claims asserting ownership of what we regard as our own intellectual property.

Some of our employees were previously employed at other companies that may have proprietary rights related to our business. Some of these employees may have executed proprietary rights, non-disclosure and noncompetition agreements in connection with such previous employment. Although we try to ensure that such individuals do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of their former employers. We are not aware of any such disclosures, or threatened or pending claims related to these matters, but in the future, litigation may be necessary to defend against such claims. If we fail to defend any such claims, we may lose valuable intellectual property rights or personnel, and may be required to pay monetary damages and be enjoined from conducting our business as contemplated. Even if we are successful in defending against such claims, litigation can be expensive and time-consuming.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business or permit us to maintain our competitive advantage.

For example:

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and reputation.

We may be subject to various privacy laws, the violation of which could result in substantial fines and other negative consequences.

We collect, store and process substantial amounts of data in the course of our business operations, which may subject us to various data protection and privacy laws. The regulatory framework for data protection, privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.

The data and information we collect and manage in conducting our business may subject us to legislative and regulatory burdens and requirements in the European Economic Area (“EEA”) and the United States of America that could require notification of data breaches, restrict our use of such information and hinder our ability to acquire new customers or market to existing customers. We have not yet implemented a comprehensive set of internal- or external-facing written data protection and privacy policies, procedures and rules. Non-compliance or a major breach of our network security and systems could have serious negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our products, and harm to our reputation and brand. For instance, Regulation (EU) 2016/679 of the European Parliament and of the Council of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (the General Data Protection Regulation, “GDPR”) imposes strict limitations on the processing of personal data. The GDPR and other data privacy laws regulate when and how personal data may be collected, for which purposes it may be processed, for how long such data may be stored and to whom and how it may be transferred. The GDPR contains strict requirements for obtaining the consent of data subjects (i.e., the persons to whom personal data relates) to the use and processing of their personal data and also requires the implementation of appropriate technical and organizational measures, depending on the nature of the processing activities, and imposes certain documentation obligations relating to data processing activities. The GDPR also imposes various obligations in the context of processing of data, including, among others, far-reaching transparency, data minimization, storage limitations, privacy by design and privacy by default obligations, data security, integrity and confidentiality obligations. In addition, it may require data protection impact assessments where the data processing is likely to result in a high risk to the rights and freedoms of individuals. In case of a violation of the provisions of the GDPR, we could be subject to fines of up to €20,000,000 or up to 4% of our total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. We may also be liable should any individual who has suffered financial or non-financial damage arising from our infringement of the GDPR exercise their right to receive compensation against us. Furthermore, adverse publicity relating to our failure to comply with the GDPR could cause a loss of goodwill, which could have an adverse effect on our reputation, brand, business and financial condition. In addition, local authorities may construe new regulations in a way that is even more restrictive and there is no guarantee that we will be able to comply with such restrictive approaches.

There is a risk that personal data that we process could become public if there were a security breach in respect of such data and, if such security breach were to occur, we could face liability under data protection laws, including the GDPR, and lose the goodwill of our customers, which may have a material adverse effect on our reputation, brand, business and financial condition. Any risk of liability under data protection laws, including the GDPR, is more pronounced against the background of our mass terminations of employees that we implemented in connection with the change in our business model and which could subject us to retaliatory actions by former employees, including willful data leakages or the disclosure of confidential information.

We are exposed to the risk of litigation or other legal proceedings that could cause us to spend substantial resources and disrupt our business.

We are exposed to the risk of product liability claims, regulatory action and litigation if any defect of our solar technology solutions or other innovations is alleged to have caused loss or injury. We face the risk of significant monetary exposure to product liability claims in the event our products do not perform as expected or contain design, manufacturing, or warning defects, and to claims without merit, or in connection with malfunctions, resulting in personal injury or death. Product liability claims could arise, for example, from malfunctions, defects, quality issues, design flaws or structural weaknesses relating to, or abuse of, our solar technology solutions implemented in or offered with vehicles. Our risks in this area are particularly pronounced given the limited field experience of our products and because we are a new entrant into the market. Any product liability claims or corresponding regulatory actions against us could result in increased costs and could adversely affect our reputation and our perception by our customers. We may not be able to secure product liability insurance coverage on commercially acceptable terms, at reasonable costs when needed, or at all and insurance coverage might not be sufficient to cover all potential product liability claims.

In addition, we face substantial litigation risks in connection with our recent decision to terminate our Sion passenger car program and to change our business model to exclusively retrofitting and integrating our solar technology onto third party vehicles. Customers who placed reservations for our vehicles or disappointed members of our community may initiate lawsuits and claim damages despite our efforts to consensually settle reservations for our vehicles and amicably manage public relations. In light of our decision to terminate the Sion passenger car program in February 2023, as of the end of March 2023, we had notified 254 employees about the termination of their employment with us. Thereafter, in connection with the corporate structure and future business model envisioned in the Yorkville Investment, including the streamlined initial business focus on the Solar Bus Kit, in September 2023, we terminated the contracts of 40 employees, including the contracts of the four managing directors of the Subsidiary. As a result, we face the risk of numerous legal proceedings in which former employees may challenge their termination, claim damages or other payments and benefits in relation to their employment relationship or seek ownership in intellectual property rights and other assets. As of December 1, 2023, 13 employees had initiated legal proceedings against us in connection with their termination due to our changes in business model, 11 of which have already been resolved as of the date of this Annual Report. We also have to terminate and settle relationships with several former business partners that became obsolete and there is no guarantee that we are able to end such relationships consensually or on favorable terms. Former business partners may assert substantial payment claims or sue us for damages.

