As filed with the Securities and Exchange Commission on November 26, 2021.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PHOENIX MOTOR INC.
(Exact name of registrant as specified in its charter)
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Delaware
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3713
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85-4319789
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(State or other jurisdiction of
incorporation or organization)
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(Primary standard industrial
classification code number)
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(I.R.S. employer
identification number)
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1500 Lakeview Loop
Anaheim, CA 92807
(909) 987-0815
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Joseph R. Mitchell
joem@phoenixmotorcars.com
Chief Executive Officer
Phoenix Motor Inc.
1500 Lakeview Loop,
Anaheim, CA, 92807
(909) 987-0815
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Mitchell S. Nussbaum, Esq.
David C. Fischer, Esq.
dfischer@loeb.com
212-407-4827
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Tel: (212) 407-4000
Fax: (212) 407-4990
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M. Ali Panjwani, Esq.
Pryor Cashman LLP
7 Times Square
New York, New York 10036
Tel: (212) 421-4100
Fax: (212) 326-0806
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 the 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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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
(Do not check if smaller reporting company)
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Smaller reporting company ☒
Emerging growth company ☒
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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 7(a)(2)(B) of the Securities Act ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Security Being Registered
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Proposed Maximum
Aggregate
Offering Price(1)(2)
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Amount of
Registration Fee(3)
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Common Stock, $0.0001 par value
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$
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150,000,000
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$
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13,905
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Underwriter Warrants(4)
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Common Stock underlying the Underwriter Warrants(5)
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Total
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(1)
Includes common stock that may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3)
Paid herewith. Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
(4)
The Registrant has agreed to issue to the underwriter warrants to purchase up to [ ]% in the aggregate of the shares of our common stock (the “Underwriter Warrants”) to be issued and sold in this offering (excluding shares issuable upon exercise of the over-allotment option described herein). The Underwriter Warrants are exercisable for a price per share equal to [ ]% of the public offering price.
(5)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The warrants are exercisable at a per share exercise price equal to [ ]% of the public offering price. As estimated solely for the purpose of recalculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the Underwriter Warrants is $[ ], which is equal to [ ]% of $[ ] ([ ]% of $[ ]).
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 26, 2021
Shares
Common Stock
This is our initial public offering of common stock. We are selling shares of common stock. We anticipate the initial public offering price will be between $ and $ per share.
No public market currently exists for our common stock. We intend to listthe common stock on the NASDAQ Capital Market, or NASDAQ, under the symbol [“PEV.”] Accordingly, while the estimates set forth above represent our bona fide estimate of the range of public offering price per share and number of shares to be issued, consistent with the requirements of the Securities and Exchange Commission and Nasdaq, we may ultimately issue more shares at a lower price or fewer shares at a greater price to achieve such minimum value of unrestricted publicly held shares. We will not consummate the offering unless such minimum value will be achieved and until we receive approval from Nasdaq to list our common stock.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced reporting requirements after this offering. See “Prospectus Summary — Emerging Growth Company Status.”
Investing in our securities involves a high degree of risk. You should carefully consider the risk factors beginning on page 11 of this prospectus before purchasing shares of our common stock.
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Price to Public
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Underwriting
Discounts and
Commissions(1)
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Proceeds to Us
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Per Share
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$
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$
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$
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Total
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$
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$
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$
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(1)
Does not include additional compensation payable to the underwriter. We have agreed to reimburse the underwriter for certain expenses incurred relating to this offering. In addition, we will issue to the underwriter a warrant to purchase the number of shares of our common stock equal to up to [ ] percent ([ ]%) of the number of shares issued at the initial closing of this offering. See “Underwriting” for additional information regarding underwriting compensation.
This offering is being underwritten on a firm commitment basis. We have granted the underwriters an option for a period of 45 days from the date of this prospectus to purchase up to an additional [ ] shares from us at the public offering price less the underwriting discount and commissions.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to purchasers on , 2021.
Maxim Group LLCRoth Capital Partners
EF Hutton
division of Benchmark Investments, LLC
The date of this prospectus is , 2021
EdisonFuture EF-1 T Truck
EdisonFuture EF-1 T Truck
TABLE OF CONTENTS
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Page
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1
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8
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9
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11
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F-1
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You should rely only on the information contained in this prospectus and in any free writing prospectus. We and the underwriters have not authorized anyone to provide you with information different from that contained in this prospectus. We and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.
Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.
Our logo and some of our trademarks and tradenames are used or incorporated by reference in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks, tradenames and service marks referred to in this prospectus may appear without the ®, TM and SM symbols, but those 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 licensor to these trademarks, tradenames and service marks.
We obtained the statistical data, market data and other industry data and forecasts described or incorporated by reference in this prospectus from market research, publicly available information and industry publications. Industry publications generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy and completeness of the information. Similarly, while we believe that the statistical data, industry data and forecasts and market research are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of the information. We have not sought the consent of the sources to refer to their reports appearing or incorporated by reference in this prospectus.
PROSPECTUS SUMMARY
This summary highlights certain information appearing elsewhere in this prospectus. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the information under “Risk Factors,” “Business” and our financial statements and the related notes included elsewhere in this prospectus before investing in our common stock.
In this prospectus, unless otherwise stated or the context otherwise requires, references to “Phoenix, “Company,” “we,” “us,” “our,” or similar references mean Phoenix Motor Inc. and its subsidiaries on a consolidated basis.
Company 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.
EdisonFuture EF-1 Pickup Truck Prototype
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.
Legacy EV Business Line: Fully Built Medium-Duty EVs
We sell our products both fully integrated into complete vehicles and in kit form to other partners for integration in the same vehicle platforms. For example, we sell to our shuttle partner/dealer electric drive system kits that are integrated into the E-450 based shuttle buses sold by them. The integration can be completed either at Phoenix manufacturing facilities or as part of the customer’s manufacturing process. We are currently in production of our recently developed third-generation drivetrain, which includes the largest battery pack and longest electric range for any Class 4 product on the market, offering up to 160 miles in range. Our current generation drivetrain allows for a variety of battery pack options which offer customers flexibility on pricing and configuration. Our latest technology also offers the largest variety of cutaway bodies including service trucks, utility trucks, flatbed trucks, cargo trucks, walk-in vans, shuttle buses, and school buses. In addition to engineering and final stage assembly of our electric drivetrain, Phoenix serves as a one-stop shop for companies or agencies looking to electrify their fleets. In advance of sales, we assist customers in analyzing their fleets’ routes for suitability for EV adoption, vehicle type, and battery pack size (range vs. payload and costs). Route analysis also encompasses charger requirements, including location, and we provide site reviews and infrastructure installation support to customers. In addition, we offer leasing services to our customers, as well as assistance in identifying federal and state incentives for fleet electrification. While providing limited warranties for the parts and components of the vehicles we sell, we offer a full range of after-sale customer support over the vehicles’ lifespans, with our all-inclusive monthly service packages covering substantially all the maintenance needs.
We deployed the very first zero emission airport shuttle bus at the Los Angeles International Airport (“LAX”), and the LAX fleet has grown to 39 electric shuttle buses, one of the largest of its kind. Over the years, we have served over 45 fleet customers with a variety of needs, providing customized products to complete essential business functions. As of September 30, 2021, we have delivered a total of 98 EVs, consisting of 84 shuttle buses and 14 work and delivery trucks, representing what we believe is the largest number of Class 4 cutaway medium duty shuttle bus deployments in the U.S. and also the most electric vehicle deployed on the Ford E-Series chassis. To date, we estimate that our products have accumulated more than three million driven electric miles, reducing CO2 emission by over 9.7 million pounds, the equivalent of carbon sequestered by over 5,444 acres of forests. Phoenix has partnered to support sustainability and clean transportation objectives, meeting the needs of medium-duty fleet customers of all sizes, including utilities, cities, municipalities, transit agencies, airports, seaports, school districts, parking companies, universities, and corporate campuses. We are diligently executing on our expansion plan to further boost our production capabilities for year 2021, while addressing the supply chain related challenges posed by the ongoing COVID-19 Pandemic
We also sell a variety of L2 and DC fast-charging (“DCFC”) solutions to our fleet customers at the point of sale for any of our fleet vehicles. We have expanded our product offerings into the residential and multi-family markets, as well as the commercial markets, offering both L2 and DCFC charging stations.
Financial Performance Summary
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Our revenues were $0.4 million, $4.1 million, and $4.0 million, respectively, for the period from November 13, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through November 12, 2020 (Predecessor), and the year ended December 31, 2019 (Predecessor).
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Our net loss was $1.2 million, $3.4 million and $6 million, respectively, for the period from November 13, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor).
Market Opportunities
According to Electric Vehicle Outlook 2021 by Bloomberg New Energy Finance (“BloombergNEF”), the adoption of EVs in the commercial market is still low with over one million commercial EVs on the road, including buses, delivery vans and trucks compared to 12 million passenger EVs in use. The commercial EV market, which we believe is currently underserved, is projected to grow from a low base today to global sales of three million units by 2025 and nine million by 2030, led by buses and light trucks, representing significant growth opportunities. Major factors driving the growth of the commercial EV market size are rising policy support, increasing electrification of public transport fleets, stringent government regulations, advancements in battery pack technologies and electric powertrains and accelerated investment in charging infrastructure. By taking advantage of increasing EV demand boosted by government incentives, grants and regulations, as well as our leading technology, experience and expertise, and our strong relationships with dealers such as Creative Bus Sales and Forest River, we believe we are well positioned to capitalize on the commercial market opportunities. With the launch of our third-generation e-drive system in the second quarter of, 2021 and a backlog of 66 units consists of orders for 41 vehicles and 25 electric drive systems. The order backlog represents approximately $9.3 million in revenue and we believe our business is on a path of robust growth in the next few years.
Competitive Strength
In response to the market opportunities, we offer the following competitive strengths:
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Demonstrated Capability to Develop and Deploy Commercial EVs and Generate Revenue While Developing Next Generation Vehicles to Fuel Future Growth
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Strong EV Development Experience and a One-Stop Shop Solution for Customers
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Experienced and Proven Management Team
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Key Relationships with OEMs, Customers and Dealerships
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Optimized Production Supply Chain Catered to Class 4 Market
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Modular Software and Hardware Design
Growth Strategy
In addition to our existing product lineup, we continue to evaluate the commercial vehicle markets, including projected trends and developments, to identify new areas of demand and product opportunities. Specifically,
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We are collaborating with EasyMile SAS, an industry leader in autonomous vehicle technology, to jointly design develop and deploy autonomous shuttle buses and delivery vans. In September 2020, EasyMile and Phoenix, in cooperation with the Metropolitan Transit Authority of Harris County (Houston Metro), secured the Federal Transit Administration (FTA) Accelerating Innovative Mobility (AIM) grant (Federal Award Identification No. TX-2021-028-00 representing the Cooperative Agreement between FTA and Houston METRO) to design and deploy the first-of-its-kind, all-electric Level 4 autonomous cutaway shuttle bus. Phoenix Motorcars is a named subcontractor to the contract between Houston Metro and EasyMile. The jointly developed autonomous electric shuttle bus will deployed in downtown Houston in 2022. The project revenue to Phoenix is expected to be $500,000, over the duration of the project. Future commercialization of the product will be a subject of negotiation upon successful completion of the development program and commercial viability of further required technology advances.
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In the third quarter of 2021, we have started planning for the development of our fourth-generation electric drivetrain (“Gen 4”). In Gen 4, we plan to incorporate the latest technology developments in electric drive systems and engineering repackaging intended to enable Phoenix to diversify sourcing, particularly for key components such as high voltage batteries, as well as significantly reduce our BOM costs. We anticipate launching the Gen 4 drivetrain in 2022.
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We began designing and developing our purpose-built New Commercial Vehicle Platform (“Ground-up Platform”) in the second half of 2021. We work closely with our sales and supply chain
partners such as Forest River, Creative Bus Sales, and EasyMile, to determine key features, customer requirements and emerging technologies. We are targeting our electric chassis for the Class 3 through 6 commercial vehicle markets by using light- weight materials and innovative electric drivetrain components that offer improved battery density, efficiency and space-claim. If developed successfully our Ground-up Platform will allow us to be independent of other chassis makers, such as Ford, on whose E-450 chassis we build our current products, and to customize our product offerings (chassis and drive system) to meet customer and fleet requirements.
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We are developing our EF1-T e-pickup truck, our first in a line of all-electric pickup trucks and last-mile delivery vans incorporating our vision for sustainable transportation, with focus on energy efficiency and innovative designs. Icona Design, a world-leading automotive design company, has delivered concept/auto-show versions of the pick-up truck and a van; and we have begun marketing the vehicles, developing sales and service and manufacturing and assembly strategies, and sourcing partners or suppliers to complete product development and provide major components.
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We currently sell both L2 and DC Fast Charging solutions to our existing fleet customers, at the point of sale. As we expand our product offerings, we plan to offer charging products for the residential and multi-family EV markets, in both networked and non-networked configurations. In most cases, Level 2 charging will be the focal point for the residential and multi-family markets, but we are able to offer DC fast charging, as well. The other market we will focus on is the commercial/public market, where we will offer both Level 2 and DC fast charging solutions, with both networked and non- networked offerings. We have entered into agreements with suppliers and launched the products in the third quarter of 2021.
AC Chargers, ranging from 7.2 Kw - 19.2 Kw DC Chargers, ranging from 30 Kw - 350 Kw
Our Corporate Structure
Upon the closing of this offering, we will be a “controlled company” within the meaning of the corporate governance standards because more than 50% of the voting power of our outstanding common stock will be beneficially owned by SPI Energy Co., Ltd., through its wholly-owned subsidiaries. For further information on the implications of this distinction, see “Risk Factors — Risks Related to this Offering and Ownership of Our Common Stock” and “Management — Controlled Company.”
Following the closing of this offering, SPI will continue to have the right, at any time until SPI and its affiliates, including EdisonFuture Inc., no longer beneficially own at least 5% of the voting power of our outstanding common stock, to nominate a number of directors comprising a percentage of the board in accordance with their beneficial ownership of the voting power of our outstanding common stock (rounded up to the nearest whole number), except that if SPI and its affiliates, including EdisonFuture, beneficially own more than 50% of the voting power of our outstanding common stock, EdisonFuture will have the right to nominate a majority of the directors. See “Management — Board Composition” for more information.
Risks Affecting Us
Our business is subject to a number of risks and uncertainties that you should understand before making an investment decision. These risks are discussed more fully in the section entitled “Risk Factors,” following this prospectus summary. These include:
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We have a history of losses and expect significant increases in our costs and expenses. As we continue to invest in our technology, research and development efforts, improve our operational, financial and management information systems, hire additional personnel, obtain, maintain, expand our intellectual property portfolio, we expect to incur losses for at least the foreseeable future.
Until our operations become self-sustaining and government-subsidies independent, we will be required to raise additional funds, which may not be available or available on favorable terms, to remain in business.
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Our history of losses makes evaluating our business and future prospects difficult and may increase the risk of your investment.
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The COVID-19 pandemic and the efforts to mitigate its impact have had and may continue to have an adverse effect on our business, liquidity, results of operations, financial condition and price of our securities.
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Our reliance on a limited base of suppliers for certain of our parts and products may result in disruptions to our supply chain and business and adversely affect our financial results.
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Our reliance on a limited group of distributors of our EV shuttle buses and trucks may result in disruptions to our marketing and sales and adversely affect our financial results.
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Our future growth is dependent upon commercial fleet customers’ willingness to adopt electric vehicles.
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To be successful, we must comply with numerous government and industry requirements and standards.
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You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
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Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
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We may become subject to product liability or warranty claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
Implications of Being an Emerging Growth Company and Smaller Reporting Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis, or CD&A, of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
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engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes — Oxley Act of 2002, or the Sarbanes — Oxley Act;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or the PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation.
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company” until the earliest to occur of:
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our reporting $1.07 billion or more in annual gross revenues;
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our issuance, in a three-year period, of more than $1 billion in non-convertible debt;
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the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and
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[ ], 2026.
We cannot predict if investors will find our securities less attractive because we may rely on these exemptions, which could result in a less active trading market for our securities and increased volatility in the price of our securities.
Finally, we are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Our Corporate Information
We were incorporated in Delaware on October 12, 2020. Two of our operating subsidiaries, Phoenix Cars, LLC and Phoenix Motorcars Leasing, LLC were formed in 2003 and our third operating subsidiary EdisonFuture Motor, Inc. was established in July 2021. Our principal executive offices are located at 1500 Lakeview Loop, Anaheim, CA 92807. Our telephone number is (909) 987-0815. We maintain a website at www.Phoenixmotorcars.com. The information contained on our website is not, and should not be interpreted to be, a part of this prospectus.
