SPI(SPI) - 2023 Q1 - Quarterly Report

PART I Financial Information Item 1. Financial Statements Q1 2023 financials reveal a widened net loss, significant working capital deficit, and negative operating cash flow, raising going concern doubts Condensed Consolidated Balance Sheets Balance sheet as of March 31, 2023, shows decreased assets, increased liabilities, and total equity reduced to $10.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $81,505 | $81,956 | | Total Assets | $230,291 | $231,095 | | Total Current Liabilities | $196,941 | $189,697 | | Total Liabilities | $219,790 | $213,223 | | Total Equity | $10,501 | $17,872 | - The company had a net working capital deficit of $115.4 million as of March 31, 2023, indicating significant short-term liquidity challenges[7][27][111] Unaudited Condensed Consolidated Statements of Operations Q1 2023 net revenues grew 24.4% to $47.9 million, yet increased operating expenses led to a wider net loss of $9.7 million Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $47,923 | $38,535 | 24.4% | | Gross Profit | $4,496 | $2,709 | 66.0% | | Operating Loss | $(7,268) | $(6,979) | (4.1)% | | Net Loss | $(9,749) | $(6,786) | (43.7)% | | Net Loss per Share (Basic & Diluted) | $(0.31) | $(0.27) | (14.8)% | Unaudited Condensed Consolidated Statements of Cash Flows Q1 2023 net cash used in operations was $4.9 million, leading to a $6.0 million decrease in total cash, ending at $5.0 million Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,873) | $(8,583) | | Net cash (used in) provided by investing activities | $(354) | $1,096 | | Net cash (used in) provided by financing activities | $(2,013) | $2,129 | | Decrease in cash, cash equivalents and restricted cash | $(5,972) | $(4,988) | | Cash, cash equivalents and restricted cash at end of period | $5,015 | $12,857 | Notes to the Unaudited Condensed Consolidated Financial Statements Notes disclose substantial doubt about the company's going concern due to recurring losses, a $115.4 million working capital deficit, and significant legal contingencies - The company provides photovoltaic (PV), roofing, solar energy systems installation, and electric vehicle (EV) solutions[22] - Substantial doubt exists about the Group's ability to continue as a going concern due to recurring net losses of $9.7 million in Q1 2023, a net working capital deficit of $115.4 million, and a large accumulated deficit of $680.2 million[27] Disaggregation of Revenues by Stream for Q1 2023 (in thousands) | Revenue Stream | Q1 2023 Revenue | | :--- | :--- | | Sales of PV components | $34,997 | | Sales of self-assembled solar modules | $9,020 | | Automotive sales & leasing | $1,241 | | Electricity revenue with PPAs | $924 | | Revenue from roofing and solar systems installation | $879 | | Others | $862 | | Total | $47,923 | - The renewable energy solutions segment generated the most revenue at $45.2 million and gross profit at $4.0 million in Q1 2023, across its EV, renewable energy, and solar projects segments[77][78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2023 revenue growth to PV and solar module sales, but acknowledges critical liquidity and a $115.4 million working capital deficit, outlining plans to address going concern Results of Operations Q1 2023 net revenues grew 24.4% to $47.9 million from PV and solar module sales, improving gross margin to 9.4%, but rising expenses widened net loss to $9.7 million - The $9.4 million increase in net sales for Q1 2023 was primarily due to a $7.0 million increase in PV component sales and $9.0 million from solar module sales[105] - Gross margin increased to 9.4% in Q1 2023 from 7.0% in Q1 2022, driven by higher margin solar module sales and a lower proportion of low-margin services[106] - General and administrative expenses increased by $1.4 million (15.3%) mainly due to higher research and development expenses[106] Liquidity and Capital Resources Critical liquidity with $5.0 million cash and a $115.4 million working capital deficit raises substantial doubt about going concern, prompting management to seek project sales and new financing - As of March 31, 2023, the company held $5.0 million in cash, cash equivalents, and restricted cash[111] - Substantial doubt about going concern stems from a Q1 2023 net loss of $9.7 million, a net working capital deficit of $115.4 million, and an accumulated deficit of $680.2 million[111] - Management plans to mitigate liquidity risks by negotiating PV solar project sales, postponing convertible bond payments, improving US business profitability, and seeking new credit facilities and equity/debt offerings[112] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not required as the company is a smaller reporting company[126] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of March 31, 2023, due to material weaknesses in internal control over financial reporting, and has outlined a remediation plan - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023[128] - Material weaknesses identified include an ineffective control environment, lack of a formal risk assessment process, ineffective monitoring, process-level controls, U.S. GAAP skills, and IT general controls[129] - The company plans remediation measures, including strengthening governance, engaging professional advisers, improving internal control execution, and providing more accounting team training[130][132] PART II Other Information Item 1. Legal Proceedings The company faces significant legal proceedings, including an arbitration award of €38.05 million and a default on a 2022 Note, with damages sought of at least $2.68 million - An arbitration tribunal in Malta ordered the company to pay SINSIN €38,054,000 plus interest, which SINSIN is now seeking to enforce in a U.S. District Court[138][139] - The company defaulted on a 2022 Note, leading Streeterville to file a complaint seeking damages of not less than $2,676,000 plus interest and fees[140] Other Items (1A, 2, 3, 4, 5, 6) Item 1A (Risk Factors) was omitted as a smaller reporting company, with no events reported for Items 2, 3, and 5, and Item 4 being not applicable - Risk Factor disclosure (Item 1A) has been omitted due to the company's status as a smaller reporting company[142] - There were no unregistered sales of equity securities (Item 2) or defaults upon senior securities (Item 3) during the period[142]