Furthermore, we may also face litigation and legal proceedings based on advertisements or other public statements should such statements turn out to be unrealistic, unfeasible or false or should the overall advertised performance or specifications of our products deviate from such advertisements or public statements. In connection with a crowdfunding campaign launched in December 2019 when we were still pursuing the development and commercialization of our solar electric vehicle Sion and accepting vehicle reservations and down payments to finance our operations, our three founders Laurin Hahn, Navina Persteiner and Jona Christians announced that they would contribute their profit participation rights associated with their shares in the Subsidiary (while the voting rights associated with the underlying shares would remain with the founders), equaling 64.07% of all profit participation rights at that time, into a “community pool” from which certain monetary benefits in the form of so-called Sono Points would then be awarded. The founders intended such monetary benefits in the form of Sono Points to be allocated among already existing customers and new customers of our electric vehicle who placed a reservation for a vehicle, depending, with respect to new customers, on the timing of the reservation and the amount of the advance payment of the relevant new customer. The Sono Points would have represented participating entitlements concerning dividends, liquidation proceeds and proceeds from the sales of shares attributable to the community pool. However, since the Sion passenger car program has been terminated and no purchase agreements for the Sion will be concluded, customers will no longer receive Sono Points. Nevertheless, there is a substantial risk that we may also face litigation and legal proceedings based on past advertisements of, and other public statements concerning, Sono Points.

We may or will be, as the case may be, subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and our compliance systems may not be sufficient to adequately prevent or detect legal, financial and operational risks.

Our business may or will be subject to various laws and regulations relating to, among other things, prevention of illegal employment, bribery and corruption, and money laundering, as well as compliance with antitrust, data protection (particularly the GDPR), consumer protection, minimum wage regulations, various criminal as well as export control regulations and trade and economic sanctions and embargoes on certain countries, persons, groups and/or entities, projects and/or activities. We are reliant on the compliance of our employees and the members of our management board, our contractors, consultants, agents, vendors and (other) collaboration partners with applicable laws and compliance policies implemented by us.

However it cannot be excluded that our employees, the members of the management board, our contractors, consultants, agents, vendors and (other) collaboration partners have committed or will commit criminal, unlawful or unethical acts (including corruption) or that our compliance and risk management and its monitoring capabilities may prove insufficient to prevent or detect any breaches of the law. Any such acts or breaches of law could result in whistle-blower complaints, adverse media coverage, (criminal) investigations, significant civil, administrative, and criminal penalties and damage claims, disgorgement or other sanctions, (collateral) consequences, remedial measures and legal expenses, and cause considerable damage to our reputation, thereby negatively affecting our business, results of operations, financial condition and future business opportunities.

We may become subject to additional Dutch and German taxes, in particular, due to the statutory seat of the Company in the Netherlands.

There is a risk that the German tax authorities classify the Company as Dutch tax resident. If the German tax authorities conclude that the Company is not, has ceased, or ceases to be (also as a consequence of the change of facts or the law), a German tax resident, it could, inter alia, become subject to German exit taxation. This could have serious German tax consequences, including German exit taxes or the increase of German withholding taxes on dividends received by the Company. Such German exit taxes could lead to the taxation of the built-in gains in the assets (e.g., intellectual property or goodwill) of the Company.

If we do pay dividends, we may need to withhold tax on such dividends payable to holders of our shares in both Germany and the Netherlands.

We currently do not intend to pay any dividends to holders of our ordinary shares. However, if we do pay dividends, we may need to withhold tax on such dividends in both Germany and the Netherlands.

As an entity incorporated under Dutch law, any dividends distributed by us are subject to Dutch dividend withholding tax based on Dutch domestic law. However, on the basis of the 2012 Convention between the Federal Republic of Germany and the Kingdom of the Netherlands for the avoidance of double taxation with respect to taxes on income, or the “double tax treaty between Germany and the Netherlands,” the Netherlands will be restricted in imposing these taxes if we continue to be a tax resident of Germany and our place of effective management is located in Germany. This withholding tax restriction does, however, not apply, and Dutch dividend withholding tax is still required to be withheld from dividends, if and when paid to Dutch resident holders of our ordinary shares and non-Dutch resident holders of our ordinary shares that have a permanent establishment in the Netherlands to which their shareholding is attributable. As a result, upon a payment (or deemed payment) of dividends, we will be required to identify our shareholders in order to assess whether there are Dutch residents (or non-Dutch residents with a permanent establishment in the Netherlands to which the ordinary shares are attributable) in respect of which Dutch dividend tax has to be withheld. Such identification may not always be possible in practice. If the identity of our shareholders cannot be determined, withholding of both German and Dutch dividend tax may occur upon a payment of dividends.

Furthermore, the withholding tax restriction referred to above is based on the current choices and  reservation made by Germany under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”). If Germany changes its MLI choices and reservation, we may not be entitled to any benefits of the double tax treaty between Germany and the Netherlands, including the withholding tax restriction, as long as Germany and the Netherlands do not reach an agreement on our tax residency for purposes of the double tax treaty between Germany and the Netherlands, and, as a result, any dividends distributed by us during the period no such agreement has been reached between Germany and the Netherlands may be subject to withholding tax both in Germany and the Netherlands.

We may become taxable in a jurisdiction other than Germany and this may increase the aggregate tax burden on us.

Since our incorporation we have had, on a continuous basis, our place of “effective management” in Germany. We will therefore qualify as a tax resident of Germany on the basis of German domestic law. As an entity incorporated under Dutch law, however, we also qualify as a tax resident of the Netherlands on the basis of Dutch domestic law. However, based on our current management structure and the current tax laws of the United States, Germany and the Netherlands, as well as applicable income tax treaties, and current interpretations thereof, we should qualify solely as a tax resident of Germany for the purposes of the double tax treaty between Germany and the Netherlands due to the “effective management” tie-breaker included in Article 4(3) of the double tax treaty between Germany and the Netherlands and the current MLI choices and reservation. Our sole tax residency in Germany for purposes of the above-mentioned tax treaty is subject to the application of the provisions on tax residency as stipulated in such treaty as amended from time to time. The MLI, Germany and the Netherlands entered into, among other countries, should not, as of this date, affect such tax treaty’s rules regarding tax residency.