THE OFFERING
Common stock being offered by us
shares
Common stock to be outstanding immediately after this offering
shares
We have granted the underwriter a 45-day option to purchase up to an additional shares from us at the public offering price per share less the underwriting discounts and commissions, to cover over-allotments, if any, on the same terms as set forth in this prospectus.
We intend to use the net proceeds from this offering to fund R& D, product development, capacity expansion and for working capital and other general corporate purposes.
Proposed NASDAQ trading symbol
[“PEV”]
Investing in our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as fully described below. The principal factors and uncertainties that make investing in our common stock risky include:
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Our history of losses
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Uncertainty regarding market acceptance of electric vehicles, generally, or our products, in particular
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Risks relating to our changing to a new vehicle platform
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Risks relating to our plans to expand our product offerings
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Competition from manufacturers with greater resources
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Our ability to maintain the pace of EV industry developments and changes
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Changes in laws, regulatory requirements, governmental incentives, and fuel and energy prices
See “Risk Factors,” beginning on page [ ].
The number of shares of our common stock to be outstanding immediately after this offering excludes:
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shares of common stock issuable upon the exercise of outstanding options and warrants at a weighted average exercise price of $ per share; and
•
shares reserved for issuance under our equity incentive plan.
Unless otherwise stated, all information in this prospectus assumes no exercise of the underwriter’s over-allotment option to purchase additional shares:
SUMMARY FINANCIAL AND OTHER DATA
The following table presents our summary historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus. The consolidated statements of operations data for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor), and the year ended December 31, 2019 (Predecessor), and the consolidated balance sheets as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor) are derived from our audited financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with the generally accepted accounting principles in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods.
The summary unaudited historical interim financial data set forth below as of September 30, 2021 (Successor) and for each of the nine months ended September 30, 2021 (Successor) and 2020 (Predecessor) have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus and which, in the opinion of management, have been prepared on a basis consistent with the audited financial statements and the notes thereto and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this information. These unaudited financial statements should be read in conjunction with the audited financial statements.
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Predecessor
|
|
|
|
|
|
Nine months
ended
September 30,
2021
|
|
|
|
Nine months
ended
September 30,
2020
|
|
|
Period from
November 13,
2020 to
December 31,
2020
|
|
|
|
Period from
January 1,
2020 to
November 12,
2020
|
|
|
For the Year
Ended
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
In thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
1,680
|
|
|
|
|
|
$
|
3,802
|
|
|
|
|
$
|
377
|
|
|
|
|
|
$
|
4,132
|
|
|
|
|
$
|
3,990
|
|
|
|
Cost of revenue
|
|
|
|
|
1,836
|
|
|
|
|
|
|
4,159
|
|
|
|
|
|
479
|
|
|
|
|
|
|
4,451
|
|
|
|
|
|
4,288
|
|
|
|
Gross loss:
|
|
|
|
|
(156)
|
|
|
|
|
|
|
(357)
|
|
|
|
|
|
(102)
|
|
|
|
|
|
|
(319)
|
|
|
|
|
|
(298)
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
6216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Total operating expenses
|
|
|
|
|
6,216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Operating loss
|
|
|
|
|
(6,372)
|
|
|
|
|
|
|
(3,191)
|
|
|
|
|
|
(1,249)
|
|
|
|
|
|
|
(4,005)
|
|
|
|
|
|
(5,679)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(2)
|
|
|
|
|
|
|
(139)
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
(300)
|
|
|
|
Other income
|
|
|
|
|
1
|
|
|
|
|
|
|
45
|
|
|
|
|
|
12
|
|
|
|
|
|
|
587
|
|
|
|
|
|
8
|
|
|
|
Total other (expense) income, net
|
|
|
|
|
(1)
|
|
|
|
|
|
|
(94)
|
|
|
|
|
|
8
|
|
|
|
|
|
|
583
|
|
|
|
|
|
(292)
|
|
|
|
Loss before income taxes
|
|
|
|
|
(6,373)
|
|
|
|
|
|
|
(3,285)
|
|
|
|
|
|
(1,241)
|
|
|
|
|
|
|
(3,422)
|
|
|
|
|
|
(5,971)
|
|
|
|
Income tax provision
|
|
|
|
|
(3)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
Net loss
|
|
|
|
$
|
(6,376)
|
|
|
|
|
|
$
|
(3,285)
|
|
|
|
|
$
|
(1,243)
|
|
|
|
|
|
$
|
(3,422)
|
|
|
|
|
$
|
(5,973)
|
|
|
|
Net loss per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
$
|
(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding*
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s recapitalization and stock split.
|
|
|
|
Successor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
In thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
5,976
|
|
|
|
|
$
|
15,699
|
|
|
|
|
|
$
|
29
|
|
|
|
Current assets
|
|
|
|
|
13,630
|
|
|
|
|
|
19,249
|
|
|
|
|
|
|
5,552
|
|
|
|
Total assets
|
|
|
|
|
22,966
|
|
|
|
|
|
29,227
|
|
|
|
|
|
|
8,955
|
|
|
|
Current liabilities
|
|
|
|
|
3,738
|
|
|
|
|
|
4,254
|
|
|
|
|
|
|
4,408
|
|
|
|
Total liabilities
|
|
|
|
|
4,503
|
|
|
|
|
|
4,437
|
|
|
|
|
|
|
20,592
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
|
|
18,463
|
|
|
|
|
|
24,790
|
|
|
|
|
|
|
(11,637)
|
|
|
|
Total liabilities and equity
|
|
|
|
|
22,966
|
|
|
|
|
$
|
29,227
|
|
|
|
|
|
$
|
8,955
|
|
|
RISK FACTORS
You should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could decline and you may lose all or part of your investment.
Risks Related to Our Business Operations and Industry
Our results of operations have not resulted in profitability, and we may not be able to achieve profitability going forward.
We have an accumulated deficit of $7.6 million as of September 30, 2021. We have had net losses of $6.4 million for the period January 1, 2021 to September 30, 2021, and $1.2 million, $3.4 million and $6.0 million for the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2019 (Predecessor), respectively. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. Our management is developing plans to alleviate the negative trends and conditions described above and there is no guarantee that such plans will be successfully implemented. Our business plan is focused on providing sustainable and cost-effective solutions to the commercial transportation sector but is still unproven. There is no assurance that even if we successfully implement our business plan, that we will be able to curtail our losses or ever achieve profitable operations. If we incur additional significant operating losses, our stock price may significantly decline.
We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.
We have had negative cash flow from operating activities of $9.6 million for the period from January 1, 2021 to September 30, 2021, and $1.4 million and $3.3 million for the period from November 13, 2020 to December 31, 2020 (Successor) and for the year ended December 31, 2019 (Predecessor), respectively. We anticipate that we will continue to have negative cash flow from operating and investing activities through 2021 and 2022 as we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to increase sales and ramp up operations at our California facility. Our business also will at times require significant amounts of working capital to support our growth of additional platforms. An inability to generate positive cash flow for the near term may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our long-term viability. There can be no assurance that we will achieve positive cash flow in the near future or at all.
Electric vehicles are a new industry, so Phoenix’s success cannot be assured.
The electric vehicle industry in the United States is small by comparison with the traditional automotive vehicle industry. In particular, the medium-duty electric vehicle business, in which Phoenix engages, is comprised of a relatively small number of companies. Unless the use of battery power for medium-duty vehicles gains wide acceptance, Phoenix’s business will become unsustainable. There are a number of obstacles to wide acceptance of Phoenix’s EVs, as follows:
Costs of electric vehicles are high in comparison with those of traditional vehicles powered by internal combustion engines or hybrids.
Phoenix’s EVs will not gain wide acceptance unless Phoenix can reduce manufacturing and selling costs. Prices of Phoenix EVs range from $165,000 to $220,000, whereas prices of comparable traditional combustion engine vehicles range from approximately $50,000 to $80,000. The cost difference is due to the
incremental cost of electric drivetrain, including lithium-ion batteries, motors, inverter and control software, coupled with the relatively low volume of production, leading to higher overheads.
In addition, government subsidies and incentives, including those available in California, are important for the cost-competitiveness of Phoenix’s EVs, and Phoenix’s growth and prospects depend in part on the availability and amounts of these subsidies and incentives. Any reduction, elimination or discriminatory application of government subsidies and incentives because of budgetary challenges, policy changes, the reduced need for such subsidies and incentives due to the perceived success of electric vehicles, or other reasons may impair the cost-competitiveness of Phoenix’s EVs.
The range of Phoenix’s EVs is limited, compared with that of traditional vehicles.
Whereas traditional combustion engine medium-duty vehicles may travel from 240 to 350 miles before refueling, Phoenix’s EVs have a maximum range of 160 miles and minimum recharging time of five to six hours. Currently, Phoenix’s EVs can be charged only at the owner’s location or select public charging locations using compatible charging equipment, further limiting the EVs to local use. Accordingly, potential customers needing vehicles with longer ranges or quicker turnaround of depleted electric energy supply may find Phoenix’s products relatively less attractive.
Phoenix’s current backlog consists entirely of orders for vehicles with a new drive system and a new chassis, entailing risks of fulfillment delays.
Phoenix is the process of releasing its Generation 3 drivetrain system, using a new battery supplier (a U.S. domestic company) and a thermal management cooling system. Also, all of Phoenix’s current products are built on the Ford E450 chassis. The Ford E450 2021 model year chassis has changed significantly from the most recent, 2019 chassis, on which Phoenix built its previous two years’ of vehicles. These changes require Phoenix’s engineering team to update the Generation 3 drive system to be compatible with both the 2019, as well as the 2021 chassis. We expect (but can give no assurance) that required engineering changes will be implemented by the end of the 2022 first quarter.
Some of Phoenix’s fleet customers require its vehicles to pass Federal Transit Administration “Altoona” testing, and the failure of Phoenix’s vehicles to do so would materially adversely affect sales and revenue.
Phoenix plans to begin Altoona testing process at the end of the third quarter or beginning of the fourth quarter of 2021 (pending availability for test slots and progress on the Generation 3 drive system); the tests are expected to last between three and six months. Failure to successfully complete testing in this timeframe would materially adversely affect order fulfillment, as well as future sales, to customers and potential customers that require successful completion of the test program in order to obtain federal financing that has lower interest cost and higher loan-to value allowances.
All of Phoenix’s current range of products are built on Ford’s E-450 chassis. A decision by Ford to offer an electric version of this chassis, directly, would impact the viability of Phoenix’s current products.
Phoenix currently builds all its products on Ford’s E-450 chassis. Ford does not offer an electric version of this chassis, due to the relatively small market size for medium-duty electric vehicles. As volumes increase, there is a potential risk of Ford’s launching an electric version of Ford’s E-450 chassis directly from the factory, negating the need for Phoenix’s current range of products. Additionally, a shortage in the availability of this chassis would impact Phoenix’s capability to produce and fulfill customer’s orders in a timely manner.
The demand for commercial electric vehicles depends, in part, on the continuation of current trends resulting from dependence on fossil fuels. Extended periods of low diesel or other petroleum-based fuel prices could adversely affect demand for Phoenix’s vehicles, which would adversely affect its business, prospects, financial condition and operating results.
We believe that much of the current and projected demand for commercial electric vehicles results from concerns about volatility in the cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency
and alternative forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, the outlook for the long-term supply of oil to the United States improves, the government eliminates or modifies its regulations or economic incentives related to fuel efficiency and alternative forms of energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for commercial electric vehicles could be reduced, and our business and revenue may be harmed.
Diesel and other petroleum-based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over extended periods of time may lower the perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which would have an adverse effect on our business, prospects, financial condition and operating results.
Phoenix’s growth depends upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles and on its ability to produce, sell, and service vehicles that meet their needs. Operators’ willingness to acquire EV fleets often depends upon the cost to an operator in adopting EV technology, as compared to the cost of traditional vehicle technology.
Phoenix’s growth requires adoption of commercial vehicle operators to adopt EVs for their fleets and on Phoenix’s ability to produce, sell and service vehicles that meet their needs. EVs’ use in the medium-duty commercial vehicle market is a relatively new development, particularly in the United States, and is characterized by rapidly changing technologies and evolving government regulation, industry standards, and customer views of the merits of using electric vehicles in their businesses. This process has been slow, as, without including the impact of government or other subsidies and incentives, the purchase prices for Phoenix’s EVs currently is higher than those for diesel-fueled vehicles. The relatively low price of oil has also hurt Phoenix’s over the last few years.
Our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles and upon our ability to produce, sell and service vehicles that meet their needs. If the market for commercial electric vehicles does not develop as we expect, or if it develops slower than we expect, our business, prospects, financial condition and operating results will be adversely affected.
Our growth requires adoption of commercial vehicle operators to adopt EVs for their fleets and on our ability to produce, sell and service vehicles that meet their needs. EVs’ use in the medium-duty commercial vehicle market is a relatively new development, particularly in the United States, and is characterized by rapidly changing technologies and evolving government regulation, industry standards, and customer views of the merits of using electric vehicles in their businesses. This process has been slow, as, without including the impact of government or other subsidies and incentives, the purchase prices for Phoenix’s EVs currently is higher than those for diesel-fueled vehicles. The relatively low price of oil has also hurt Phoenix’s over the last few years.
Phoenix must educate fleet managers regarding the economic benefits that Phoenix believes result over the life of its EVs. Phoenix believes that these benefits depend on the following:
•
the difference in the initial purchase prices of commercial electric vehicles and vehicles with comparable gross vehicle weight powered by internal combustion engines or hybrids, both including the effect of government and other subsidies and incentives designed to promote the purchase of electric vehicles;
•
the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price and ongoing operating and maintenance costs;
•
the availability and terms of financing options for purchases of vehicles and, for commercial electric vehicles, financing options for battery systems;
•
the availability of tax and other governmental incentives to purchase and operate electric vehicles and future regulations requiring increased use of nonpolluting vehicles;
•
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
•
fuel prices, including volatility in the cost of diesel fuel;
•
cost and availability of other alternatives to diesel fueled vehicles, such as vehicles powered by natural gas or hybrids;
•
corporate sustainability initiatives;
•
commercial electric vehicle quality, performance and safety (particularly with respect to lithium-ion battery packs);
•
the quality and availability of service for the vehicle, including the availability of replacement parts;
•
the range over which commercial electric vehicles may be driven on a single battery charge;
•
access to charging stations and related infrastructure costs, and standardization of electric vehicle charging systems;
•
electric grid capacity and reliability; and
•
macroeconomic factors.
If, in weighing these factors, operators of commercial vehicle fleets determine that there is no compelling business justification for purchasing commercial EVs, the market for commercial EVs may not develop as, or may develop more slowly than, Phoenix expects which would adversely affect Phoenix’s business, prospects, financial condition and operating results.
Phoenix has a limited number of customers, with which Phoenix does not have long-term agreements, and expects that a significant portion of our future sales will be from a limited number of customers. The loss of any of these customers could materially harm Phoenix’s business.
A significant portion of Phoenix’s projected future revenue is expected to be generated from a limited number of customers. Phoenix has no contracts with customers that include long-term commitments that ensure future sales of vehicles. The loss of or a reduction in sales or anticipated sales to Phoenix’s most significant customers would have a material adverse effect on our business, prospects, financial condition and operating results.
Phoenix may face competition from global automotive manufacturers.
We compete with a number of commercial EV manufacturers, including those such as Lightning eMotors, GreenPower Bus, SEA Electric and Arrival. In addition to Tesla & Rivian, a number of traditional global automobile manufacturers, including Ford, General Motors, Mercedes Benz, and Nissan-Renault-Mitsubishi-Toyota, have entered the consumer EV business, and a few, including BYD, Ford, General Motors, Tesla and Daimler have begun entry into the commercial EV market. These companies have far greater resources, brand recognition, and distribution channels than Phoenix or the Company does, which could make it difficult for Phoenix to gain widespread market acceptance. Ford has announced its intention to begin selling, in spring 2022, an all-electric version of its F-150 pickup truck, a market segment in which the Company intends to compete. There can be no assurance that Phoenix will be able to compete successfully with other market participants, and, if Phoenix cannot, then its business could fail.
Phoenix currently has no long-term parts supply contracts that guarantee pricing, which exposes Phoenix to fluctuations in component, materials, and equipment costs. Substantial increases in these prices would increase operating costs, adversely affecting Phoenix’s business, prospects, financial condition and operating results.
Because Phoenix currently has no long-term parts supply contracts that guarantee pricing on key components including base chassis and drivetrain components (excluding batteries), Phoenix is exposed to risks of increases in prices of the raw materials, parts, and components, and equipment used in EV production. Substantial increases in such prices would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. Furthermore, currency fluctuations, tariffs
or shortages in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs and could reduce our margins. Any attempts to increase the announced or expected prices of our vehicles in response to increased costs could be viewed negatively by our customers and could adversely affect our business, prospects, financial condition and operating results. Phoenix has a long-term contract with its current battery supplier, offering pricing guarantees for a three-year period. The contract also stipulates minimum order quantities for the term of the contract.
