Form 10-Q PHOENIX MOTOR INC. For: Jun 30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)

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For the quarterly period ended June 30, 2022

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For the transition period from ________ to__________

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Commission file number: 333-261384

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Phoenix Motor Inc.

(Exact Name of Registrant as Specified in Its Charter)

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(909) 978-0815

(Registrant’s Telephone Number, Including Area Code)

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1500 Lakeview Loop

Anaheim, CA 92807

(Former name or former address, if changed since last report)

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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The registrant had 19,643,750 shares of common stock outstanding at August 8, 2022.

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TABLE OF CONTENTS

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PART I

Item 1. Interim Financial Statements

Index to Financial Statements

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PHOENIX MOTOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PHOENIX MOTOR INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PHOENIX MOTOR INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except for share and per share data)

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PHOENIX MOTOR INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PHOENIX MOTOR INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in US$ thousands, except share and per share data)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” in our Form S-1 Registration Statement filed on May 24, 2022. Readers are cautioned not to place undue reliance on these forward-looking statements.

Overview

Phoenix Motor Inc., doing business as “Phoenix Motorcars” through its wholly owned subsidiaries, Phoenix Cars LLC, Phoenix Motorcars Leasing LLC, and EdisonFuture Motor, Inc., currently designs, assembles, and integrates electric drive systems and light and medium duty electric vehicles (“EVs”) and markets and sells electric vehicle chargers for the commercial and residential markets.

The Company operates two primary brands, “Phoenix Motorcars” focused on commercial products including medium duty electric vehicles, chargers and electric forklifts, and “EdisonFuture” which intends to offer light-duty electric vehicles. As an EV pioneer, we delivered our first commercial EV in 2014. We develop and integrate our proprietary electric drivetrain into the Ford Econoline Chassis (E-Series), specifically on the Ford E-450. The Ford E-Series is the dominant chassis in the medium duty Class 4 market in the U.S. in terms of market share and the range of configurations varying from shuttle buses, Type A school buses, utility trucks, service trucks, to flatbed trucks, walk-in vans, and cargo trucks. Since our inception, we have been developing light and medium duty commercial electric vehicles for various service and government fleet markets, including city fleets, campuses, municipalities and transit agencies and serve a broad spectrum of commercial fleet customers, such as airport shuttle operators, hotel chains, transit fleet operators, seaports, last-mile delivery fleets, and large corporations.

Basis of presentation, management estimates and critical accounting policies

Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the accounts of our company, and all of our subsidiaries. We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. In order to understand the significant accounting policies that we adopted for the preparation of our condensed consolidated interim financial statements, readers should refer to the information set forth in Note 3 “Summary of significant accounting policies” to our audited financial statements in Form S-1 Registration Statement filed on May 24, 2022.

Principal Factors Affecting Our Results of Operations

We believe that the following factors have had, and we expect that they will continue to have, a significant effect on the development of our business, financial condition and results of operations.

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Public health efforts to mitigate the impact of COVID-19 have included government actions such as travel restrictions, limitations on public gatherings, shelter in place orders, and mandatory closures. These actions are being lifted to varying degrees. However, the associated impact of COVID-19 closures and mobility restrictions on the economy are expected to continue to unfold. Supply chain disruptions, inflation, high energy prices, and supply-demand imbalances are expected to continue in 2022. The Group closely monitors customer accounts and has not experienced significant delays in the collection of accounts receivable.

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The ultimate impact of COVID-19 and the outbreak of war in Ukraine on our business, results of operations, financial condition, and cash flows is dependent on future developments, including the duration of COVID-19 and the crisis in Ukraine, government responses and the related length of this impact on the economy, which are uncertain and cannot be predicted at this time.

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On July 30, 2022, our battery pack supplier Romeo Power, Inc. (“Romeo”) entered into a Merger Agreement (the “Transaction”) to be acquired by Nikola Corporation. (“Nikola”). Subsequently, we were notified by Romeo that they intend

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to stop taking additional purchase orders once they finish fulfilling our current purchase orders, until the Transaction closes. During the three months ended June 30, 2022, Romeo was the only supplier for our battery packs. We are dependent on the continued supply of battery packs by Romeo for the manufacturing of our current generation products and we have limited flexibility in changing battery pack supplier given the design of our current generation products. While we may be able to establish alternative supply relationships and obtain replacement, we may be unable to do so in the short term (or at all) at prices or quality levels that are favorable to us. While we’re actively pursuing a mitigation plan to minimize impacts on our manufacturing process, including modifying the design of our current generation products, accelerating the development of next generation products and negotiating an exception with Nikola and Romeo management, the loss of Romeo as our battery supplier could cause a near-term disruption in our ability to timely deliver certain products, or increase costs, which may have a material adverse effect on our business, financial condition, and operating results.

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Results of Operations

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Net Revenues

For the three months ended June 30, 2022 and 2021, our revenues were $1.5 million and $0.7 million, respectively. Our total revenue increased by $0.8 million, or 129.6%, principally driven by the expanded sale of forklift products during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. We delivered two EVs during the three months ended June 30, 2022, and two EVs during the three months ended June 30, 2021, respectively.

For the six months ended June 30, 2022 and 2021, our revenues were $2.2 million and $1.1 million, respectively. The 92.7% increase in revenues was primarily driven by the increase in sales of forklifts.

For the three ended June 30, 2022 and 2021 and six months ended June 30, 2022 and 2021, our revenue breakdown by major categories for relevant periods is as follows:

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