The test of “effective management” is largely a question of fact and degree based on all the circumstances, rather than a question of law. Nevertheless, the relevant case law and OECD guidance suggest that our Company is likely to be regarded as having become a German tax resident from incorporation and remaining so if, as our Company intends, (i) most meetings of its management board are prepared and held in Germany (and none will be held in the Netherlands) with a majority of management board members present in Germany for those meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting our Company and its subsidiaries; (iii) those meetings are properly minuted; (iv) a majority of our management board members, together with supporting staff, are based in Germany; and (v) our Company has permanent staffed office premises in Germany. We may, however, become subject to limited income tax liability in other countries with regard to the income generated in the respective other country, for example, due to the existence of a permanent establishment or a permanent representative in such other country.

The applicable tax laws, tax treaties or interpretations thereof may change, including the MLI choices and reservation. Furthermore, whether we have our place of effective management in Germany and are as such solely tax resident in Germany is largely a question of fact and degree based on all the circumstances, rather than a question of law, which facts and degree may also change. Changes to applicable tax laws or interpretations thereof, changes to applicable facts and circumstances (for example, a change of directors or the place where board meetings take place), or changes to applicable tax treaties, including a change to the application of the MLI, may result in us becoming (also) a tax resident of the Netherlands or another jurisdiction. See “Item 3. Key Information—D. Risk Factors—Regulatory, Legal and Tax Risks—If we do pay dividends, we may need to withhold tax on such dividends payable to holders of our shares in both Germany and the Netherlands.” As a consequence, our overall effective income tax rate and income tax expense could materially increase, which could have a material adverse effect on our business, results of operations, financial condition and prospects, which could cause our share price and trading volume to decline.

We may be or become a passive foreign investment company (“PFIC”), which could result in adverse United States federal income tax consequences to United States investors.

Based on the composition of our income and valuation of our assets, including goodwill, we believe that we were not a PFIC in our taxable year ended December 31, 2022. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either: (1) 75% or more of our gross income in a taxable year is passive income, or (2) the average percentage of our assets by value in a taxable year which produce or are held for the production of passive income (which includes cash) is at least 50%.

Our PFIC status is a factual determination that is made annually and thus may be subject to change. It is therefore possible that we could become a PFIC in our taxable year ending December 31, 2023 or in a future taxable year.

If we are or were to become a PFIC, such characterization could result in adverse United States federal income tax consequences and burdensome reporting requirements to a holder of ordinary shares if such holder is a United States investor.

Risks Related to Our Shares

Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline.

Sales of substantial amounts of our ordinary shares in the public market, or the perception that these sales may occur, could cause the market price of our ordinary shares to decline. This could also impair our ability to raise additional capital through the sale of our equity securities. Under our articles of association, we are authorized to issue up to 320,000,000 ordinary shares. Although our articles of association provide that upon an increase of our issued share capital to at least €25,000,000 our authorized share capital will automatically increase to €102,000,000, divided into 1,500,000,000 ordinary shares and 8,000,000 high voting shares, in connection with the Yorkville Investment, we currently intend to amend our articles of association a future general meeting of shareholders to increase our authorized share capital. An issuance of new ordinary shares may also lead to substantial dilution of our then existing shareholders. We cannot predict the size of future issuances of our shares, or the effect, if any, that future issuances and sales of shares would have on the market price of our ordinary shares.

The market price of our ordinary shares could fluctuate significantly, which could result in substantial losses for purchasers of our ordinary shares.

The stock market in general and the market for smaller technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may lose some or all of your investment. The market price of our ordinary shares is affected by the supply and demand for our ordinary shares, which may be influenced by numerous factors, many of which are beyond our control, including:

 ​

As a result, our share price may be subject to substantial fluctuation.

In addition, general market conditions and fluctuation of share prices and trading volumes could lead to pressure on the market price of our ordinary shares, even if there may not be a reason for this based on our business performance or earnings outlook. Prices for companies with a limited operating history, particularly in industries with barriers such as the solar technology and automotive industries, may be more volatile compared to share prices for established companies or companies from other industries. The price of our shares has been volatile since our IPO.

If the market price of our ordinary shares declines as a result of the realization of any of these risks, investors could lose part or all of their investment in our ordinary shares.

Additionally, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

Our dual-class share structure with different voting rights will limit your ability as a holder of ordinary shares to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of ordinary shares may view as beneficial.

We have a dual-class share structure, which we currently intend to maintain, as our share capital consists of ordinary shares and high voting shares. In respect of matters requiring the votes of shareholders, holders of ordinary shares will be entitled to one vote per share, while holders of high voting shares will be entitled to 25 votes per share. Each high voting share is convertible into one ordinary share at any time by the holder thereof, while ordinary shares are not convertible into high voting shares under any circumstances.

The high voting shares are held by our Founders, Laurin Hahn and Jona Christians. As of September 30, 2023, Laurin Hahn held approximately 32.8% and Jona Christians held approximately 29.5% of our total voting rights. In connection with the Yorkville Investment, the Founders have agreed to transfer, if so requested, all of their high voting shares to the new members of the management board to be appointed for the Company. The current concentration of ownership, if so maintained, and any future concentration of ownership that may occur as a result of the Yorkville Investment, if concluded and implemented, may discourage, delay or prevent a change in control of our Company, which could deprive our other shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of our Company and might ultimately affect the market price of our ordinary shares. Such concentrated control will limit your ability to influence corporate matters that holders of ordinary shares may view as beneficial. In addition, certain index providers, such as S&P Dow Jones or FTSE Russell, view multi-class shares critically and have amended their rules so that companies with multi-class shares will no longer be added to their indexes.

Future offerings of debt or equity securities by us could adversely affect the market price of our ordinary shares, and future issuances of equity securities could lead to a substantial dilution of our shareholders.

We will require significant additional capital in the future to finance our business operations and growth. For example, we will require additional funding to reach commercial operation, and we may seek to offer new equity in the future for such funding. The Company may seek to raise such capital through the issuance of additional equity or debt securities with conversion rights (e.g., convertible bonds and option rights). An issuance of additional equity or debt securities with conversion rights could potentially reduce the market price of our ordinary shares and the Company currently cannot predict the amounts and terms of such future offerings. We expect such funding to be in the form of, or at least include, additional equity fundraising, which will dilute existing shareholders.

If such offerings of equity or debt securities with conversion rights are made without granting preemptive rights to our existing shareholders, these offerings would dilute the economic and voting rights of our existing shareholders. Preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board has been authorized for a period of five years following the date of the Company’s annual general meeting which took place on December 21, 2022 to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.