Disruption of supply or shortage of raw materials could harm our business.
Historically, we have experienced significant delivery delays and supply shortage with our BOM components, battery packs in particular. When encountered with supply disruption or shortage, our production plans and delivery schedules to our customers are to a large extent dictated by the timing of receiving these BOM components, or when a different supplier is fully qualified and customized into our product design. For example, COVID-19, including associated variants, has caused disruptions to and delays in our operations, including shortages and delays in the supply of certain parts, including semiconductors, materials and equipment necessary for the production of our vehicles, and the various internal designs and processes we have adopted in an effort to remedy or mitigate impacts of such disruptions and delays have resulted in higher costs. In addition, a growth in popularity of EVs without a significant expansion in battery cell production capacity could result in shortages which would result in increased materials costs to us, and would impact our projected manufacturing and delivery timelines, and adversely affect our business, prospects, financial condition, results of operations, and cash flows. Although we have worked diligently with our suppliers to mitigate the risks, we expect supply chain delays to continue to have a significant impact on our 2021 production and revenue and possibly thereafter. Any such supply interruption or shortage could materially adversely affect our business and operating results.
Phoenix EVs use lithium-ion batteries, which, if not appropriately managed and controlled, have caught fire or released smoke and flames. Such events could result in liability under Phoenix’s warranties, for damage or injury, adverse publicity and a potential safety recall, any of which would hurt Phoenix’s prospects.
The battery packs in Phoenix’s EVs use lithium-ion cells, which, if not appropriately managed and controlled can rapidly release energy by venting smoke and flames that can ignite nearby materials. Highly publicized incidents of laptop computers and cell phones bursting into flames have focused attention on the safety of these cells. These events also have raised questions about the suitability of lithium-ion cells for automotive applications. There can be no assurance that a field failure of Phoenix’s battery packs will not occur, which would damage the vehicle or lead to personal injury or death that subject Phoenix to lawsuits. Furthermore, there is some risk of electrocution if individuals who attempt to repair battery packs do not follow applicable maintenance and repair protocols. Any such damage or injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity could adversely affect Phoenix’s business, prospects, financial condition and operating results.
If we are unable to design, develop, market and sell new electric vehicles and services that address additional market opportunities, our business, prospects and operating results will suffer.
We may not be able to successfully develop new electric vehicles and services, address new market segments or develop a significantly broader customer base. To date, we have focused our business on the sale of high-performance electric buses and light-duty trucks. We will need to address additional markets and expand our customer demographic in order to further grow our business. In particular, we intend the Class 5 and Class 6 ZEUS vehicles to appeal to the larger day-delivery medium-duty vehicle customers, which is a much larger and different demographic from that our Class 4 vehicle. Successfully offering a vehicle in this vehicle class requires delivering a vehicle with a higher standard of fit and size than currently exists in the Class 4, at a price that is competitive with other larger vehicles. We have not completed the design, component sourcing or manufacturing process for the Class 5 and Class 6 vehicles, so it is difficult to forecast its eventual cost, manufacturability or quality. Therefore, there can be no assurance that we will be able to deliver a vehicle that is ultimately competitive in the premium sedan class. Our failure to address additional market opportunities would harm our business, financial condition, operating results and prospects.
If we are unable to address the service requirements of our current and future customers or if there is inadequate access to charging stations, our business will be materially and adversely affected.
Demand for our EV buses and trucks will depend in part on the availability of service providers and charging infrastructure. Servicing electric vehicles is different than servicing internal combustion engine or hybrid vehicles and requires specialized skills, including high voltage training and servicing techniques. Our vehicles also require the use of charging stations to recharge its batteries. While the prevalence of charging stations has been increasing, charging station locations are significantly less widespread than gas stations. We currently partner with third-party service providers to maintain and repair the Zeus buses and trucks and with third-party electric vehicle charging station providers to offer installation of charging stations to our customers. If we are unable to satisfactorily service our current and future customers or provide seamless access to charging infrastructure, our ability to generate customer loyalty, grow our business and sell Zeus vehicles could be impaired.
Our future growth depends upon our ability to maintain relationships with our existing suppliers and source suppliers for our critical components, and to complete building out our supply chain, while effectively managing the risks due to such relationships.
Our success will be dependent upon our ability to maintain and expand our relationships with suppliers who are critical and necessary to the output and production of our vehicles. We also rely on a small group of suppliers to provide us with the components for our vehicles. The supply agreements we have or may enter into with key suppliers in the future may have provisions where such agreements can be terminated in various circumstances, including potentially without cause. If these suppliers become unable to provide, or experience delays in providing, components, or if the supply agreements we have in place are terminated, it may be difficult to find replacement components. Changes in business conditions, pandemics, governmental changes and other factors beyond our control or that we do not presently anticipate could affect our ability to receive components from our suppliers.
Further, we have not secured supply agreements for all of our components. In addition, there is the possibility that finalizing the supply agreements for the parts and components of our vehicles will cause significant disruption to our operations, or such supply agreements could be at costs that make it difficult for us to operate profitably.
If we do not enter into long-term supply agreements with guaranteed pricing for our parts or components, we may be exposed to fluctuations in prices of components, materials and equipment. Agreements for the purchase of battery cells typically contain pricing provisions that are subject to adjustment based on changes in market prices of key commodities. Substantial increases in the prices for such components, materials and equipment would increase our operating costs and could reduce our margins if we cannot recoup the increased costs. Any attempts to increase the announced or expected prices of our vehicles in response to increased costs could be viewed negatively by our potential customers and could adversely affect our business, prospects, financial condition or operating results.
We expect to require continued capital investment.
The design, manufacture and sale of electric vehicles is a capital-intensive business. Although we anticipate that the funding from this offering will provide sufficient capital, our business plan to design, produce, sell and service commercial electric buses, vans and trucks, including the EZ Zeus autonomous bus, is expected to require continued capital investment to fund operations, to continue research and development and to improve infrastructure. Unlike established EV automotive manufacturers that have greater financial resources than we do, there can be no assurance that we will have access to the capital we need on favorable terms when required or at all. If we cannot raise additional funds when we need them, our financial condition and business could be materially adversely affected.
Phoenix’s business requires highly technically skilled personnel, for whom Phoenix must compete for employment.
Phoenix’s manufacturing and research and development require highly skilled electrical, mechanical, and software engineers. Competition for employment of such individuals is intense, and Phoenix’s ability to
attract and retained and retaining them is essential to continuing its business. Growth of Phoenix’s business will depend upon its ability to compete for increasing numbers of such employees, and there can be no assurance that Phoenix will be able to do so. Our inability to attract and retain key personnel may materially and adversely affect our business operations. Any failure by our management to effectively anticipate, implement and manage the changes required to sustain our growth would have a material adverse effect on our business, financial condition and results of operations.
We will also need to hire and train a significant number of hourly employees to expand our commercial manufacturing operations. Furthermore, in the event employees hired by us seek to join or form a labor union, we could be subject to risks as we engage in an attempt to finalize negotiations with any such union, including potential work slowdowns or stoppages, delays and increased costs. If we are unsuccessful in hiring and training an expanded workforce in a timely and cost-effective manner, our business, financial condition and results of operations could be adversely affected.
We face various challenges in scaling manufacturing, assembling, and converting processes effectively and quickly from low volume production to high volume production for our third-generation drivetrain products.
We have no experience to date in high volume manufacturing, assembling, and converting to commercial electric vehicles. Our existing production model utilizing third party vendors for our third-generation products currently offered to customers may not be well suited for high-volume production to scale our business. We do not know whether we will be able to develop efficient, low-cost manufacturing, assembly and converting capability and processes, and reliable sources of component supply that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes we target. Any failure to develop such manufacturing, assembly and converting processes and capabilities and reliable sources of component supply within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition. Even if we are successful in developing our high-volume manufacturing, assembly and converting capability and processes, and reliable sources of 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 and vendors, or in time to meet our commercialization schedules or to satisfy the requirements of customers. In addition, certain components we integrate may not be available on a consistent basis or in large quantities. Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain or if we cannot obtain materials of sufficient quality at reasonable prices.
The complexity in our business is expected to grow as we develop new products and services. We have limited experience in simultaneously designing, testing, manufacturing, upgrading, adapting and selling our electric drivetrains as well as limited experience allocating our available resources among the design and production of multiple electric drivetrains. As we add complexity to our product line and introduce new products and services, we may experience unexpected delays.
If we are unable to scale our existing assembly processes and systems quickly while maintaining our current quality level, including as a result of supply chain constraints and inability to manage complexity in our business, we may be unable to meet our customers’ vehicle quality and quantity requirements or our forecasted production schedule or lower our cost of sales. As a result, we may not be able to meet our customers’ delivery schedules and could face the loss of customers, or be exposed to liability to customers to which we promised delivery, which could adversely affect our business, prospects, financial condition and operating results.
If we fail to scale our business operations or otherwise manage future growth effectively as we attempt to rapidly grow our company, we may not be able to produce, market, service and sell our vehicles profitably or successfully.
We are targeting significant future growth in our Zeus product line to include Class 5 and 6 vehicles and the EZ Zeus autonomous driving vehicle. Any failure to plan and manage our growth effectively could materially and adversely affect our business, prospects, operating results or financial condition. Our future operating results depend to a large extent on our ability to plan and realize our expansion and growth successfully. We cannot assure that we will be able to design and develop efficient, automated, low-cost
manufacturing capabilities and processes, and reliable sources of component supply, that will enable us to meet our planned quality, price, engineering, design and production goals and standards, as well as the production volumes, required to profitably market our vehicles.
We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We will be required to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our prospective customers. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our business, financial condition and operating results.
We may be unable to adequately control the costs or maintain adequate supply of components associated with our operations.
We may be unable to adequately control the costs associated with our operations. We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. The prices for these raw materials fluctuate depending on factors beyond our control. Our business also depends on the continued supply of battery cells for our vehicles. We are exposed to multiple risks relating to availability and pricing of quality lithium-ion battery cells.
Furthermore, currency fluctuations, tariffs or shortages in petroleum or other raw materials and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs, and could reduce our margins. In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages, which would result in increased costs in raw materials to us or impact our prospects.
We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of our vehicles and components and our business, revenues and prospects.
Our business and prospects heavily depend on our ability to develop, maintain and strengthen our brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a larger base of customers. Our ability to develop, maintain and strengthen our brand will depend heavily on the success of our marketing efforts. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Our current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Our electric vehicles will compete for market share with vehicles powered by other vehicle technologies that may prove to be more attractive than our vehicle technologies.
Our bus and light and medium-duty truck market currently is serviced by many manufacturers with existing customers and suppliers using proven and widely accepted fuel technologies. Additionally, our competitors are working on developing technologies that may be introduced in our target market. If any of these alternative technology vehicles can provide lower fuel costs, greater efficiencies, greater reliability or otherwise benefit from other factors resulting in an overall lower total cost of ownership, this may negatively affect the commercial success of our vehicles or make our vehicles uncompetitive.
We may be unable to keep up with changes in electric vehicle technology as new entrants and existing, larger manufacturers enter the electric vehicle space.
Our Zeus line of buses and trucks are designed for use with, and is dependent upon, existing electric vehicle technology. As new companies and larger, existing vehicle manufacturers enter the electric vehicle space, we may lose any technological advantage we may have had in the marketplace and suffer a decline in our position in the market. As technologies change, we plan to upgrade or adapt our products to continue to provide products with the latest technology. However, our products may become obsolete or our research and development efforts may not be sufficient to adapt to changes in or to create the necessary technology to effectively compete. As a result, our potential inability to adapt to and develop the necessary technology may harm our competitive position.
If our vehicles fail to perform as expected, our ability to develop, market and sell or lease our electric vehicles could be harmed.
If our vehicles were to contain defects in design and/or manufacture that cause them not to perform as expected or that require repair, our ability to develop, market and sell or lease our vehicles could be harmed. For example, the operation of our vehicles is highly dependent on software that will require modification and updates over time. Software products are inherently complex and often contain defects and errors when first introduced. We currently have a limited frame of reference by which to evaluate the long-term quality, reliability and performance characteristics of our buses, trucks, battery packs and other products. There can be no assurance that we will be able to detect and repair any defects in our products before commencing the sale of our vehicles. Any product defects or any other failure of our vehicles to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims or significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
We are relying on third-party suppliers to develop a number of advanced technologies for use in our products, including lithium-ion battery technology.
There can be no assurances that our suppliers, including our lithium-ion battery supplier, will be able to meet the technological requirements, production timing and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects and results of operations.
Our success may be dependent on our development and protection of intellectual property rights.
We rely on confidentiality and trade secret protections to protect our proprietary technology. All new EV drivetrain and technical developments by us will be owned by us. Our success will, in part, depend on our ability to obtain patents and trademarks and protect our trade secrets and proprietary technology. We are currently maintaining our engineering under confidentiality agreements and other agreements to preserve our trade secrets and other proprietary technology. Although we have entered into confidentiality agreements with our employees, consultants and contractors, our agreements may not adequately protect our intellectual property, particularly with respect to conflicts of ownership relating to work product generated by our employees, consultants and contractors, and we cannot be certain that others will not gain access to our trade secrets and other proprietary technology. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.
Risks Relating to Regulation and Claims
Product liability or other claims could have a material adverse effect on our business.
The risk of product liability claims, product recalls and associated adverse publicity is inherent in the manufacturing, marketing and sale of all vehicles, including electric vehicles. Although we have liability insurance policies in place, that insurance may be inadequate to cover all potential product claims. Any product recall or lawsuit seeking significant monetary damages either in excess of our coverage, or outside
of our coverage, may have a material adverse effect on our business and financial condition. We may not be able to secure additional liability insurance coverage on acceptable terms or at reasonable costs when needed or at all. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product recall could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of other future product candidates. We cannot provide assurance that such claims and/or recalls will not be made in the future.
Regulatory requirements may have a negative effect upon our business.
All vehicles sold must comply with international, federal and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Our Zeus buses and trucks are subject to substantial regulation under federal, state and local laws and standards. These regulations include those promulgated by the U.S. EPA, the National Highway Traffic Safety Administration (“NHTSA”), the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and various state boards, and compliance certification is required for each new model year. These laws and standards are subject to change from time to time and we could become subject to additional regulations in the future. In addition, federal, state and local laws and industrial standards for electric vehicles are still developing. Compliance with these regulations could be challenging, burdensome, time consuming and expensive. If compliance results in delays or substantial expenses, our business could be adversely affected.
We may be exposed to liability for infringing upon other companies’ intellectual property rights.
Our success, in part, is dependent on our ability to operate without infringing on others’ proprietary rights. While we are not aware of any patents and trademarks which would cause our products or their use to infringe the rights of any third parties, we cannot be certain that infringement has not or will not occur. We could incur substantial costs, in addition to a great amount of time lost, in defending any patent or trademark infringement suits or in asserting any patent or trademark rights in a suit with another party.
Changes in laws or regulations, or a failure to comply with any laws and regulations, or any litigation that we may be subject to or involved in may adversely affect our business, investments and results of operations.
We are subject to laws, regulations and rules enacted by national, regional and local governments and the Nasdaq Stock Market on which we are applying for our securities to be listed. In particular, we will be required to comply with certain SEC, Nasdaq and other legal and regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.
We may be compelled to undertake product recalls or take other actions, which could adversely affect our business, prospects, operating results, reputation and financial condition.
Any product recall in the future may result in adverse publicity, damage our reputation and adversely affect our business, prospects, operating results and financial condition. In the future, we may, voluntarily or involuntarily, initiate a recall if any of our electric vehicles or components (including our battery cells) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. Such recalls, whether caused by systems or components engineered or manufactured by us or our suppliers, would involve significant expense and diversion of management’s attention and other resources, which could adversely affect our brand image in our target market and our business, prospects, financial condition and operating results.
Insufficient warranty reserves to cover future warranty claims could adversely affect our business, prospects, financial condition and operating results.
Our ZEUS EVs are sold with warranties, and as a result we need to maintain warranty reserves to cover any warranty-related claims. If our warranty reserves are inadequate to cover such future warranty
claims, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.
Risks Related to this Offering and Ownership of our Common Stock
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission, or SEC, and the NASDAQ Stock Market. In addition, our management team will also have to adapt to the requirements of being a public company. We expect complying with these rules and regulations will substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly.
The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating results.
As a public company, we also expect that it may be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
Concentration of ownership among our existing principal stockholder, executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.
