Phoenix Motor (PEV) - 2023 Q1 - Quarterly Report

Part I. Financial Information Item 1. Interim Financial Statements Phoenix Motor Inc. reported a net loss of $2.8 million on revenues of $1.8 million for Q1 2023, with recurring losses and negative operating cash flow raising going concern doubts Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $6,572 | $7,721 | | Total Assets | $18,984 | $20,443 | | Total Current Liabilities | $5,042 | $4,789 | | Total Liabilities | $8,217 | $8,161 | | Total Stockholders' Equity | $10,767 | $12,282 | Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net Revenues | $1,781 | $671 | | Gross Profit | $173 | $120 | | Operating Loss | $(3,673) | $(2,903) | | Net Loss | $(2,778) | $(2,322) | | Net Loss Per Share (Basic & Diluted) | $(0.13) | $(0.13) | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,086) | $(2,692) | | Net cash used in investing activities | $(71) | $0 | | Net cash generated from financing activities | $1,151 | $75 | | Decrease in cash, cash equivalents and restricted cash | $(6) | $(2,617) | - The company has recurring losses, negative operating cash flow, and needs to raise additional funds, raising substantial doubt about its ability to continue as a going concern[37] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes 165.4% revenue growth to eased supply chains, but gross margin declined, operating expenses rose, and liquidity is a major concern - Net revenues for Q1 2023 increased by 165.4% to $1.8 million from $0.7 million in Q1 2022, primarily driven by the delivery of five EV units compared to two in the prior-year period as supply chain constraints eased[70] - Gross margin decreased to 9.7% in Q1 2023 from 17.9% in Q1 2022, attributed to lower margins on forklift sales, increased fixed costs, partially offset by higher margins on EV sales and leasing[74] - Operating expenses increased to $3.8 million from $3.0 million year-over-year, mainly due to higher payroll and research and development expenses[75] - The company's liquidity is a major concern, with cash and equivalents at only $0.4 million, and management has expressed substantial doubt about the company's ability to continue as a going concern, relying on equity financing (SEPA), cost controls, and negotiating better payment terms to sustain operations[82] - Key business trends and challenges include the impact of the Inflation Reduction Act (IRA) causing some customer order delays, ongoing supply-chain challenges leading to delivery delays and component shortages, and cost increases due to inflation and rising interest rates[92][93][97] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - The company stated that this item is not applicable to smaller reporting companies[96] Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2023, due to four material weaknesses identified in the 2022 audit - Management concluded that the company's disclosure controls and procedures were ineffective as of the end of the fiscal quarter ended March 31, 2023[99] - Four material weaknesses were identified in the 2022 audit: (1) ineffective control environment, (2) ineffective risk assessment process, (3) ineffective monitoring activities, and (4) lack of sufficient controls and skilled resources for financial reporting under U.S. GAAP[103] - The company intends to implement remedial measures, including hiring more qualified staff, establishing a formal control framework, improving processes, and increasing senior management review[101] Part II. Other Information Legal Proceedings The company is involved in various legal proceedings but does not believe any pending cases would materially impact its financial condition - The company does not believe that any pending legal proceeding would be material to its financial condition[105] - A dispute with a previous landlord from 2021 is ongoing, but the outcome and potential loss are uncertain at this stage[53] Risk Factors No material changes to risk factors were reported from the 2022 Annual Report on Form 10-K - No material changes to the risk factors from the 2022 Form 10-K were reported[107] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported for the period[108] Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes required certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32) and XBRL interactive data files[112]