In addition, such dilution may arise from the acquisition or investments in companies in exchange, fully or in part, for newly issued ordinary shares, convertible rights in connection with financing arrangements the Company entered into before the IPO, stock options or conversion rights granted to our business partners or our customers as well as from the exercise of stock options or conversion rights granted to our employees in the context of existing or future stock option programs or the issuance of ordinary shares to employees in the context of existing or future employee participation programs.

Any future issuance of ordinary shares could reduce the market price of our ordinary shares and dilute the holdings of existing shareholders.

Future sales by major shareholders could materially adversely affect the market price of our ordinary shares.

For various reasons, shareholders may sell all or some of our ordinary shares, including in order to diversify their investments. Sales of a substantial number of our ordinary shares in the public market, or the perception that such sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares and trading volume could decline.

The trading market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If securities or industry analyst coverage results in downgrades of our ordinary shares or publishes inaccurate or unfavorable research about our business, our share price will likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our ordinary shares could decrease, which, in turn, could cause the market price or trading volume for our ordinary shares to decline significantly.

Shareholders may not be able to exercise preemptive rights and, as a result, may experience substantial dilution upon future issuances of ordinary shares.

In the event of an issuance of ordinary shares, subject to certain exceptions, each shareholder will have a pro rata preemptive right in proportion to the aggregate nominal value of the ordinary shares held by such holder. These preemptive rights may be restricted or excluded by a resolution of the general meeting or by another corporate body designated by the general meeting. Our management board, subject to approval of our supervisory board, has been authorized, for a period of five years following the date of the Company's annual general meeting which took place on December 21, 2022 to issue shares or grant rights to subscribe for shares up to our authorized share capital from time to time and to limit or exclude preemptive rights in connection therewith. This could cause existing shareholders to experience substantial dilution of their interest in us.

We do not expect to pay any dividends in the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the change in our business model, the further development of our solar technology and start of its commercial production, as well as the growth of our business. Furthermore, these plans are subject to developments with respect to the Self-Administration Proceedings. Accordingly, we currently do not intend to pay any dividends to holders of our ordinary shares. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain on an investment in our ordinary shares.

Risks Related to Our Company’s Status

We have and will continue to incur increased costs as a result of operating as a public company, and our management has and will continue to be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company we have and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, including, but not limited to, costs and expenses for management board members’ and supervisory board members’ fees, increased directors and officers insurance, investor relations, and various other costs of a public company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

We were already subject to Sections 302 and 906 of the Sarbanes-Oxley Act with respect to our annual report on Form 20-F for the fiscal year ended December 31, 2021. Pursuant to Section 404(a) of the Sarbanes-Oxley Act, beginning with this annual report on Form 20-F for the fiscal year ended December 31, 2022, we are required to furnish a report by our management on our internal control over financial reporting annually. Pursuant to Section 404(b) of the Sarbanes-Oxley Act, if we are no longer an emerging growth company and become an accelerated or large accelerated filer, we would be required to also include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

To achieve compliance with Section 404(a) of the Sarbanes-Oxley Act, we are engaged in documenting and evaluating our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, have engaged outside consultants and are adopting a detailed work plan to assess and document the adequacy of internal control over financial reporting. We will continue to implement steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404(a) of the Sarbanes-Oxley Act. Such conclusion could adversely impact the market price of our shares due to a loss of investor confidence in the reliability of our reporting processes.

Once we are required to include an attestation report on internal control over financial reporting by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes Oxley Act, there is a risk that such independent assessment of the effectiveness of our internal controls over financial reporting could identify material weaknesses that our management’s assessment pursuant to Section 404(a) does not identify.

The consequences of being a public company could have a material adverse effect on our business, financial condition, results of operations and prospects.

Following the anticipated delisting of our shares from Nasdaq, as determined by the Panel in its delist decision from December 11, 2023, we may not be able to meet the initial listing requirements for admission of our shares to trading on a stock exchange in the future and pay for the costs associated with an initial listing and therefore may not be able to have our shares admitted to trading on a stock exchange in the future.

On December 11, 2023, the Company received a decision of the Panel advising the Company that the Panel has determined to delist the Company’s ordinary shares from Nasdaq.

On March 20, 2023, we received written notification from the Listing Qualifications Department of Nasdaq that, based on the closing bid price per share of our ordinary shares for a period of 30 consecutive business days, we no longer comply with the minimum bid price requirement for continued listing on Nasdaq. Nasdaq Listing Rule 5450(a)(1) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive trading days.

On April 21, 2023, we notified Nasdaq that as a result of the resignation of four out of five members of our supervisory board, including all independent supervisory board members, we were no longer in compliance with Nasdaq Listing Rule 5605(c)(2)(A), which requires a listed company to have an audit committee composed of at least three members who each meet the criteria for independence set forth in Rule 10A-4(b)(1) under the Securities Exchange Act of 1934.

On May 3, 2023, we received written notification from the Listing Qualifications Department of Nasdaq stating that because we had not yet filed our Annual Report on Form 20-F for the fiscal year ended December 31, 2022, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC.

On July 12, 2023, we received a delisting notice stating that the staff of the Listing Qualifications Department has determined that our securities will be delisted from Nasdaq in accordance with Listing Rules 5101, 5110(b) and IM-5101-1 and notifying us of the suspension in trading of our common shares as of the opening of business on July 21, 2023. The delisting notice further stated that a Form 25-NSE was to be filed with the SEC, which would remove our securities from listing and registration on Nasdaq. The Staff’s determination was based on the following factors: the associated public interest concerns raised by our announcement of the applications for the Self-Administration Proceedings; concerns regarding the residual equity interest of the existing listed securities holders; and concerns about our ability to sustain compliance with all requirements for continued listing on Nasdaq. The delisting notice further stated that our failure (up to that time) to file our Annual Report on Form 20-F for the fiscal year ended December 31, 2022  with the SEC and Nasdaq and resultant failure to comply with Nasdaq’s filing requirement as set forth under Listing Rule 5250(c)(1) served as an additional and separate basis for delisting.