Upon completion of this offering, our executive officers, directors, principal shareholders and their affiliates will beneficially own, in the aggregate, approximately [ ]% of our outstanding shares of common stock. In particular, EdisonFuture, Inc., a subsidiary of SPI Energy, Ltd, which currently owns 100% our common stock, will beneficially own approximately[ ]% of our outstanding shares of common stock upon completion of this offering. As a result, these stockholders will be able to exercise effective control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
As a result, upon completion of this offering we will be “Controlled Company,” or a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company, under The Nasdaq Stock Market (“Nasdaq”) rules. “Controlled Companies” may elect not to comply with certain Nasdaq corporate governance requirements, including regarding independence of their directors and board committees. Currently, we have elected to not take advantage of these exemptions and are subject to the same governance standards as companies that are not “controlled companies.”
As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of this offering. This assessment will need to include
disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our auditors have issued an attestation report on effectiveness of our internal controls.
We are in the very early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and may not be able to remediate any or all material weaknesses. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.
An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment.
Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common stock will be determined through negotiation with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares of common stock following this offering. In addition, the trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
A total of , or %, of our total outstanding shares after the offering are restricted from immediate resale, but may be sold on a stock exchange in the near future. The large number of shares eligible for public sale or subject to rights requiring us to register them for public sale could depress the market price of our common stock.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after this offering, and the perception that these sales could occur may also depress the market price of our common stock. Based on 70 million shares of common stock outstanding as of September 30, 2021, we will have [ ]shares of common stock outstanding after this offering. Of these shares, the common stock sold in this offering will be freely tradable in the United States, except for any shares purchased by our “affiliates” as defined in Rule 144 under the Securities Act of 1933. The holders of 70 million[ ]shares of outstanding common stock have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock during the 180-day period beginning on the date of this prospectus, except with the prior written consent of the underwriters. After the expiration of the 180-day restricted period, these shares may be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S. registration, including, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144.
Number of Shares and % of
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Immediately after this offering.
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180 days after the date of this prospectus due to contractual obligations and lock-up agreements between the holders of these shares and the underwriters. However, the underwriters can waive the provisions of these lock-up agreements and allow these stockholders to sell their shares at any time, provided their respective one-year holding periods under Rule 144 have expired.
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From time to time after the date 180 days after the date of this prospectus upon expiration of their respective one-year holding periods in the U.S.
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Upon completion of this offering, stockholders owning an aggregate of shares [(including stock options)] will be entitled, under contracts providing for registration rights, to require us to register shares of our common stock owned by them for public sale in the United States. In addition, we intend to file a registration statement to register the approximately shares reserved for future issuance under our equity compensation plans. Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and, in certain cases, lock-up agreements with the representatives of the underwriters referred to above, the shares of common stock issued upon exercise of outstanding options will be available for immediate resale in the United States in the open market.
Sales of our common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our common stock.
Provisions in our amended and restated certificate of incorporation, our by-laws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Provisions of our amended and restated certificate of incorporation, our by-laws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:
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the inability of stockholders to call special meetings; and
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the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors.
The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The anticipated initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $ in the net tangible book value per share from the price you paid. In addition, following this offering, purchasers in the offering will have contributed % of the total consideration paid by our stockholders to purchase
shares of common stock, in exchange for acquiring approximately % of our total outstanding shares as of [ ], 2021 after giving effect to this offering. The exercise of outstanding stock options will result in further dilution.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.
Our management will have broad discretion over the use of our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures, which may in the future include investments in, or acquisitions of, complementary businesses, services or technologies. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.
After the completion of this offering, we do not expect to declare any dividends in the foreseeable future.
After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our shares of common stock.
Any additional financing that we secure, may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock. We cannot be certain how the repayment of those promissory notes will be funded and we may issue further equity or debt in order to raise funds to repay the promissory notes, including funding that may be highly dilutive. The holders of any securities or instruments we may issue may have rights superior to the rights of our common stockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over holders of our common stock, it may negatively impact the trading price of our shares of common stock and you may lose all or part of your investment.
A possible “short squeeze” due to a sudden increase in demand of our common stock that largely exceeds supply may lead to further price volatility in our common shares.
Investors may purchase our common stock to hedge existing exposure in our common stock or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase in the open market, investors with short exposure may have to pay a
premium to repurchase our common stock for delivery to lenders of our common stock. Those repurchases may in turn, dramatically increase the price of our common stock until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common stock that are not directly correlated to the performance or prospects of our company and once investors purchase the shares of common stock necessary to cover their short position the price of our common stock may decline.
As an “emerging growth company” under the JOBS Act, we are allowed to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ordinary shares.
For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:
•
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
•
not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;
•
not being required to comply with any requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and our financial statements;
•
reduced disclosure obligations regarding executive compensation; and
•
not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.
In addition, we may delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to those of companies that comply with public company effective dates.
We intend to take advantage of these exemptions until we are no longer an “emerging growth company.” We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceed $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
After we are no longer an “emerging growth company,” we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
General Risk Factors
Economic conditions could adversely affect our business.
Uncertain global economic conditions, in particular in light of the COVID-19 pandemic, could adversely affect our business. Negative global economic trends, such as decreased consumer and business spending, high unemployment levels and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability and cash flow. Although we continue to devote significant resources to support our brands, unfavorable economic conditions may negatively affect demand for our products.
Litigation may adversely affect our business, financial condition and results of operations.
From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations. Since inception, the Company has not been a party to any material litigation.
We have and may continue to be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic.
The 2019 novel coronavirus (“COVID-19”), which is widely acknowledged as having originated in Wuhan, China has since spread throughout the United States and globally. Our business, results of operations, and financial condition have been, and may continue to be, adversely impacted in material respects by COVID-19 and by related government actions (including declared states of emergency and quarantine, “shelter in place” orders, or similar orders), non-governmental organization recommendations, and public perceptions, all of which have led and may continue to lead to disruption in global economic and labor markets. These effects have had a significant impact on our business, including reduced demand for our products and workforce solutions, early terminations or reductions in projects, hiring freezes, and a shift of a portion of our workforce to remote operations, all of which have contributed to a decline in revenues and other significant adverse impacts on our financial results. Other potential impacts of COVID-19 may include continued or expanded closures or reductions of operations with respect to our supplier partners’ and customer operations or facilities, the possibility our customers will not order and will not be able to pay for our products, or that they will attempt to defer payments owed to us, either of which could materially impact our liquidity, the possibility that the uncertain nature of the pandemic may not yield the increase in certain of our workforce solutions that we have historically observed during periods of economic downturn, and the possibility that various government-sponsored programs to provide economic relief may be inadequate. Further, we may continue to experience adverse financial impacts, some of which may be material, if we cannot offset revenue declines with cost savings through expense-related initiatives, human capital management initiatives, or otherwise.
Some of our suppliers and partners also experienced temporary suspensions before resuming. Reduced operations or closures at government offices, motor vehicle departments and municipal and utility company inspectors have resulted in challenges in or postponements for our vehicle manufacturing and sales. Global trade conditions and consumer trends may further adversely impact us and our industries. For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. Sustaining our production will require the readiness and solvency of our suppliers and vendors, a stable and motivated production workforce and ongoing government cooperation.
We cannot predict the duration or direction of current global trends, the sustained impact of which is largely unknown, is rapidly evolving and has varied across geographic regions. Ultimately, we continue to
monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly. If current global market conditions continue or worsen, or if we cannot or do not maintain operations at a scope that is commensurate with such conditions or are later required to or choose to suspend such operations again, our business, prospects, financial condition and operating results may be harmed.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
MARKET, INDUSTRY AND OTHER DATA
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our services. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third party information and cannot assure you of its accuracy or completeness. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $ , based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares, we estimate that we will receive an additional $ million in net proceeds.
A $1.00 increase (decrease) in the assumed initial public offering price of $ would increase (decrease) the net proceeds to us from this offering by $ .
We intend to use the net proceeds from this offering to invest in our technology, research and development efforts, obtain, maintain, expand our intellectual property portfolio and provide funding for working capital and other general corporate purposes. Pending specific utilization of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term investment grade and U.S. government securities.
DIVIDEND POLICY
We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings, if any, to fund the development and growth of our business.
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2021:
•
On an actual basis; and
•
On a pro forma as adjusted basis, to give further effect to (i) the sale of shares of common stock by us in this offering at the initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
|
|
|
|
As of September 30, 2021
(USD ‘000)
|
|
|
|
|
|
Actual
|
|
|
As adjusted
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
5,976
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks, par value $0.0001, 450,000,000 shares authorized, 70,000,000 issued and outstanding, as adjusted, respectively
|
|
|
|
$
|
7
|
|
|
|
|
|
|
Subscription receivable
|
|
|
|
$
|
(7)
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
$
|
26,082
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
$
|
(7,619)
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
|
$
|
18,463
|
|
|
|
|
|
|
Total capitalization
|
|
|
|
$
|
18,463
|
|
|
|
|
|
The number of shares of our common stock outstanding set forth in the table above excludes:
•
10,275,000 shares of common stock issuable upon the exercise of outstanding options and warrants at a weighted average exercise price of $0.43 per share; and
DILUTION
“Net tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided by the total number of shares outstanding on September 30, 2021 After giving pro forma effect to the conversion of our outstanding shares of preferred stock into shares of common stock immediately prior to the closing of this offering, our pro forma net tangible book value on September 30, 2021 was approximately $ million, or $ per share.
After giving effect to our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discounts and offering expenses payable by us, the pro forma as adjusted net tangible book value as of September 30, 2021 would have been $ , or $ per share. This represents an immediate increase in pro forma net tangible book value of $ per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of $ per share to investors purchasing shares of common stock in this offering at the assumed public offering price.
The following table illustrates this dilution:
|
|
Assumed public offering price per share
|
|
|
|
$
|
|
|
|
|
|
Pro forma net tangible book value per share as of September 30, 2021
|
|
|
|
$
|
|
|
|
|
|
Increase in pro forma net tangible book value per share attributable to the offering
|
|
|
|
$
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share as of September 30, 2021 after the offering
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors in the offering
|
|
|
|
$
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the pro forma net tangible book value by , the pro forma net tangible book value per share after this offering by $ per share and the dilution in pro forma net tangible book value per share to investors in this offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us. If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors. If any shares are issued in connection with outstanding options, you will experience further dilution.
The following table presents, on a pro forma basis as of September 30, 2021, the differences between the existing stockholders and the new investors purchasing our common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of common stock, cash received from the exercise of stock options and the average price per share paid or to be paid to us at the public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses:
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average
Price Per
Share
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Existing stockholders
|
|
|
|
|
|
|
|
%
|
|
|
|
$
|
|
|
|
|
%
|
|
|
|
$
|
|
|
New investors
|
|
|
|
|
|
|
|
%
|
|
|
|
$
|
|
|
|
|
%
|
|
|
|
$
|
|
|
Total
|
|
|
|
|
|
|
|
%
|
|
|
|
$
|
|
|
|
|
%
|
|
|
|
|
|
Assuming the underwriters’ option to purchase additional shares is exercised in full, sales in this offering will reduce the percentage of shares held by existing stockholders to % and will increase the number of shares held by our new investors to shares, or %, assuming no purchases of our common stock by existing stockholders in this offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of Phoenix’s financial condition and results of Phoenix’s operations together with its consolidated financial statements and the notes thereto appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting Phoenix’s current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors”, “Cautionary Statement regarding Forward-Looking Statements” and elsewhere in this prospectus.
Basis of Presentation
On November 12, 2020, EdisonFuture, Inc. (“EdisonFuture”), a Delaware corporation wholly owned by SPI Solar, Inc., which is a wholly owned subsidiary of SPI Energy Co., Ltd (“SPI”), acquired 100% of the membership interest of Phoenix Cars, LLC (“PCL”) and Phoenix Motorcars Leasing, LLC. (“PML”)(the “Business Combination”). Simultaneously, EdisonFuture effected the transfer of 100% membership interests of PCL and PML to Phoenix. The acquisition has been accounted for under ASC 805 Business Combinations. For the purposes of the consolidated financial data included in this prospectus, periods on or prior to November 12, 2020 reflect the financial position, results of operations and cash flows of the Company and its consolidated subsidiaries prior to the Business Combination, referred to herein as the Predecessor, and periods beginning after November 12, 2020 reflect the financial position, results of operations and cash flows of the Company after the Business Combination, referred to herein as the Successor. As a result of the Business Combination, the results of operations and financial position of the Predecessor and Successor are not directly comparable because of the application of the acquisition method during purchase accounting, which required a step up in basis of our assets and liabilities from their historical carrying values to fair value on the date of the Business Combination.
Following Business Combination, Phoenix become a holding company whose sole material asset consist of PCL and PML unites, and cash. Phoenix is the managing member of PCL and PML, and will be responsible for all operational, management and administrative decisions relating to PCL and PML’s business.
The unaudited historical interim financial data as of September 30, 2021 (Successor) and for each of the nine months ended September 30, 2021 (Successor) and September 30, 2020 (Predecessor) have been derived from our unaudited condensed consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements as of December 31, 2020 (Successor), November 12, 2020 (Predecessor) and December 31, 2019 (Predecessor).
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.
•
Covid-19 Impact. On January 30, 2020, the World Health Organization declared the COVID-19 outbreak, a “Public Health Emergency of International Concern” and, on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate its spread have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which we operate. On March 27, 2020, the CARES Act was enacted to, among other provisions, provide emergency assistance for individuals, families and businesses affected by the COVID-19 pandemic. As the COVID-19 pandemic continues to evolve, the ultimate extent of the impact on our businesses, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. The COVID-19 pandemic has resulted in government authorities’ implementing numerous measures to try to contain the virus, such as travel bans and
restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures have adversely impacted our employees’ ability to collaborate in a discipline that requires a high degree of collaborative work. Our operations have had to change and adapt to meet these new demands. However, various aspects of our business cannot be conducted remotely, including manufacturing and testing of our EVs. Further, our ability to hire, onboard and train new employees has been impacted and has required us to evaluate areas of our business that will not result in the best use of our human capital for long-term growth. The spread of COVID-19 has also caused us and many of our contractors and service providers to modify our business practices (including employee travel, recommending that all non-essential personnel work from home and cancellation or reduction of physical participation in testing activities, meetings, events and conferences), and, collectively with our contractors and service providers, we have been and may further be required to take actions as required by government authorities or that we determine are in the best interests of our employees, customers, suppliers, vendors and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of our workforce or contractors and service providers are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with the COVID-19 pandemic, our operations will be impacted. These factors related to COVID-19 are beyond our knowledge and control and, as a result, at this time, we are unable to predict the ultimate impact, both in terms of severity and duration, that the COVID-19 pandemic will have on our business, operating results, cash flows and financial condition, but it could be material if the current circumstances continue to exist for a prolonged period of time.
•
Product Development and Scaling. Our results are impacted by our ability to sell our electrification solutions and services to new and existing customers. We have had initial success with selling to our fleet customers. We believe continued reduction in costs, improvement in battery performance and increase in production volumes will enable commercial vehicle customers to adopt electrification more quickly. In order to sell additional products to new and existing customers, we will require substantial additional capital to develop our products and services, ramp up production and support expansion. We expect that both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we continue to invest in our technology, research and development efforts, obtain, maintain and improve our operational, financial and management information systems, hire additional personnel, obtain, maintain, expand and protect our intellectual property portfolio. Until we can generate sufficient revenue from vehicle sales, we expect to primarily finance our operations through funding from SPI, our parent company, proceeds from public or private stock offering, and/or debt financings, and potentially federal and state incentive funding programs. The amount and timing of our future funding requirements, will depend on many factors, including the pace and results of our research and development efforts and our ability to successfully manage and control costs and scale our operations. If we fail to make the right investment decisions in our technology and electrification solutions, including electrification and charging solutions, if customers do not adopt our technology or our products and services, or if our competitors are able to develop technology or products and services that are superior to ours, our business, prospects, financial condition, and operating results could be adversely affected.
•
BOM and Supply Chain. Purchased materials represent the largest component of cost of goods sold in our products and we continue to explore ways to improve cost structure of our products through better design, strategic alliances for sourcing, supply chain optimization, and, in some cases vertical integration. We believe that an increase in volume and additional experience will allow us to reduce our Bill of Materials (“BOM”), labor and overhead costs, as a percentage of total revenue. By reducing material costs, increasing facility utilization rates and improving overall economies of scale, we can reduce prices while maintaining or growing gross margins of our products to improve customers’ total cost of ownership and help accelerate commercial electric vehicle adoption. Our ability to achieve our cost-saving and production-efficiency objectives could be negatively impacted by a variety of factors including, among other things, lower-than-expected facility utilization rates, manufacturing and production cost overruns, increased purchased material costs, and unexpected supply chain quality issues or interruptions. If we are unable to achieve our goals, we may not be able to reduce price enough to accelerate commercial vehicle electrification, and our cost of goods sold
and operating costs could be greater than anticipated, which would negatively impact gross margin and profitability. Specifically, as a result of the COVID-19 pandemic, the operations of our suppliers, vendors and business partners have been impacted, and partially due to our capital constraints in year 2020 prior to Business Combination, which forced us to maintain raw material inventories at low levels, we have been experiencing significant delivery delays and supply shortages with BOM components — battery packs in particular. Although we have been working with our suppliers to mitigate the risks, we expect supply chain delays to continue to have a significant impact on our 2021 production and revenue and possibly thereafter.
•
Government Subsidies and Incentive Policies. With growing emphasis on improving air quality around our communities, large states like California are mandating key end user segments to switch to zero emission transportation options. Some of the key regulations driving growth in our addressable market include — requiring all transit buses in California to be zero emissions by 2040; requiring all airport shuttles in California to be all electric by 2035, requiring at least 50% of all medium-duty trucks sold in California to electric by 2030, requiring specific end user segments like drayage and yard trucks to go electric. Other states like New York, New Jersey and Massachusetts are also expected to bring in regulatory requirements for key end user segments like, transit agencies and school buses to switch to all electric transportation options. Fifteen other states including Connecticut, Colorado, Hawaii, Maine, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington have committed to follow California’s Advanced Clean Trucks Regulation. Primarily driven by the urgent need to meet carbon and greenhouse gas emission reduction targets, various state and federal agencies are also supporting the switch to zero emission transportation, providing a host of funding and incentive support to develop, demonstrate and deploy zero emission transportation solutions. Some of the key funding / incentives driving adoption of electric medium duty vehicles include: the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project, which offers a minimum of $60,000 per vehicle as incentive for Class 4 electric vehicles registered and operating in the state; the New York Truck Voucher Incentive Program offering up to $100,000 per Class 4 electric vehicle; funding from federal agencies like the Federal Transit Administration, covering up to 80% of the cost of procuring electric transit buses and various funding options covering up to 100% of the cost of procuring all electric school buses across key states. Federal and various state agencies have established incentives for setting up both public and private charging infrastructure. Notably, the California Energy Commission and the California Public Utilities Commission have approved funding up to 100% of the cost of setting up chargers and related infrastructure. Large utilities like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric have ‘Charge Ready’ programs that cover the entire cost of setting up charging infrastructure. Other states like New York, Chicago, North Carolina, Tennessee, Texas and Ohio have also introduced programs to support fleets with their charging infrastructure requirements.
Results of Operations
Our results of operations and statements of assets and liabilities may not be comparable to historical results as a result of the Business Combination, which was completed late in the fourth quarter of 2020.
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Predecessor
|
|
|
In thousands
|
|
|
Nine months
ended
September 30,
2021
|
|
|
|
Nine months
ended
September 30,
2020
|
|
|
Period from
November 13,
2020 to
December 31,
2020
|
|
|
|
Period from
January 1,
2020 to
November 12,
2020
|
|
|
For the Year
Ended
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
1,680
|
|
|
|
|
|
$
|
3,802
|
|
|
|
|
$
|
377
|
|
|
|
|
|
$
|
4,132
|
|
|
|
|
$
|
3,990
|
|
|
|
Cost of revenues
|
|
|
|
|
1,836
|
|
|
|
|
|
|
4,159
|
|
|
|
|
|
479
|
|
|
|
|
|
|
4,451
|
|
|
|
|
|
4,288
|
|
|
|
Gross loss:
|
|
|
|
|
(156)
|
|
|
|
|
|
|
(357)
|
|
|
|
|
|
(102)
|
|
|
|
|
|
|
(319)
|
|
|
|
|
|
(298)
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Predecessor
|
|
|
In thousands
|
|
|
Nine months
ended
September 30,
2021
|
|
|
|
Nine months
ended
September 30,
2020
|
|
|
Period from
November 13,
2020 to
December 31,
2020
|
|
|
|
Period from
January 1,
2020 to
November 12,
2020
|
|
|
For the Year
Ended
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
|
|
6,216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Total operating expenses
|
|
|
|
|
6,216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Operating loss
|
|
|
|
|
(6,372)
|
|
|
|
|
|
|
(3,191)
|
|
|
|
|
|
(1,249)
|
|
|
|
|
|
|
(4,005)
|
|
|
|
|
|
(5,679)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(2)
|
|
|
|
|
|
|
(139)
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
(300)
|
|
|
|
Other income
|
|
|
|
|
1
|
|
|
|
|
|
|
45
|
|
|
|
|
|
12
|
|
|
|
|
|
|
587
|
|
|
|
|
|
8
|
|
|
|
Total other (expense) income, net
|
|
|
|
|
(1)
|
|
|
|
|
|
|
(94)
|
|
|
|
|
|
8
|
|
|
|
|
|
|
583
|
|
|
|
|
|
(292)
|
|
|
|
Loss before income taxes
|
|
|
|
|
(6,373)
|
|
|
|
|
|
|
(3,285)
|
|
|
|
|
|
(1,241)
|
|
|
|
|
|
|
(3,422)
|
|
|
|
|
|
(5,971)
|
|
|
|
Income tax provision
|
|
|
|
|
(3)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
Net loss
|
|
|
|
$
|
(6,376)
|
|
|
|
|
|
$
|
(3,285)
|
|
|
|
|
$
|
(1,243)
|
|
|
|
|
|
$
|
(3,422)
|
|
|
|
|
$
|
(5,973)
|
|
|
|
Net loss per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
$
|
(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding*
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
Our revenues were primarily derived from sale and lease of EVs, and other revenue. Other revenue consists of maintenance service, sales of component and charging stations, shipping and delivery fees and others.
For the nine months ended September 30, 2021(Successor) and the nine months ended September 30, 2020 (Predecessor), our revenues were $1.7 million and $3.8 million, respectively. The decrease in revenues is mainly due to significant delivery delays and supply shortages with bill of materials — battery packs in particular.
For the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2019 (Predecessor), our revenues were $0.4 million, $4.1 million and $4.0 million, respectively. Our revenue breakdown by major categories for relevant periods is as follows:
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Nine months
ended
September 30,
2021
|
|
|
|
Nine months
ended
September 30,
2020
|
|
|
Period from
November 13,
2020 to
December 31,
2020
|
|
|
|
Period from
January 1,
2020 to
November 12,
2020
|
|
|
Year ended
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
Sales of EVs
|
|
|
|
$
|
796
|
|
|
|
|
|
$$
|
2,465
|
|
|
|
|
$
|
235
|
|
|
|
|
|
$
|
2,690
|
|
|
|
|
$
|
2,649
|
|
|
|
Lease of EVs
|
|
|
|
|
458
|
|
|
|
|
|
|
433
|
|
|
|
|
|
92
|
|
|
|
|
|
|
492
|
|
|
|
|
|
303
|
|
|
|
Others
|
|
|
|
|
426
|
|
|
|
|
|
|
904
|
|
|
|
|
|
50
|
|
|
|
|
|
|
950
|
|
|
|
|
|
1,038
|
|
|
|
|
|
|
|
$
|
1,680
|
|
|
|
|
|
$
|
3,802
|
|
|
|
|
$
|
377
|
|
|
|
|
|
$
|
4,132
|
|
|
|
|
$
|
3,990
|
|
|
Cost of Revenues
For the nine months ended September 30, 2021(Successor) and the nine months ended September 30, 2020 (Predecessor), our costs of revenues were $1.8 million and $4.2 million, respectively. The decrease in cost of revenues is consistent with the decrease in revenues.
For the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2019 (Predecessor), our costs of revenue were $0.5 million, $4.5 million and $4.3 million, respectively. Our costs of revenue consist primarily of direct parts, materials, labor, manufacturing overheads.
Operating Expenses
Operating expenses consist of selling, general, administrative expenses.
Our selling, general and administrative expenses which consist primarily of salaries, research and development, professional service fees, rent expense, and office supplies expenses.
For the nine months ended September 30, 2021(Successor) and the nine months ended September 30, 2020 (Predecessor), our operating expenses were $6.2 million and $2.8 million, respectively. The increase in operating expenses is mainly due to the increase in salaries and wages.
For the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2019 (Predecessor), were $1.1 million and $3.7 million, and $5.4 million, respectively.
Other (Expense) Income, net
Other (expense) income, net includes interest expense and other income.
Interest Expense, net
Our interest expense, net for nine months ended September 30, 2020 (Predecessor) were $0.1 million, primarily due to interest on related party borrowings.
Our interest expense, for the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor), were $4 thousand and $4 thousand, and $0.3 million, respectively.
Other income
Our other income for the nine months ended September 30, 2020(Predecessor), were $45 thousand, primarily due to a one-time sale of non-electric vehicles.
Our other income for the period from January 1, 2020 to November 12, 2020 (Predecessor) was $0.6 million, primarily due to recognition of a forgiven PPP loan.
Net Loss
As a result of the above factors, our net loss for nine months ended September 30, 2021(Successor) and the nine months ended September 30, 2020 (Predecessor) was $6.4 million and $3.3 million, respectively.
As a result of the above factors, our net loss for the periods from November 13, 2020 through December 31, 2020 (Successor), January 1, 2020 through November 12, 2020 (Predecessor), and the year ended December 31, 2019 (Predecessor) was $1.2 million, $3.4 million, and $6.0 million, respectively.
Critical Accounting Policies and Estimates
Principles of Consolidation
The consolidated financial statements include the financial statements of Phoenix Motor Inc., and its subsidiaries. All material inter-company transactions and balances have been eliminated upon consolidation.
Revenue Recognition
On January 1, 2019, we adopted Accounting Standards Codification (“ASC”) No. 606, “Revenue from Contracts with Customers” (“ASC 606” or “Topic 606”) and applied the modified retrospective method to all contracts that were not completed as of January 1, 2019. We have determined that the impact of the transition to the new standard is immaterial to our revenue recognition model. Accordingly, we have not made any adjustments to opening retained earnings and revenues for the nine months ended September 30, 2021 (Successor), the nine months ended September 30, 2020 (Predecessor), the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor) were presented under ASC 606.
Our accounting practices under ASC Topic 606 are as followings:
Sales of EVs
We generated revenue from sales of EVs and identified the customers who purchase the vehicle as our customers. EV buyers in California are entitled to government grants when they purchase EV that qualifies certain government grant project. We applied for and collected such government grants on behalf of the customers. Accordingly, customers only pay the amount after deducting government grants.
We recognize revenue on sale of EVs at a point in time following the transfer of control of such products to the customer, which typically occurs upon the delivery to the customer. We determined that the government grants should be considered as part of the transaction price because it is granted to the EV buyer and the buyer remains liable for such amount in the event the grants were not received by us or returned due to the buyer breaks the government grant terms and conditions.
Lease of EVs
EV leasing revenue included revenue recognized under lease accounting guidance for direct leasing programs. We accounted for these leasing transactions as operating leases under ASC 840 Leases, and revenues were recognized on a straight-line basis over the contractual term.
Other revenue
Other revenue consisted of maintenance service, sales of component and charging stations, shipping and delivery fees and others.
Inventories
Inventories are stated at the lower of cost or net realizable value (market value). The cost of inventories is determined on the basis of first in first out method. The cost of finished goods comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less selling expenses and any further costs expected to be incurred for completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances.
Accounts Receivables and Allowance for Doubtful Accounts
We grant open credit terms to credit-worthy customers. Accounts receivable are primarily related to sales of EVs and EV components. We maintain allowances for doubtful accounts. We regularly monitor and assess the risk of not collecting amounts owed by customers. This evaluation is based upon a variety of factors, including an analysis of amounts current and past due along with relevant history and facts particular to the customer. We do not have any off-balance-sheet credit exposure related to its customers.
Income Taxes
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.
We recognize in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, management presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. In addition, a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Our tax liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of the tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. We record interest and penalties related to an uncertain tax position, if and when required, as part of income tax expense in the consolidated statements of income. No reserve for uncertainty tax position was recorded by the Group during any period presented.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation processes for Level 3 fair value measurements; modifies certain disclosure requirements in Topic 820; and require additional disclosures such as the range and weighted average of significant unobservable inputs used to develop Level 3 measurements etc. ASU No. 2018-13 is effective for the Group beginning in the first quarter of fiscal year 2020. The Group adopted this ASU as of January 1, 2020 and it did not have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, the Group will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Group adopted this ASU as of January 1, 2020 and it did not have a material impact on its consolidated financial statements.
Accounting Pronouncements Issued But Not Yet Adopted
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases. Under the new lease accounting standard, a lessee will be required to recognize a right-of-use asset and lease liability for most leases on the balance sheet. The new standard also modifies the classification criteria and accounting for sales-type and direct financing leases, and enhances the disclosure requirements. Leases will continue to be classified as either finance or operating leases. In June 2020, ASU 2020-05, amendment to ASC Topic 842 modified the effective dates of all other entities. For all other entities, ASC Topic 842 is effective for fiscal years beginning after December 15, 2021. We are an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We are evaluating the impact of this guidance on its consolidated financial statements and the impact is not expected to be material.
In December 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not subject to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment to subsidiary or vice versa, 5) elimination of exception to intraperiod allocation when there is gain in discontinued operations and a loss from continuing operations, 6) treatment of franchise taxes that are partially based on income. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2021 and interim periods beginning after December 15, 2022. We are evaluating the impact of this guidance on its consolidated financial statements and the impact is not expected to be material.
We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of income and cash flows.
Liquidity and Capital Resources
As of September 30, 2021 and December 31, 2020, we had cash and cash equivalents of $6.0 million and $15.7 million, respectively. In assessing our liquidity and capital resources, we monitor and analyze our cash on-hand and our needs to meet our working capital requirements, investment in new products and technologies, as well as needs associated with improvement and expansion of existing manufacturing facilities, operating expenses, and general corporate purposes. We have historically funded our operation, capital expenditure and working capital requirements through borrowings from prior owner, payments received from customers, and in the year ended December 31, 2020, the Paycheck Protection Program (the “PPP loan”) under CARES Act. The Business Combination substantially boosted our liquidity due to a capital contribution in the amount of $17 million by SPI, which has supported our efforts to increase and optimize production and expand our current portfolio of products and services
We believe that our sources of existing cash and cash equivalents and funding and capital commitments provided in connection with the Business Combination and payments from customers will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months. However, as we continue to execute our business strategy and seek to ramp up production and intensify research and development efforts, additional funding may be required for a variety of reasons, including, but not limited to, delays in anticipated schedule to develop the ground-up chassis platform and the electric pickup truck. In addition, our budget projections may be subject to cost overruns for reasons outside of our control and it may experience slower sales growth than anticipated, which would pose a risk to our achieving certain cash flow and profitability goals. While we continue to evaluate our operational performance and requirements and continue to consider alternative operational schedules and opportunities, any significant changes to our current plans and projections could require us to seek more funding earlier than originally anticipated. If we are unable to generate sufficient cash flows from operations in the future, or fund availability as committed by SPI is not sufficient, or other factors beyond our control, including those described under “Risk Factors”, we may have to obtain additional equity or debt financing, or a combination of these potential sources of funds. The incurrence of indebtedness would result in increased fixed obligations and could result in significant financial and operating covenants that would restrict our operations. In the event that we need access to additional cash, we may not be able to access the equity or credit markets on commercially acceptable terms or at all.
A summary of the cash flow activities is as follows:
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Predecessor
|
|
|
|
|
|
Nine months
ended
September 30,
2021
|
|
|
|
Nine months
ended
September 30,
2020
|
|
|
Period from
November 13,
2020 to
December 31,
2020
|
|
|
|
Period from
January 1,
2020 to
November 12,
2020
|
|
|
For the Year
Ended
December 31,
2019
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
|
Net cash (used in) provided by operating activities
|
|
|
|
$
|
(9,612)
|
|
|
|
|
|
$
|
114
|
|
|
|
|
$
|
(1,434)
|
|
|
|
|
|
$
|
11
|
|
|
|
|
$
|
(3,334)
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(680)
|
|
|
|
|
|
|
(639)
|
|
|
|
|
|
(80)
|
|
|
|
|
|
|
(556)
|
|
|
|
|
|
(2,839)
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
569
|
|
|
|
|
|
|
738
|
|
|
|
|
|
16,985
|
|
|
|
|
|
|
744
|
|
|
|
|
|
6,015
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
(9,723)
|
|
|
|
|
|
|
213
|
|
|
|
|
|
15,471
|
|
|
|
|
|
|
199
|
|
|
|
|
|
(158)
|
|
|
Operating Activities
Nine months ended September 30, 2021 (Successor) and September 30, 2020 (Predecessor)
Net cash used in operating activities was $9.6 million for the nine months ended September 30, 2021, (Successor), primarily due to net operating loss and increase in prepaid expenses.