On August 28, 2023, we received an additional staff determination letter (the “Letter”) from the staff of the Listing Qualifications Department of Nasdaq stating that, for the 12 consecutive trading days prior to the Letter, the closing bid price of the our ordinary shares had been below $0.10, which served as an additional basis for delisting our ordinary shares from Nasdaq pursuant to Listing Rule 5810(c)(3)(A)(iii). In addition, the Letter stated that the resignation in April 2023 of four out of five members of our supervisory board, including all of our independent members, and our resultant failure to meet the audit committee requirement for continued listing on Nasdaq set forth in Listing Rule 5605(c)(2), serve as an additional basis for delisting our ordinary shares from Nasdaq.

We appealed the delisting determination, and on October 13, 2023, the Panel granted our request for continued listing of our shares on Nasdaq subject to us regaining compliance with the periodic filing requirement on or before November 30, 2023 and us providing an update to the Panel including detailed financial projections and the progress of our withdrawal from the Self-Administration Proceedings on or before November 30, 2023. To date, we have regained compliance with the deficiencies related to our supervisory board and audit committee. On September 11, 2023, three new members – Sandra Vogt-Sasse, Martin Sabbione and Thomas Wiedermann – were appointed to our supervisory board. The new supervisory board members have been appointed on a provisional basis until their formal appointment at our next annual general meeting of shareholders, which has been convened for December 29, 2023. On September 22, 2023, Ms. Vogt-Sasse, Mr. Sabbione and Mr. Wiedermann were appointed to the audit committee. The Company and the supervisory board have determined that each of the three new members meets the independence requirement of Nasdaq Listing Rule 5605(c)(2), with Ms. Vogt-Sasse acting as the audit committee’s financial expert. With our filing of this Annual Report, we have also regained compliance with the periodic filing requirement.

At our annual shareholders meeting held on December 21, 2022, our shareholders approved a proposal to authorize our management board, with the approval of our supervisory board, to effect a reverse stock split at a ratio of 5:1, such that every five ordinary shares or high-voting shares, as applicable, will be combined into one share of the same class. This reverse stock split has not been implemented, but the resolution by the Company's general meeting remains in full force and effect and can therefore be implemented by our management board, with the approval of our supervisory board,

Following the anticipated delisting of our shares from Nasdaq, there can be no assurance that we will be able to meet the initial listing requirements for admission of our shares to trading on a stock exchange in the future and pay for the costs associated with an initial listing on a stock exchange. As a result, there can be no assurance that we will be able to have our shares admitted to trading on a stock exchange in the future.

Investors may have difficulty enforcing civil liabilities against us or the members of our management and supervisory board or our other officers (functionarissen).

We are organized and existing under the laws of the Netherlands. As such, under Dutch private international law, the rights and obligations of our shareholders vis-à-vis the Company originating from Dutch corporate law and our articles of association, as well as the civil liability of our officers (functionarissen) (including our management board members, supervisory board members and executive officers are governed in certain respects by the laws of the Netherlands.

We are not a resident of the United States and our officers may also not all be residents of the United States. As a result, depending on the subject matter of the action brought against us and/or our officers, United States courts may not have jurisdiction. If a Dutch court has jurisdiction with respect to such action, that court will apply Dutch procedural law and Dutch private international law to determine the law applicable to that action. Depending on the subject matter of the relevant action, a competent Dutch court may apply another law than the laws of the United States.

Also, service of process against non-residents of the United States can in principle (absent, for example, a valid choice of domicile) not be effected in the United States. Furthermore, substantially all of our assets are located outside the United States.

As of the date of this Annual Report, (i) there is no treaty in force between the United States and the Netherlands for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters and (ii) both the Hague Convention on Choice of Court Agreements (2005) and the Hague Judgments Convention (2019) have entered into force for the Netherlands, but have not entered into force for the United States. Consequently, a judgment rendered by a court in the United States will not automatically be recognized and enforced by the competent Dutch courts. However, if a person has obtained a judgment rendered by a court in the United States that is enforceable under the laws of the United States and files a claim with the competent Dutch court, the Dutch court will in principle give binding effect to that United States judgment if (i) the jurisdiction of the United States court was based on a ground of jurisdiction that is generally acceptable according to international standards, (ii) the judgment by the United States court was rendered in legal proceedings that comply with the Dutch standards of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging), (iii) binding effect of such United States judgment is not contrary to Dutch public order (openbare orde) and (iv) the judgment by the United States court is not incompatible with a decision rendered between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for recognition in the Netherlands. Even if such a United States judgment is given binding effect, a claim based thereon may, however, still be rejected if the foreign judgment is not or no longer formally enforceable. Moreover, if the United States judgment is not final (for instance when appeal is possible or pending) a competent Dutch court may postpone recognition until the United States judgment will have become final, refuse recognition under the understanding that recognition can be asked again once the United States judgment will have become final, or impose as a condition for recognition that security is posted.

A competent Dutch court may deny the recognition and enforcement of punitive damages or other awards. Moreover, a competent Dutch court may reduce the amount of damages granted by a United States court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. Thus, United States investors may not be able, or experience difficulty, to enforce a judgment obtained in a United States court against us or our officers.

The United States and Germany currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments, in civil and commercial matters. Consequently, a final judgment for payment or declaratory judgments given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in Germany. German courts may deny the recognition and enforcement of a judgment rendered by a U.S. court if they consider the U.S. court not to be competent or the decision to be in violation of German public policy principles. For example, judgments awarding punitive damages are generally not enforceable in Germany. A German court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate for actual losses or damages.

In addition, actions brought in a German court against us, our management board members, our supervisory board members, our senior management and the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, German courts generally do not award punitive damages. Litigation in Germany is also subject to rules of procedure that differ from the U.S. rules, including with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. German procedural law does not provide for pre-trial discovery of documents, nor does Germany support pre-trial discovery of documents under the 1970 Hague Evidence Convention. Proceedings in Germany would have to be conducted in the German language and all documents submitted to the court would, in principle, have to be translated into German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a German court predicated upon the civil liability provisions of the U.S. federal securities laws against us, our management board members, our supervisory board members, our senior management and the experts named in this Annual Report.

Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or management board members, supervisory board members, executive officers, our other officers (functionarissen) or certain experts named herein who are residents of or possessing assets in the Netherlands, Germany and or other countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

We are a Dutch public company. The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions and may not protect investors in a similar fashion afforded by incorporation in a U.S. jurisdiction.

We are a public company (naamloze vennootschap) organized under the laws of the Netherlands. Our corporate affairs are governed by our articles of association, the rules of our management board and those of our supervisory board and by the laws governing companies incorporated in the Netherlands. However, there can be no assurance that Dutch law will not change in the future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which could adversely affect the rights of investors.

The rights of shareholders and the responsibilities of management board members and supervisory board members may be different from the rights and obligations of shareholders and directors in companies governed by the laws of U.S. jurisdictions. In the performance of their duties, our management board members and supervisory board members are required by Dutch law to consider the interests of our Company, its shareholders, its employees and other stakeholders, in all cases with due observance of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder.

Our articles of association stipulate that the planet, humankind and society are important stakeholders of us and the highest principle pursued by us as part of our objects is the protection of the environment, nature and humankind. Under our articles of association, this principle shall form the foundation of our actions and the decisions of our management board and the supervisory board. On the basis of that premise, among other matters, our management board and the supervisory board may let the interests of the planet, humankind and society outweigh the interests of other stakeholders, provided that the interests of the latter stakeholders are not unnecessarily or disproportionately harmed. A resolution to amend the text or purport of these provisions of our articles of association shall require a unanimous vote in a general meeting where the entire issued share capital is represented.

Our articles of association contain exclusive forum provisions for certain claims, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or the members of our management or supervisory board.

Our articles of association provide that unless we consent in writing to the selection of another forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act or the Exchange Act (the “Federal Forum Provision”). Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our decision to adopt the Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our shareholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and our articles of association confirm that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Exchange Act. Accordingly, actions by our shareholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.

We may argue that any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities will have, or will be deemed to have, notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. Additionally, our shareholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. These provisions may limit our shareholders’ ability to bring a claim in a judicial forum they find favorable for disputes with us or the members of our management or supervisory board, or employees and agents, which may discourage lawsuits against us and the members of our management or supervisory board or employees and agents.

Alternatively, if a court were to find the choice of forum provision contained in our articles of association to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which may have an adverse effect on our business, financial condition and results of operations.

Provisions of our articles of association or Dutch corporate law might deter acquisition bids for us that might be considered favorable and prevent, delay or frustrate any attempt to replace or remove our management board members or supervisory board members.

Under Dutch law, various protective measures are possible and permissible within the boundaries set by Dutch law and Dutch case law. In this respect, certain provisions of our articles of association may make it more difficult for a third party to acquire control of us or effect a change in our management board and supervisory board. These include:

In addition, Dutch law allows for staggered multi-year terms of our management board members and supervisory board members, as a result of which only part of our management board members and supervisory board members may be subject to appointment or re-appointment in any one year.

Furthermore, in accordance with the Dutch Corporate Governance Code (the “DCGC”), shareholders who have the right to put an item on the agenda for our general meeting or to request the convening of a general meeting shall not exercise such rights until after they have consulted our management board. If exercising such rights may result in a change in our strategy (for example, through the dismissal of one or more of our management board members or supervisory board members), our management board must be given the opportunity to invoke a reasonable period of up to 180 days to respond to the shareholders’ intentions. If invoked, our management board must use such response period for further deliberation and constructive consultation, in any event with the shareholder(s) concerned and exploring alternatives. At the end of the response time, our management board, supervised by our supervisory board, shall report on this consultation and the exploration of alternatives to our general meeting. The response period may be invoked only once for any given general meeting and shall not apply (i) in respect of a matter for which a response period or a statutory cooling-off period (as discussed below) has been previously invoked or (ii) if a shareholder holds at least 75% of our issued share capital as a consequence of a successful public bid.

Moreover, our management board, with the approval of our supervisory board, can invoke a cooling-off period of up to 250 days when shareholders, using their right to have items added to the agenda for a general meeting or their right to request a general meeting, propose an agenda item for our general meeting to dismiss, suspend or appoint one or more management board members or supervisory board members (or to amend any provision in our articles of association dealing with those matters) or when a public offer for our Company is made or announced without our support, provided, in each case, that our management board believes that such proposal or offer materially conflicts with the interests of our Company and its business. During a cooling-off period, our general meeting cannot dismiss, suspend or appoint management board members and supervisory board members (or amend the provisions in our articles of association dealing with those matters) except at the proposal of our management board. During a cooling-off period, our management board must gather all relevant information necessary for a careful decision-making process and at least consult with shareholders representing 3% or more of our issued share capital at the time the cooling-off period was invoked, as well as with our Dutch works council (if we or, under certain circumstances, any of our subsidiaries would have one). Formal statements expressed by these stakeholders during such consultations must be published on our website to the extent these stakeholders have approved that publication. Ultimately one week following the last day of the cooling-off period, our management board must publish a report in respect of its policy and conduct of affairs during the cooling-off period on our website. This report must remain available for inspection by shareholders and others with meeting rights under Dutch law at our office and must be tabled for discussion at the next general meeting. Shareholders representing at least 3% of our issued share capital may request the Enterprise Chamber of the Amsterdam Court of Appeal (the “Enterprise Chamber”) (Ondernemingskamer), for early termination of the cooling-off period. The Enterprise Chamber must rule in favor of the request if the shareholders can demonstrate that:

We are not obligated to, and do not, comply with all best practice provisions of the Dutch Corporate Governance Code.

We are subject to the DCGC. The DCGC contains both principles and best practice provisions on corporate governance that regulate relations between the management board, the supervisory board and the general meeting and matters in respect of financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their annual reports, filed in the Netherlands, whether they comply with the provisions of the DCGC. If they do not comply with those provisions (for example, because of a conflicting Nasdaq requirement), the company is required to give the reasons for such noncompliance. The DCGC applies to Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, including Nasdaq. We do not comply with all best practice provisions of the DCGC. See “Item 16G. Corporate Governance”. This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.