Net cash generated from operating activities was $0.1 million for the nine months ended September 30, 2020 (Predecessor), primary due to decrease in inventory and increase in accounts payable, partially offset by net operating loss.
For the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor)
Net cash used in operating activities was $1.4 million for the period from November 13, 2020 to December 31, 2020 (Successor), the decrease of cash was primarily as a result of (i) net loss of $1.2 million, adjusted by an add-back of non-cash depreciation and amortization in the amount of $0.4 million, (ii) increase in prepaid expenses and other assets of $0.3 million, (iii) decrease in accounts payable of $0.1 million.
Net cash generated from operating activities was $0.01 million for the period from January 1, 2020 to November 12, 2020 (Predecessor), the increase of cash was primarily as a result of (i) net loss of $3.4 million, adjusted by non-cash items of depreciation and amortization of $0.9 million and income from PPP loan forgiveness of $0.6 million, (ii) decrease in accounts receivable of $0.6 million, (iii) decrease in inventories of $1.8 million, (iv) increase in accounts payable of $0.3 million.
Net cash used in operating activities operating activities was $3.3 million for the period from the year ended December 31, 2019 (Predecessor), the decrease of cash was primarily as a result of (i) net loss of $6.0 million, adjusted by non-cash items of depreciation and amortization of $0.6 million and noncash expenses of $1.2 million (ii) increase in accounts receivable of $1.3 million, (iii) increase in inventories of $1.6 million; the decrease was partially offset by (i) decrease in prepaid expenses and other assets of $0.9 million, (ii) increase in accounts payable of $1.0 million, iii) increase in customer deposit of $1.6 million.
Investing Activities
Nine months ended September 30, 2021 (Successor) and September 30, 2020 (Predecessor)
Net cash used in investing activities was $0.7 million and $0.6 million for the nine months ended September 30, 2021 (Successor) and the nine months ended September 30, 2020 (Predecessor), respectively, primarily as a result of capital expenditure.
For the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor)
Net cash used in investing activities was $0.1 million for the period from November 13, 2020 to December 31, 2020 (Successor), primarily as a result of capital expenditure.
Net cash used in investing activities was $0.6 million for the period from January 1, 2020 to November 12, 2020 (Predecessor), primarily as a result of capital expenditure.
Net cash used in investing activities was $2.8 million for the year ended December 31, 2019 (Predecessor), primarily as a result of capital expenditure.
Financing Activities
Nine months ended September 30, 2021 (Successor) and September 30, 2020 (Predecessor)
Net cash generated from financing activities was $0.6 million and 0.7 million for the nine months ended September 30, 2021 (Successor) and for the nine months ended September 30, 2020 (Predecessor), respectively, primarily as a result of net proceeds received from PPP loan and other long-term borrowing.
For the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor)
Net cash generated from financing activities was $17.0 million for the period from November 13, 2020 to December 31, 2020 (Successor), primarily the proceeds of capital contribution from SPI.
Net cash generated from financing activities was $0.7 million for the period from January 1, 2020 to November 12, 2020 (Predecessor), primarily as result of net proceeds from PPP loan and other long-term borrowing.
Net cash generated in financing activities was $6.0 million for the year ended December 31, 2019 (Predecessor), primarily consisting of (i) a $1.2 million net proceeds from related party, (ii) a $4.8 million of member’s contribution.
Trend information
Our operating results substantially depend on revenues derived from our sales and leasing of EVs. As the COVID-19 spread continues, the measures implemented to curb the spread of the virus have resulted in supply chain disruptions, insufficient work force and suspended manufacturing and construction works for EV industry. In light of the rapidly changing situation across different countries and regions, it remains difficult to estimate the extent, duration and/or magnitude of COVID-19’s impact on our business. Given the globalized supply chain, recent flare-ups in COVID-19 infections in Asian and other countries have impacted the price and availability prospects of many EV products as well as shipping timing and costs, which create risks that may affect our business.
Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events for 2019 and 2020 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause reported consolidated financial information not necessarily to be indicative of future operating results or financial conditions.
Off-Balance Sheet Arrangements
Phoenix has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition or results of operations that are material to stockholders.
BUSINESS
Our History
Our predecessor entity was founded in 2003 as Phoenix MC, Inc., a Delaware corporation headquartered in Ontario, California. On November 13, 2020, EdisonFuture Inc., a Delaware corporation (“EdisonFuture”) wholly owned by SPI Solar, Inc, which is a wholly owned subsidiary of SPI Energy Co., Ltd, a Nasdaq listed public company, entered into Membership Interest Purchase Agreement with the third-party owner of the LLC interests in PCL and PML. As a result, all of the issued and outstanding membership interests in each of Phoenix Cars LLC, a Delaware limited liability company (“PCL”), and Phoenix Motorcars Leasing LLC, a California limited liability company (“PML”), were acquired by EdisonFuture. Simultaneously, EdisonFuture effected the transfer of 100% of the membership interests of PCL and PML to us, Phoenix Motor Inc., a Delaware corporation incorporated on October 20, 2020. On July27, 2021, EdisonFuture Motor, Inc., a wholly owned subsidiary of PMI, was established to focus on development of our pickup trucks and last mile utility vans business.
Doing business as “Phoenix Motorcars,” PCL manufactures and assembles our electric vehicles. PML sells and leases our EVs under the name, “Phoenix Electric Sales.”
We launched our first medium-duty electric drivetrain in 2009 and sold our first commercial EV in 2014. Los Angeles Air Force Base in El Segundo and NASA’s Jet Propulsion Laboratory in Pasadena, California are among our customers for our first generation E Series Zeus electric vehicle. In 2015, we began offering more body options on the Ford E450 chassis, delivering flatbed and work trucks to US Naval Base Ventura County Port Hueneme and the City of Irvine, California, respectively.
In 2016, we received an order for 33 of Zero Emissions Utility Shuttle (ZEUS) buses from WallyPark, Joe’s Airport Parking and Joe’s Auto Parks, subsidiaries of the L&R Group of Companies, a leader in the airport shuttle bus industry. Our14-passenger, fully electric ZEUS 300 buses were acquired to service airport parking at one of the nation’s busiest airports — Los Angeles International, where our fleet has grown to 39.
In 2018, we entered into a non-binding memorandum of understanding with Creative Bus Sales and Forest River, to build and distribute electric buses. The parties are jointly preparing to complete Altoona testing for the electric shuttle bus product, which would enable transit agencies to procure the vehicle with FTA funding. Through the nationwide dealer Creative Bus Sales, Phoenix has secured orders for 22 units to date and also listed on various state procurement contracts. Deliveries on the 22 units are expected to be completed in 2022 and are dependent on receipt of chassis from Creative Bus Sales, and successful completion of Altoona testing. In 2019, we launched our second generation (“Gen 2”) High Power Drive System for the Ford E450 chassis, the E-200. In April 2021, we began production on our third generation (“Gen 3”) drivetrains (E-300), featuring our new, made-in-USA modular battery packs, giving customers choices among 63 kWh, 94 kWh, 125 kWh, and 156 kWh batteries.
Industry Overview
Around the world, countries have announced target dates by which they would allow the sale of only zero emission vehicles (ZEVs) to accelerate the transition to a cleaner, electrified transportation sector. On August 5, 2021, President Biden signed an executive order setting a target for zero-emissions vehicles to account for half of all automobiles sold in the United States by 2030. In early 2021, President Biden signed an executive order mandating the replacement of all civilian federal vehicles, over 600,000 vehicles, with U.S.-made clean and zero-emission vans, trucks and passenger vehicles; meanwhile, the administration has also announced a goal of building more than 500,000 EV chargers across the United States and has expressed its support for an expansion of federal tax credits and incentives targeted at EVs and EV manufacturing. According to Grandview Research, the North American EV market is estimated at $16 billion in 2021 and is expected to grow to $148 billion in 2028. In 2020, 15 states, including California, Connecticut, Massachusetts, New Jersey, and Pennsylvania signed a memorandum of understanding to increase sales of zero emission new medium- and heavy- duty vehicles to 30% by 2030 and to 100% by 2050. California requires 100% of airport shuttle fleets and 75% of Class 4 through Class 8 truck sales to be zero-emission by 2035. EV100 is a global initiative bringing together 82 companies committed to accelerating the EV transition and making electric transport the new normal by 2030.
Examples of Announced Fleet Electrification Commitments:
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Retail
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Amazon
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2022: 10,000 electric delivery vans (short-term goal)
2030: 100,000 electric delivery vans total (long-term goal)
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Walmart
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2040: Zero emission vehicle fleet, including long-haul (6,000 trucks)
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Power
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Schneider Electric
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2030: 100% electric fleet (14,000 vehicles)
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Transportation
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Uber
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2030: 100% of rides take place in EVs in U.S., Canadian, and European cities
2040: 100% of rides take place in zero-emission vehicles, on public transit or with micro-mobility
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Delivery
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DHL
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2025: 70% of first- and last-mile delivery services with clean transport modes
2050: Reduce logistics-related emissions to zero
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FedEx
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2040: 100% global pickup and delivery (PUD) vehicle purchases electric
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Biotech
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Genentech
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2030: 100% electrification of sales fleet (1,300 vehicles) and commuter buses
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Municipal
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New York, New York
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2017: Only purchase Plug-in Hybrid EVs (PHEV) for non-emergency sedans going forward
2025: Add 2,000 EVs to NYC sedan fleet
2040: 100% electric MTA bus fleet
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New Jersey
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2024: At least 10% of new bus purchases will be zero emission buses
2026: At least 50% of new bus purchases will be zero emissions buses
2032: 100% of new bus purchases will be zero emissions buses
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Los Angeles, California
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2028: 100% ZEV vehicle conversions “where technically feasible” (2028: taxi fleet, school buses; 2035: urban delivery vehicles)
2035: 100% electrification of sanitation fleet through LA Department of Sanitation Commitment
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Houston, Texas
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2030: 100% EV non-emergency, light-duty municipal fleet
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Chicago, Illinois
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2040: 100% electric Chicago Transit Authority (CTA) bus fleet (1,850 buses)
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With these commitments, the number of electric buses and trucks in use could increase substantially in the near future, from approximately 2,000 in 2019 to 54,000 by 2025. Further, according to the North American Council for Freight Efficiency, the initial costs of electric trucks are expected to reach parity with diesel combustion vehicles in class 3 through 6 vehicles by 2030.
We believe that given the corporate fleet electrification commitments, together with increasing government incentives and stringent government regulations, the market for electric buses and trucks will experience substantial demand and significant growth in the foreseeable future. Other major factors that are contributing to the growth of the commercial EV market size include advancements in battery pack technologies and electric powertrains, accelerated investment in charging infrastructure, accelerated electrification of public transport fleets. Some of the regulations directly impacting the growth of our target segments include:
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California Air Resources Board Zero-Emission Airport Shuttle rule that requires fixed route airport shuttles serving the state’s 13 largest airports to transition to 100% zero-emission vehicles by 2035
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California Air Resources Board Innovative Clean Transit Regulation that sets a statewide goal for public transit agencies to gradually transition to 100% zero-emission bus (ZEB) fleets by 2040.
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California Air Resources Board Advanced Clean Fleet Rule proposal which requires that beginning in 2025, 50% of the total annual vehicle purchases by public agencies that do not solely serve low-population areas must be zero-emission vehicles, requiring mandates for certain fleets to start deploying electric vehicles and overall proposing that at least 50% of class 4 – 8 vehicles in the state of California be electric by 2030.
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Additionally, 15 states have signed an MOU to adopt California’s Clean Truck Rule.
While the current market penetration of electric commercial vehicles is low, the segment is expected to see significant growth. Phoenix is specifically targeting the medium-duty EV segment, particularly Class 4, 5 and 6 segments.
Battery Technology Momentum
Due to technological advancements and the production of EV batteries in large volumes, battery costs, have decreased significantly over the past decade, and prices continue to fall. These cost reductions significantly improve the total cost of ownership of EV vehicles as EV batteries are one of the most expensive parts of an electric vehicle.
As illustrated in a 2019 report by BloombergNEF, from 2010 to 2020, lithium-ion battery prices have fallen 88%, from $1,160 per kilowatt-hour (“kWh”) to $137 per kWh, primarily due to reduced manufacturing costs, lower cathode material prices and greater volumes of production, As investment in battery technology continues to increase as a result of OEMs’ allocating more capital to next-generation electric powertrain technology, this trend in battery cost reduction is expected to continue, achieving $150 per kWh as the US Department of Energy’s long-term goal for commercialization (see chart below for projected battery pack average costs below according to ACT research).
Industry Focused on TCO
In the highly competitive trucking industry, when choosing between truck models that meet their technical requirements, customers mainly base their purchasing decision on total cost of ownership
(“TCO”). TCO is the total cost of owning the vehicle through its lifecycle, including purchase price or lease payments, fuel costs, and service and maintenance expenses. According to ACT Research, traditionally, TCO for gasoline and diesel powered trucks, typically break down into cost of fuel (approximately 50%), purchase or lease payments (approximately 22%), and repairs and maintenance (approximately 28%).
Depending on prevailing fuel prices, gasoline and diesel fuel comprise 40% to 60% of TCO, exposing ICE fleet operators are exposed to volatility in their largest cost component, creating risk and uncertainty. Prices of Phoenix EVs range from $165,000 to $220,000, whereas prices of comparable traditional vehicles range from approximately $50,000 to $80,000. The cost difference is due to the incremental cost of electric drivetrain, including lithium-ion batteries, motors, inverter and control software, coupled with the relatively low volume of production, leading to higher overheads.
Although more expensive on initial purchase, we believe that our ZEUS electric vehicles will have a lower TCO over the useful life of a comparable bus or truck as:
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the cost of recharging batteries in our EVs is less than the price of gasoline or diesel fuel; and
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the repairs and maintenance of our EVs are less, as there are far fewer parts in the electric motor and drivetrain than in an internal combustion engine; fewer fluid changes are required; and regenerative braking extends the life of brake parts significantly.
Market Opportunities
Our target market is largely light and light and medium-duty buses and trucks. Vehicles that operate on fixed routes, have stop-and-go operations, maintain low average speeds, and are centrally maintained and fueled are ideal candidates for zero emission electric technologies.
Zero emission, light and medium-duty (MD) electric trucks are well on their way to becoming mainstream technology that will impact both the transportation and mobility sectors over the next two decades. However, innovations on light and medium-duty electric trucks have predominantly focused on adapting battery-electric drivetrains to conventional chassis designed for internal combustion engines (ICE). Given the relatively low volume demand for MD electric vehicles, early movers including Phoenix followed a similar approach and electrified ICE chassis available from manufacturers like Ford, Chevrolet, Freightliner etc. While efficient in addressing the niche markets, such a retrofit model results in electric trucks that continue to be less than optimal in terms of efficiency and cost, leading to limited adoption among fleet operators in the long term. Key drawbacks of available zero emission medium-duty vehicles include:
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Non-optimized chassis and body designs
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Limited operating range due to size and capacity of batteries
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Significantly reduced payload due to increased weight of battery packs
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High cost due to need for large battery packs required to accommodate the maximum range use cases, which are often the outliers
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Operational challenges due to high recharge time and lack of adequate charging infrastructure
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Operational challenges from conventional plug-in charging includes time constraints, safety concerns, driver errors, and refueling labor restrictions at ports.
By taking advantage of increasing EV demand boosted by government incentives, grants and regulations, as well as our leading technology, experience and expertise, and our strong relationships with dealers such as Creative Bus Sales and Forest River, we believe we are well positioned to capitalize on the commercial market opportunities.
Total Addressable Market
Regulatory tailwinds and a rapidly improving cost structure have accelerated the pace of adoption for electric vehicles, allowing operators to transition fleets to zero-emission standards in accelerated timelines. According to Bloomberg NEF, global commercial EV sales are expected to increase from 96,000 vehicles in
2020 to 473,000 vehicles in 2040, representing a nearly 500% increase over the next 20 years. We define our total addressable market based on our ability to compete on price and quality within the geographic regions we plan to compete in.
According to Electric Vehicle Outlook 2021 by BloombergNEF, the adoption of EVs in the commercial market is still low with over one million commercial EVs on the road, including buses, delivery vans and trucks compared to 12 million passenger EVs in use. The commercial EV market, which we believe is currently underserved, is projected to grow from a low base today to global sales of three million units by 2025 and nine million by 2030, led by buses and light trucks, representing significant growth opportunities.
Phoenix is focused on the medium-duty commercial EV market in the US. According to data sourced by Phoenix from IHS Markit, in 2019, medium duty (Class 4, 5, and 6) vehicles in the US accounted for around 202,000 units in sales. Phoenix management expects this segment to grow to approximately 272,000 units by 2030, of which 30% is projected to be powered by electric drivetrains, translating to an addressable market of approximately 81,000 units. an $11billion market. Phoenix is one of the few manufacturers delivering all-electric medium-duty vehicles today and we anticipate to address this market effectively through production capacity expansion and further investments in technology and new vehicle development.
Annual light duty electric vehicles sales globally are projected to grow from 2.5 million units in 2020 to 31.1 million units, by 2030, as per Deloitte Insights article ‘Electric Vehicles Setting Course for 2030,’ published in July 2020, securing approximately 32 per cent of the total market share for new car sales. Battery Electric Vehicles are projected to account for 25.3 million units. According to the report, the US is projected to account for 14 percent of the global market, approximately 4.2 million units and 27 percent of all new cars sales. With our EdisonFuture line of EVs, we aim to address this opportunity, starting with the all-electric pickup truck that is in concept development stage currently.
Our Competitive Strengths
In response to the market opportunities, we offer the following competitive strengths:
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Demonstrated Capabilities to Develop and Deliver Commercial EVs While Developing Next Generation Vehicles to Fuel Future Growth — Phoenix is in position to generate revenue today with its legacy business line (electric powertrains), and we will begin the sales and delivery in the [•] quarter of [•] of our charger business line, while also investing in the development of future technologies with the New Commercial Vehicle Platform Business line.
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Strong EV Development Experience and a One-Stop Shop Solution for Customers — For more than 12 years, Phoenix has developed electric drivetrains for our EVs. We are currently in production of our recently developed third-generation drivetrain, which includes the largest battery pack and longest electric range for any Class 4 product on the market, offering up to 160 miles in range. With over 3 million electric miles driven by its customers, Phoenix provides a one-stop shop for sales, product and route planning, charger requirements and installation, manufacturing, service support, as well as maintenance plans and training.
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Experienced and Proven Management Team — We have a well-rounded team with years of experience in the design and integration of electric drivetrain systems, hardware and software engineering capabilities, as well as proven telematics technical expertise, and senior management public company track record, supported by strong advisors and leading industry institutional investors.
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Key Relationships with OEMs, Customers and Dealerships — Phoenix has a deep customer base given it’s been in this market since 2014 with its first product deployment and establishment of customers across segments including the US Navy, US Air Force, JPL-NASA campus, airport shuttle buses, cities, municipalities, school districts, large corporates, seaports and small businesses. As of July 31, 2021 Phoenix has 31 customers who have deployed our range of electric shuttle buses and trucks. Phoenix also has agreements with the largest US dealership for shuttle buses and largest OEM for shuttle buses with Forest River. Phoenix is also building the first of its kind autonomous shuttle bus in collaboration with EasyMile.
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Optimized Production Supply Chain Catered to Class 4 Market — Our Class 4 EV customers benefit from customizations that are not possible with internal combustion engine vehicles. Our factory is
focused on low volume, high customization products through the vertical integration on a few parts and processes, a factory layout that supports multiple Class 4 production lines and a high level of purchased parts from an established network of US commercial vehicle manufacturing partners that allow for significant customization.
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Modular Software and Hardware Design — We have developed proprietary optimized modular software and hardware solutions and know-how that allow us to address the diversified opportunities in the markets we serve in a cost-effective manner. We serve a highly segmented Class 4 vehicle market where there are numerous specialty vehicles with significant mechanical and electrical complexities. Therefore, a one-size-fit-all design would likely fail in the face of the high degree of customization required. We have innovated in this space to create a vehicle class and application agnostic design enabled by modular software and hardware design. With a software-enabled platform and integration capabilities, we can bring vehicles across the class and application types to market faster and at a lower cost than our peers.
Phoenix has been developing medium-duty EVs since 2010 and delivered our first customer vehicle in 2014, establishing itself as a pioneer in commercial electric vehicles. Over the last six years we have developed and deployed for customers all-electric shuttle buses, utility trucks, service trucks, cargo trucks and flatbed trucks and combined these vehicles have accumulated over 3 million zero-emission miles. This differentiates us in the market where most commercial EV manufacturers are still in the prototype phase. We have gained significant experience and learnt from all the data gathered from the early deployments, translating these into design enhancements and innovations in our Gen-2 and Gen-3 drivetrain systems. As of July 31, 2021, we have deployed 96 Class 3 and 4 EVs, generating approximately $18 million in vehicle revenue since 2014, and our Gen-3 drivetrain offers a segment-leading battery warranty at 5 years / 150,000 miles and four different battery pack sizes, enabling customers to prioritize between payload, range and cost constraints. The commercial EV market has been in its early stages, and, since inception, the industry was challenged by limited market demand, high costs and investment. As demand grows and technology matures, costs of EVs are expected to reduce, while the environment for EVs becomes more conducive, with higher penetration of charging infrastructure, regulatory requirements, industry momentum and technology cost inflection points, in particular for on-board energy storage. By taking advantage of our proprietary technology, experience and expertise, EV demand boosted by government incentives, grants and regulations, and our strong relationships with dealers such as Creative Bus Sales and Forest River, we believe we are well positioned to address the commercial market opportunities.
Our Strategy
Strategies for EV business
We intend to be a leading designer, developer and manufacturer of electric vehicles and electric vehicle technologies. Key elements of our strategy include:
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Capitalize on increasing regulatory and customer demands for commercial emission free vehicles. We believe the commercial EV space is at a significant inflection point driven by multiple tailwinds including regulations, corporate mandates and state as well as federal grants. The growing supply chain maturity is also significantly increasing the economic attractiveness of EVs when compared with internal combustion vehicles. We have already capitalized on these trends for over a decade and will continue to aggressively pursue demand for increased EV adoption.
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Acquire new customers. By leveraging our strategic partners including Forest River and EasyMile, we will continue to win new customers and expand into new markets. In addition, despite a relatively small sales staff, we have been able to generate strong revenue growth and a large pipeline of customers. We also intend to bolster our sales staff as we grow to help improve our pipeline and acquire new customers for our business.
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Focus on current revenue generating business while also building for the future. Phoenix expects to leverage electric powertrain business lines, as well as our charger business line, to continue to grow our customer base and generate consistent revenue. Concurrently, Phoenix is investing in new technologies with purpose-built commercial chassis planned for introduction to the market by 2024.
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Broaden Our Class 4 Vehicle Product Line. We believe the continued growth and development of our Class 4 vehicle model ZEUS model with our new 4th generation drive train will be critical to our ability to capitalize on the electric vehicle market opportunity. We are currently executing a detailed plan to improve the design, engineering and component sourcing for the Class 4 product line and obtain the equipment to support its production.
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Increase Manufacturing Capacity and Develop Integrated Engineering and Manufacturing Capabilities. We intend to relocate to a new plant with greater production capacity and establish a substantially integrated electric vehicle manufacturing facility, allowing our design, vehicle engineering, and manufacturing teams to work alongside one another to streamline the feedback loop for rapid product enhancements and quality improvements. The engineering team is being expanded to support R&D work on the powertrain business line and development of our purpose-built ground up electric commercial vehicle platform.
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Expand our global channel relationships. We intend to continue building partnerships to accelerate the development and production of our solutions. Phoenix Motorcars’ strategic, engineering, production and technology partners augment our internal resources, and we intend to leverage their capabilities and infrastructure to bring our solutions to market more quickly and to meet industry standards, without requiring us to invest substantial amounts of capital.
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Leverage Industry Advancements in Battery Cells. We intend to leverage the substantial investments being made globally by battery cell manufacturers, as we have designed our powertrain technology to permit flexibility with respect to battery cell chemistry, form factor, drive time and distance, and vendor.
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Develop a purpose-built, ground-up, zero-emission, medium-duty platform. As part of our future product development, we plan to develop a purpose-built, ground-up, zero-emission, medium-duty platform that will overcome the abovementioned challenges by incorporating various technological innovations and applying advanced design approaches. This product line will be designed to be a world leader from both performance and cost perspective. that will overcome the abovementioned challenges by incorporating various technological innovations and applying advanced design approaches. This product line will be designed to be a world leader from both performance and cost perspective.
Strategies for EV Charging business
Creating an accessible public charging network will be essential to achieving wide-spread EV adoption. In the United States an infrastructure plan proposed in early 2021 would establish grant and incentive program to install 500,000 chargers, adding to about 100,000 existing charging points. Leading states such as California and New York offer subsidies and tax incentives and collaborate with electric utilities to promote EV deployment.
The primary focus of our EV charging strategy currently is to support our clients who are purchasing Zeus EV’s for their fleets. As a customer purchases a vehicle, we support their charging needs by offering them chargers for their facilities. We anticipate driving future revenues from our fleet customers by offering the following services:
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Charging Analytics: Through partnerships with fleet software providers, we will be able to collect and offer to our customers real time data from our charging stations that are powering fleet vehicles. This data is crucial in understanding the driving habits and vehicle performance, and most importantly, understanding charging times to improve charging habits and strategies. Having the ability to manage charging times and load balancing via a software platform will also allow fleet managers to better mitigate costs when charging their vehicles.
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Energy-as-a service: As fleet vehicle sales continue to grow, we expect that, in certain instances, our customers would need to rely on chargers that are deployed in public locations. We expect to build upon our wealth of experience within the EV infrastructure industry to develop programs with other industry participants, so that we can offer our clients better pricing at public charging stations that are operated by other companies, when they need to rely on public charging stations.
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Charging-as-a-service (ChaaS): As part of our ability to offer a charging station solution to our customers, we are developing and intend to implement our ChaaS offering. Our ChaaS offerings will provide a unique value-added proposition for our fleet customers, in which we manage the entire process of procuring, installing, operating and maintaining the charging equipment for our customers. We will continue to develop a number of different pricing models for our customers, which will include outright ownership of all infrastructure, financing options, and operating and management services.
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Own / Operate — We will evaluate on a project-by-project basis, deploying our own capital to either create fleet hubs or to own and operate chargers with our host partners when warranted. This will further benefit our existing clients with additional charging options, as well as to develop and capture charging revenues from public users. Capital discipline is crucial in driving this type of opportunity, and based upon the financial analysis and payback time, we will pursue opportunities where we believe there is a positive ROI.
As part of our ongoing strategy for our fleet customers, our focus will be these key areas:
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Customer service
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Proper capital deployment
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Growing our product offerings to satisfy any and all needs for our customers (e.g. new vendors)
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Providing the most relevant data points to our customers so they can take advantage of what the data tells them (analytics, on both vehicle and charging infrastructure side).
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Continuing to develop new revenue opportunities for our customers that they may not have taken advantage of (e.g., managing the reporting and monetization of Low Carbon Fuel Standard (“LCFS”) credits for customers
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Assisting customers in pursuing public grants, subsidies, and incentives, to reduce capex.
We will continue to pursue public grants, subsidies, and incentives to help reduce capital expenditures when we deploy our own capital to own and operate charging station assets. As we are technology agnostic, we are able to offer a variety of different products from different equipment manufacturers, as needs will vary from one customer to another. At the same time, we expect to use one software provider to monitor all chargers that we sell and deploy. Leveraging our in-depth knowledge of the industry will allow us to provide the best customer experience, both for those we sell charging stations to, as well as the EV drivers who use those chargers that are deployed.
Phoenix Zero-Emission Commercial Product Line
As the short-haul, commercial transportation sector adopts towards zero-emission solutions, we believe there will be a need to offer tailored solutions that meet the needs of each customer.
We sell our products both fully integrated into complete vehicles and in kit form to other partners for integration in the same vehicle platforms. For example, we sell to our shuttle partner/dealer electric drive system kits that are integrated into the E-450 based shuttle buses sold by them. The integration can be completed either at Phoenix manufacturing facilities or as part of the customer’s manufacturing process. We are currently selling our recently developed third-generation drivetrain, which includes the largest battery pack and longest electric range for any Class 4 product on the market, offering up to 160 miles in range. Our current generation drivetrain allows for a variety of battery pack options which offer customers flexibility on pricing and configuration. Our latest technology also offers the largest variety of cutaway bodies including service trucks, utility trucks, flatbed trucks, cargo trucks, walk-in vans, shuttle buses, and school buses. In addition to engineering and final stage assembly of our electric drivetrain, Phoenix serves as a one-stop shop for companies or agencies looking to electrify their fleets. In advance of sales, we assist customers in analyzing their fleets’ routes for suitability for EV adoption, vehicle type, and battery pack size (range vs. payload and costs). Route analysis also encompasses charger requirements, including location, and we provide site reviews and infrastructure installation support to customers. In addition, we offer leasing services to our customers, as well as assistance in identifying federal and state incentives for fleet electrification. While
providing limited warranties for the parts and components of the vehicles we sell, we offer a full range of after-sale customer support over the vehicles’ lifespans, with our all-inclusive monthly service packages covering substantially all the maintenance needs.
We have developed a portfolio of proprietary technologies that are embedded and integrated in our EV zero-emission vehicles.
Z400 All-Electric Shuttle Bus
Z500 All-Electric Shuttle Bus
Z600 All-Electric Type A School Bus
Electric Drive System Kits
We develop proprietary electric drive systems for integration into Ford E-Series commercial vehicles. We sell our products both fully integrated into complete vehicles and in kit form to other partners for integration in the same vehicle platforms. For example, we sell to our shuttle partner/dealer electric drive system kits that are integrated into the E-450 based shuttle buses sold by them. The integration can be completed either at Phoenix manufacturing facilities or as part of the customer’s manufacturing process. We are currently in production of our recently developed third-generation drivetrain, which includes the largest battery pack and longest electric range for any class 4 product on the market, offering up to 160 miles in range. Our current generation drivetrain allows for a variety of battery pack options which offer customers flexibility on pricing and configuration.
Class 2 Pickup Truck and Delivery Van
We have contracted with a global leading and recognized design company, Icona Design (“Icona”), to collaboratively develop EF1-T e-pickup truck, first of our all-electric class 2 pickup truck and delivery/utility van vehicle line that will be on our roadmap for development with key partners. Icona delivered a prototype of this concept vehicle to us in September, 2021, and we will have in on display at key tradeshows in the coming months. We are targeting the global market for this product line and will work with key partners on the design, development, manufacture and launch of this product line.
EV Charging
We currently sell both L2 and DC Fast Charging solutions to its existing fleet customers at the point of sale for any of our fleet vehicles. As we expand our product offerings, we will be offering charging products
for the residential and multi-family markets, in both networked and non-networked configurations. In most cases, Level 2 charging will be the focal point for the residential and multi-family markets, but we are able to offer DC fast charging, as well. The other market we will focus on is the commercial/public market, where we will offer both Level 2 and DC fast charging solutions, with both networked and non-networked offerings.
Competition
Competition in the light and medium-duty truck industry is intense, as new regulatory requirements for vehicle emissions, technological advances, and shifting customer demands are pushing the industry towards zero-emission solutions. Notable regulations include California Air Resources Board’s Zero Emission Airport Shuttle regulation requiring airport shuttles at 13 major airports in California to switch to zero emission by 2035, the Innovate Clean Transit Rule requiring all transit buses to be zero emissions by 2040 and the Advanced Clean Truck Rule mandating 30 – 50 percent of new truck sales in the State to be electric by 2030. Following the Advanced Clean Truck Rule, 15 US states and the District of Columbia announced a joint memorandum of understanding (MOU) to advance the market for electric medium- and heavy-duty vehicles (MHDV) to ensure that 100% of all new medium- and heavy-duty vehicle sales be zero emission vehicles by 2050 with an interim target of 30% zero-emission vehicle sales by 2030.
We believe the primary competitive factors in the light and medium duty market include, but are not limited to:
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total cost of ownership (TCO);
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product performance and uptime;
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availability of charging or re-fueling network;
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emissions profile;
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vehicle quality, reliability and safety;
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technological innovation;
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improved drivability through reduced noise, clean operation and smoother acceleration.
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ease of autonomous operation capability development; and
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service options.
Phoenix competes with a number of commercial EV manufacturers, including those such as Lightning eMotors, GreenPower Bus, SEA Electric and Arrival. In addition to Tesla & Rivian, a number of traditional global automobile manufacturers, including Ford, General Motors, Mercedes Benz, and Nissan-Renault-Mitsubishi-Toyota, have entered the consumer EV business, and several major companies, including BYD, Ford, General Motors, Tesla and Daimler have begun entry into the commercial EV market. There are several recent entrants in the commercial market, including Lightning eMotors, Lordstown, Nikola and Workhorse. It is possible that others in the consumer EV business, or heavy-duty EV manufacturers, could expand into the medium-duty EV business and compete with Phoenix. In addition, many of the aforementioned companies, along with others, such as Volvo, BYD, Hyundai, Honda, and Fiat participate in the hybrid combined electric and gasoline powered vehicle business, which includes commercial vehicles that may compete with Phoenix.