We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain whether the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors, given that we may rely on these exemptions.

We are eligible to be treated as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the independent auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act in our annual reports filed on Form 20-F. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years from the date of our IPO, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion, if we issue more than $1.00 billion in non-convertible debt securities during any three-year period, or if we are a large accelerated filer and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of any second quarter before that time.

As a foreign private issuer, we are not subject to U.S. proxy rules and are only subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Dutch laws and regulations with regard to such matters, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information. In addition, foreign private issuers are required to file their annual report on Form 20-F within four months after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, holders of our ordinary shares may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2024.

In the future, we would lose our foreign private issuer status if, among others, (1) more than 50% of our outstanding voting securities, which we intend to determine based on the voting power of our ordinary shares and high voting shares on a combined basis are directly or indirectly held of record by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, more than 50% of our assets are located in the United States or our business is administered principally in the United States. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms including consolidated financial statements prepared under U.S. GAAP, and which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. Although we received a decision from the Panel advising us that the Panel has determined to delist our ordinary shares from Nasdaq, as of the date of this Annual Report our securities are still listed on Nasdaq. If we lose our foreign private issuer status, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer. These expenses would relate to, among other things, the obligation to present our financial information in accordance with U.S. GAAP in the future.

Additionally, a loss of our foreign private issuer status would divert our management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

As a foreign private issuer and as currently permitted by the listing requirements of Nasdaq, we follow certain home country governance practices rather than the corporate governance requirements of Nasdaq.

We are a foreign private issuer. As a result, in accordance with the listing requirements of Nasdaq we rely on home country governance requirements and certain exemptions thereunder rather than relying on the corporate governance requirements of Nasdaq. In accordance with Dutch law and generally accepted business practices, our articles of association currently do not provide quorum requirements generally applicable to general meetings. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting shares. Although we must provide shareholders with an agenda and other relevant documents for the general meeting, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands, thus our practice varies and will vary from the requirement of Nasdaq Listing Rule 5620(b). As permitted by the listing requirements of Nasdaq, we have also opted out of the requirements of Nasdaq Listing Rule 5605(d), which requires, among other things, an issuer to have a compensation committee that consists entirely of independent directors, Nasdaq Listing Rule 5605(e), which requires independent director oversight of director nominations, and Nasdaq Listing Rule 5605(b)(1), which requires an issuer to have a majority of independent directors on its board. In addition, we have opted out of shareholder approval requirements, as included in the Nasdaq Listing Rules, for the issuance of securities in connection with certain events such as the acquisition of shares or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of our Company and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. For an overview of our corporate governance principles, see “Item 16G. Corporate Governance”. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these stock exchange requirements.

On December 11, 2023, we received a decision from the Panel advising us that the Panel has determined to delist our ordinary shares from Nasdaq. Although the delisting process has not been completed as of the date of this Annual Report, Nasdaq informed us that Nasdaq will complete the delisting by filing a Form 25 Notification of Delisting with the SEC following the lapse of applicable appeal periods. We do not intend to appeal the Panel’s decision.

We do not anticipate paying any cash dividends for the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the development and growth of our business. We do not intend to pay any dividends to holders of our ordinary shares. As a result, capital appreciation in the price of our ordinary shares, if any, will be your only source of gain on an investment in our ordinary shares.

Our ability to use our net operating loss carryforwards and other tax attributes may be limited.

Our ability to utilize our net operating loss carryforwards is currently limited, and may be limited further, under Section 8c of the German Corporation Income Tax Act (Körperschaftsteuergesetz) (“KStG”) and Section 10a of the German Trade Tax Act (Gewerbesteuergesetz) (“GewStG”). These limitations apply if a qualified ownership change, as defined by Section 8c KStG, occurs and no exemption is applicable.

Generally, a qualified ownership change occurs if more than 50% of the share capital or the voting rights are directly or indirectly transferred to a shareholder or a group of shareholders within a period of five years. A qualified ownership change may also occur in case of a transaction comparable to a transfer of shares or voting rights or in case of an increase in capital leading to a respective change in the shareholding.

In the case of such a qualified ownership change tax loss carryforwards expire in full. To the extent that the tax loss carryforwards do not exceed the built-in gains (stille Reserven) in the assets and liabilities taxable in Germany, they may be further utilized despite a qualified ownership change. In case of a qualified ownership change within a group, tax loss carryforwards will be preserved if certain conditions are satisfied. In case of a qualified ownership change, tax loss carryforwards will be preserved (in the form of a “fortführungsgebundener Verlustvortrag”) if the business operations have not been changed and will not be changed within the meaning of Section 8d KStG.

According to an appeal filed by the fiscal court of Hamburg dated August 29, 2017, Section 8c, paragraph 1, sentence 1 KStG is not in line with the German constitution. The appeal is still pending. It is unclear when the Federal Constitutional Court will decide this case.

As of December 31, 2022, there were net operating loss carryforwards of the Subsidiary for German corporate tax purposes of € 252.1 million and for German trade tax purposes of € 251.3 million available. The contribution of 100% of the Subsidiary’s shares into Sono Group B.V. was qualified as an ownership change within the meaning of Section 8c KStG and Section 10a GewStG. Furthermore, the termination of the Sion passenger car program in February 2023 was considered a harmful event within the meaning of Section 8d para. 2 KStG. As a result, the available tax loss carryforwards of the Subsidiary would generally expire in full. However, the net operating loss carryforwards would not be forfeited to the extent that the Subsidiary has built-in gains in its assets that are fully taxable in Germany. The built-in gains are determined by comparing the Fair Market Value of the respective entity with the entity’s tax book equity. The built-in gains as of December 31, 2022 have not yet been determined. Therefore it is currently unclear whether all tax losses can still be carried forward.

Future changes in share ownership may also trigger an ownership change and, consequently, a Section 8c KStG or a Section 10a GewStG limitation. Any limitation may result in the expiration of a portion or the complete tax operating loss carryforwards before they can be utilized. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to reduce German income tax may be subject to limitations, which could potentially result in increased future cash tax liability to us.

We have historically conducted our business through the Subsidiary, which became a wholly-owned subsidiary of the Company after a corporate reorganization described as follows: We were incorporated pursuant to the laws of the Netherlands as Sono Motors Finance B.V. on October 23, 2020 as a wholly-owned subsidiary of the Subsidiary. As part of the corporate reorganization that was completed on November 27, 2020, our then-existing shareholders contributed all of their shares in the Subsidiary to Sono Motors Finance B.V. in exchange for newly issued ordinary shares of Sono Motors Finance B.V. In addition, the sole issued and outstanding common share in Sono Motors Finance B.V. at that time, which was held by the Subsidiary, was canceled (ingetrokken). As a result, the Subsidiary became a wholly-owned subsidiary of Sono Motors Finance B.V. and the then-existing shareholders of the Subsidiary became the shareholders of Sono Motors Finance B.V. Also on November 27, 2020, Sono Motors Finance B.V. was converted into a public company with limited liability under Dutch law (naamloze vennootschap), and changed its legal name from Sono Motors Finance B.V. to Sono Group N.V.

On November 17, 2021, our ordinary shares commenced trading on the Nasdaq Global Market under the symbol “SEV.” We received approximately US$156.1 million in net proceeds from our IPO, after deducting underwriting commissions and discounts and the offering expenses payable by us.

The Company is incorporated in the Netherlands, and a majority of its outstanding securities is owned by non-U.S. residents. Under the rules of the SEC, the Company is currently eligible for treatment as a “foreign private issuer.” As a foreign private issuer, we are not required to file periodic reports and consolidated financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Our business address is Waldmeisterstraße 76, 80935 Munich, Germany. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC at www.sec.gov. Our website address is https://ir.sonomotors.com/. The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider any information contained on, or that can be accessed through, our website as part of this Annual Report or in deciding whether to purchase our shares.

On May 15, 2023, based on management’s conclusion that the Company is over-indebted and faces impending illiquidity (drohende Zahlungsunfähigkeit), the Company applied to the Court to permit the opening of self-administration proceedings (Eigenverwaltung) with respect to the Company pursuant to Section 270 (b) of the German Insolvency Code (Insolvenzordnung). On the same day and for the same reason, the Subsidiary applied to the Court to permit the opening of self-administration proceedings in the form of a protective shield proceeding (Schutzschirmverfahren) with respect to the Subsidiary pursuant Section 270 (d) of the German Insolvency Code. The applications, in each case, were made with the goal of sustainably restructuring the business of both Companies. On May 17, 2023 and May 19, 2023, the Court admitted the opening of the Preliminary Self-Administration Proceedings with respect to the Company and the Subsidiary, respectively. On September 1, the Court opened the Subsidiary Self-Administration Proceedings with respect to the Subsidiary.

The business operations of the Company are being continued on a provisional basis under the supervision of its preliminary custodian in the context of its Preliminary Self-Administration Proceedings, and the business operations of the Subsidiary are being continued on a provisional basis under the supervision of its custodian in the context of the Subsidiary Self-Administration Proceedings. Furthermore, the M&A Process was initiated to find one or more potential investors to fund and/or acquire all or parts of the Subsidiary’s business and/or the Company’s business in one or more potential M&A transactions.

Parallel to the M&A Process, the Company began discussions with Yorkville, the Company’s main creditor apart from the Subsidiary, regarding a new investment. In connection with those discussions, the Company and Yorkville entered into the Yorkville Agreements, pursuant to which Yorkville has committed to provide financing to the Company subject to the satisfaction of certain conditions precedent. The aim of the Yorkville Agreements and the Transactions is the planned restructuring of the Company and the Subsidiary, which is intended to enable the Company to withdraw its application for its Preliminary Self-Administration Proceedings and to enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via an insolvency plan, which was filed with the Court on December 7, 2023 for approval by the Subsidiary’s creditors and subsequent confirmation by the Court.

The Closing is currently expected in late January 2024 and is subject to the satisfaction of certain conditions precedent, including the Company’s filing of this Annual Report on Form 20-F for the year ended December 31, 2022, the Company’s submission of the Interim Report to the SEC, the Subsidiary’s insolvency plan becoming legally binding, and the withdrawal of the Company’s application for its Preliminary Self-Administration Proceedings. On December 22, 2023, Yorkville waived the Company's submission of the Interim Report as a condition precedent to the Closing. Apart from the Subsidiary, Yorkville is the Company’s main creditor under the Existing Convertible Debentures, see “Item 10. Additional Information—C. Material Contracts—Convertible Debentures”. For more information on the Transactions and the Yorkville Investment, see “Item 4. Information on the Company—B. Business Overview—The Planned Yorkville Investment”. The plan under the German Insolvency Code sets out how the Subsidiary intends to restructure its debt and procure the inflow of new money, including in connection with the Yorkville Investment, and subsequently exit the Subsidiary Self-Administration Proceedings. Approval by the creditors and confirmation by the Court was obtained in the creditors meeting on December 21, 2023. The 14-day appeal period started on December 21, 2023. Only one creditor with a claim of €500 declared an appeal during the creditors meeting. No successful appeal actions in regard to the Court’s confirmation are expected by the management.

The Companies expect the Yorkville Investment to position them to obtain sufficient funding for their business operations, with an initial focus on the Solar Bus Kit, through the end of 2024. Under the terms of the Yorkville Agreements, the financing will be provided by Yorkville at the Closing by way of one or more new interest-bearing convertible debenture(s) that will be convertible into ordinary shares of the Company and will mature on July 1, 2025.

The Company believes that, subject to the satisfactions of the conditions precedent under the Yorkville Agreements (other than the withdrawal of the Company’s Preliminary Self-Administration Proceedings), a successful conclusion and implementation of the Yorkville Investment would (i) enable it to withdraw its application for Self-Administration Proceedings at the Court and (ii) enable the Subsidiary to exit the Subsidiary Self-Administration Proceedings via its plan under the German Insolvency Code, which was approved by its creditors and confirmed by the Court on December 21, 2023.