Most of our current and potential competitors have greater financial, technical, manufacturing, marketing, and other resources than we do. They may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their electric truck programs. Additionally, those competitors have greater name recognition, larger sales forces, broader customer and industry relationships, and other resources than we do.
Sales and Marketing
We sell our vehicles to fleet customers directly and through our strategic relationships with premier commercial vehicle companies, including Creative Bus Sales (“Creative”), the largest bus dealer in the
United States, with 18 physical locations, a 75-person sales team and more than 200 service and support staff and through Forest River, a Berkshire Hathaway company. Phoenix leverages Creative’s national sales footprint in selling and servicing its vehicles. Forest River, one of the nation’s largest manufacturers of commercial vehicles, serves as a source of vehicles for Phoenix and we believe could become a partner in assembling EVs.
Our EV charging business has been centered around supporting the companies base of fleet vehicle customers. As part of the company sales process for its Electric Vehicles, we offer a variety of different DC fast chargers and L2 products, to support our customers charging needs. The company will continue to add equipment manufacturers and software partners to our offerings for our customers. As we are currently technology agnostic, we are perfectly positioned to offer our fleet customers the best solution for their specific needs, both from a hardware and software standpoint. The company intends on offering charging solutions for the residential, commercial, and fleet vehicle markets.
Customers and Backlog
Phoenix targets fleet customers with established sustainability goals, as well as fleets operating along dedicated routes that are located in regions offering strong incentives for using zero-emission vehicles to transport people and products. Current customers for our ZEUS line of shuttle buses and Class 4 trucks include companies such as major airports, airport shuttle operators, hotel chains, seaports, universities, municipalities, and large corporations,
Our current backlog of approximately 66 orders consists of 41 vehicles and 25 electric drive system kits.
We expect to fulfill the current confirmed backlog of 66 firm orders in the fourth quarter of 2021 and the first quarter of 2022. The vehicle order backlog represents $9.3 million of revenue, with 18 of the orders awaiting California HVIP incentive funding approvals, which we expect to be obtained by the end of 2021. Additionally, Phoenix has binding orders for 25 chargers representing over $700,000 in revenue.
Suppliers
With the emerging state of our market and products, our strategy is to remain as flexible as possible with our supply chain to ensure we can have maximum flexibility to adopt the most cost effective and technically advanced products as possible to support our applications. We currently purchase our key components from the following suppliers for our current line of products:
Phoenix has a long-term contract with its current battery supplier, offering pricing guarantees through 2022 based on volume commitments.
We currently have no other long-term supply contracts that guarantee pricing on key components including base chassis and drivetrain components (excluding batteries), exposing us to risks of increases in prices of the raw materials, parts, and components, and equipment used in EV production. Substantial increases in such prices would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. Any attempts to increase the announced or expected prices of our vehicles in response to increased costs could be viewed negatively by our customers and could adversely affect our business, prospects, financial condition and operating results.
Manufacturing and Production
U.S. Production Facility
We previously carried out the production of our EV shuttle buses and trucks from the 401 S. Doubleday Ave, Ontario, California (the “Ontario Facility”) manufacturing facility since 2014. In August 2021, we moved to a newly leased facility at 1500 Lakeview Loop, Anaheim, California (the “Anaheim Facility”). The Anaheim Facility is leased by us at a rent of $0.4 million per year and comprises 39,043 square feet of space consisting of 21,000 square feet of manufacturing floor and 18,043 square feet of office space. Our Anaheim Facility will allow us design, build, and test prototype vehicles and components in-house. The lease on Anaheim Facility expires in March 2027.
Our Anaheim Facility will allow us to produce up to 120 units a year, with one manufacturing shift and 240 units a year with two shifts per day.
Research and Development
Our research and development activities take place out of our headquarters facility in Anaheim, California and at our development partners’ facilities located around the world. In addition to autonomous vehicle development, our research and development projects include the following:
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Gen 4 drivetrain: We have started the development work on our next generation electric drivetrain (“Gen 4”). In Gen 4, we plan to incorporate the latest technology developments in electric drive systems (e.g. E-axles, advanced charging protocols, etc.) and engineering repackaging that will enable Phoenix to diversify components sourcing, particularly for key items like high voltage batteries, as well as reduce BOM costs.
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Ground-up Platform: We plan to start the design development of our purpose bult New Commercial Vehicle Platform (“Ground-up Platform”) in the second half of 2021. Targeting electric chassis for the mid-size commercial vehicle markets and strongly supported by our sales and supply chain partners such as Forest River, Creative Bus Sales, EasyMile, this Ground-up Platform will allow us to be independent of other chassis providers and customize our product offering (chassis and drive system) to meet customer and fleet requirements, and substantially increase our gross and net margins and accelerate achieving our goals towards enhanced profitability.
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This new vehicle will be FMVSS- and NHTSA-compliant and, we believe, significantly improve efficiencies, reduce cost, and enable operational improvements for fleet operators. The next- generation platform will be built by combining structural and design innovations, modular and interchangeable battery systems and fuel cell range extenders to significantly reduce the standard battery capacity required, learning-based energy-efficient automated driving and power management, as well as utilize various software and data mapping solutions to enable route and fleet optimization. A key goal of this development is to demonstrate a zero-emission medium-duty vehicles that offers significantly lower total cost of ownership while enabling measurable fleet efficiency improvements through vehicle design, powertrain, energy management and real-time intelligent route and driving optimization solutions.
•
The key technical track and components of the new project will be:
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Purpose-Built Medium-Duty EV Chassis Design and Development
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Modular and on-demand Energy Unit Sharing System including batteries and Fuel Cell Range Extenders
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Learning-based Energy-efficient Automated Driving and Power Management
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Truck-level Eco-routing for Optimal Delivery Efficiency
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Fleet-level Management and Optimization
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Shared Automated Charging Infrastructure
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Benefits of the Ground-up Platform would include:
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Low Floor and ADA capability for shuttle bus variants
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Utilizing latest in battery technology to maximize range and payload and reduce costs
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Cost competitiveness with ICE vehicles, thereby reducing dependencies on incentives and subsidies
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Modular chassis configuration ranging from class 3-6 as well as modular battery sizes
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Fuel Cell Range extender option
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Autonomous Driving: We are collaborating with EasyMile, an industry leader in autonomous vehicle technology, to jointly design, develop and deploy autonomous shuttle buses and delivery vans. In September 2020, EasyMile and Phoenix, in cooperation with the Metropolitan Transit
Authority of Harris County (Houston Metro), secured the Federal Transit Administration (FTA) Accelerating Innovative Mobility (AIM) grant to deploy the first-of-its-kind, all-electric Level 4 autonomous cutaway shuttle bus. EasyMile’s award winning driverless software will be integrated into Phoenix’s ZEUS range of all-electric shuttle buses and trucks and is being called EZ ZEUS. The EZ ZEUS development will initially use a Starcraft Allstar vehicle chassis, which is supported by the manufacturer Forest River Inc., Creative Bus Sales, the nation’s largest bus dealer, will offer the EZ ZEUS to its customers.
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Our 3rd generation all-electric shuttle buses and trucks are an ideal product to automate, as they are widely used in many fixed route, short loop and low-speed applications. According to the U.S. Federal Motor Carrier Safety Association, in the U.S., many truck drivers face total hours restrictions that do not allow them to operate their vehicles more than 11 hours a day. In the EU, drivers are generally restricted to 9 hours a day, according to the European Parliament. Autonomous driving will help achieve higher utilization by avoiding the limitations on truck drivers’ hours.
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In addition to potential cost savings available to fleet operators, we believe that autonomous technology, will significantly improve vehicular safety and asset utilization.
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E-pickup truck: In partnership with Icona Design, a world-leading automotive design company, we are at an advanced stage of developing our EF1-T e-pickup truck (“e-pickup truck”), our first in a line of all-electric pickup trucks and last-mile delivery vans incorporating our vision for sustainable transportation with focus on energy efficiency and innovative designs. We’re also actively pursuing various opportunities with potential engineering, supply chain and production partners to tap the synergies of our common development capabilities, platforms and technologies.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. We protect our intellectual property rights, both in the U.S. and abroad, through a combination of patent, trademark, copyright and trade secret protection, as well as confidentiality and invention assignment agreements with our employees and consultants. We seek to control access to, and distribution of, our proprietary information through non-disclosure agreements with our vendors and business partners. Unpatented research, development, know-how, and engineering skills make a vital contribution to our business, and we pursue patent protection when we believe it is possible and consistent with our overall strategy for safeguarding intellectual property.
On May 13, 2021, the Company filed a design application with the U.S. Patent Office for the design of a certain vehicle. The application was assigned U.S. Serial No. 29/783,529. A “design patent” protects an article’s ornamental appearance (35 U.S.C. 171), while a “utility patent” protects the way an article is used and works (35 U.S.C. 101). The ornamental appearance of an article includes its shape/configuration or surface ornamentation upon the article, or both.
On May 19, 2021, the Company filed a trademark application for EdisonFuture in the class of goods and services of motor vehicles. The mark was assigned an application number 90721679. The mark consists of standard character mark and logo for “EdisonFuture.” On May 21, 2021, we filed a trademark application for EdisonFuture in the class of goods and services of motor vehicles. The mark was assigned an application number 90727325. The mark consists of single word “EdisonFuture” in stylized font with the letter E of Edison capitalized and the letter F of Future capitalized and all other letters in small font.
On August 17, 2021, the Company filed a design application with the U.S. Patent Office for the design of Retractable Solar Roof for a Motor Vehicle. The application was assigned U.S. Serial No. 29/804,007. A “design patent” protects an article's ornamental appearance (35 U.S.C. 171), while a “utility patent” protects the way an article is used and works (35 U.S.C. 101). The ornamental appearance of an article includes its shape/configuration or surface ornamentation upon the article, or both.
Service and Maintenance
A key requirement for our fleet customers is knowing there is an available service infrastructure for the maintenance and repair of our vehicles. We have a service facility for our customers in southern California.
Phoenix also has a strong network of third party providers, including Creative Bus Sales, who provide several levels of service depending on the complexity and type of maintenance required.
Phoenix’s service and maintenance of its vehicles include the following:
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Electric vehicles have a system of sensors and controls that allow for precise monitoring of the vehicle and component operation performance. We use this data to provide smart predictive maintenance, which will decrease downtime and costs by identifying a potential problem before it results in a breakdown.
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In cases where a customer has its own maintenance infrastructure, we identify and provide procedures for items that can be maintained at its shop. This may include procedures such as tire changes, wiper and windshield repair and brake servicing.
In cases where the customer does not have a maintenance infrastructure or for more complex items, Phoenix outsources maintenance and warranty work. Customers will have access to an already established network of service centers and a network of service providers, and we plan to deploy a mobile service model.
Employees
As of September 30, 2021, we had 37 full-time employees based primarily in the greater Ontario, California area. A majority of our employees are engaged in manufacturing functions. Our targeted hires typically have significant experience working for well-respected original equipment manufacturers, automotive engineering firms and software companies. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.
Government Regulation
We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, water use; air emissions; use of recycled materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. We have been required to obtain and comply with the terms and conditions of multiple environmental permits, many of which are difficult and costly to obtain and could be subject to legal challenges. Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue our operations.
Environmental standards applicable to Phoenix are established by the laws and regulations of the state and countries in which Phoenix operates, standards adopted by regulatory agencies and the permits and licenses. Each of these sources is subject to periodic modifications and increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, and possibly orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.
Vehicle Safety and Testing Regulation
Our vehicles are subject to, and comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”), including applicable U.S. federal motor vehicle safety standards (“FMVSS”). As a manufacturer, we must self-certify that the vehicles meet or are exempt from all applicable FMVSSs before a vehicle can be imported into or sold in the U.S.
There are numerous FMVSSs that apply to our vehicles. Examples of these requirements include:
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Electric Vehicle Safety — limitations on electrolyte spillage, battery retention, and avoidance of electric shock following specified crash tests;
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Crash Tests for High-Voltage System Integrity — preventing electric shock from high voltage systems and fires that result from fuel spillage during and after motor vehicle crashes.
In addition to the FMVSS rules, Phoenix designs our vehicles to meet the Federal Motor Carrier Safety Regulations of the Federal Motor Carrier Safety Administration, which prescribes requirements for bus and truck fleet owners. These include standards defrosting, and defogging systems, and speedometers, such as steps and handholds.
We are also required to comply with other NHTSA requirements and federal laws administered by NHTSA, including early warning reporting requirements regarding warranty claims, field reports, death and injury reports, foreign recalls, and owner’s manual requirements.
Altoona Testing
Under the Surface Transportation and Uniform Relocation Assistance Act of 1987 (“STURAA”), federal funding of acquisition of a new model bus is unavailable unless a bus of that model has been tested for safety, structural integrity, durability, performance, maintainability, noise, and fuel economy. Testing is conducted at the Larson Transportation Institute’s Bus Research and Testing Center, in Altoona, Pennsylvania established for that purpose.
Vehicles that are built to Buy America compliant standards and have passed the Altoona test are eligible for FTA funding of up to 80% of the capital cost of a transit vehicle. Our new E-300 Shuttle Bus is scheduled for the Altoona testing in the fourth quarter of 2021; testing will last between three and six months. Failure to complete testing in this timeframe would materially adversely affect order fulfillment, as well as future sales, to customers and potential customers that require successful completion of the test program.
EPA Emissions & Certificate of Conformity
The U.S. Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by the California Air Resources Board (“CARB”), concerning emissions for our vehicles. A Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act’s standards and an Executive Order is required for vehicles sold in states that have sought and received a waiver from the EPA to utilize California standards. CARB sets the California standards for emissions control for certain regulated pollutants for new vehicles and engines sold in California. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. There are currently four states which have adopted the California standard for heavy-duty vehicles.
The Greenhouse Gas Rule was incorporated into the Clean Air Act on August 9, 2011. Since our vehicles have zero-emissions, Phoenix is required to seek an EPA Certificate of Conformity for the Greenhouse Gas Rule, and a CARB Executive Order for the CARB Greenhouse Gas Rule. We expect to receive the Certificate of Conformity followed by an Executive Order for sales of the Phoenix Tre in the second half of 2021.
Battery Safety and Testing Regulation
In addition, our vehicles are designed to standard for electrically-propelled vehicles in vehicle operational safety specifications and connecting to an external power supply. Additionally, we are incorporating other battery system standards in our vehicles.
Some of these standards include:
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Conductive Charging — for on-board charge electromagnetic requirements;
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Battery Pack Enclosure Protection — degrees of protection of the electrical equipment within an enclosure from the effects due to the ingress of water; and
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Testing Lithium-ion Traction Battery Packs and Systems — safety performance requirements during a variety of testing, like vibration, thermal cycling, overcharge, and loss of thermal control.
Our battery pack conforms with mandatory regulations governing the transport of “dangerous goods,” which includes lithium-ion batteries that may present a risk in transportation. The governing regulations, which are issued by the Pipeline and Hazardous Materials Safety Administration, are based on the United Nations Recommendations on the Safe Transport of Dangerous Goods Model Regulations, and related UN
Manual Tests and Criteria. The regulations vary by mode of transportation when these items are shipped by ocean vessel, rail, truck, or by air.
Our battery packs are designed to meet the compliance requirements of the UN Manual of Tests and Criteria demonstrating our ability to ship the vehicles and battery packs by any method.
These tests include:
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Altitude simulation — simulating air transport;
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Thermal cycling — assessing cell and battery seal integrity;
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Vibration — simulating vibration during transport;
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Shock — simulating possible impacts during transport;
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External short circuit — simulating an external short circuit; and
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Overcharge — evaluating the ability of a rechargeable battery to withstand overcharging.
The cells in our battery packs are composed mainly of lithium-ion. In addition, our battery packs include packaging for the lithium-ion cells. This packaging includes trace amounts of various hazardous chemicals whose use, storage, and disposal is regulated under federal law.
Greenhouse Gas (GHG) Credits — U.S. Environmental Protection Agency
In connection with the delivery and placement into service of our zero-emission vehicles under the Greenhouse Gas Rule, Phoenix will earn tradable credits that under current laws and regulations can be sold. Under the EPA’s Greenhouse Gas Rule, each BEV earns a credit multiplier of 4.5 for use in the calculation of emission credits. Commercial vehicle manufacturers are required to ensure they meet the nitrogen oxide emission standard for each type of vehicle produced. This emission standard continues to lower the emission requirement over time, increasing the difficulty for conventional diesel vehicles to meet the standard. Until technology catches up for commercial vehicles, manufacturers of diesel trucks will need to purchase GHG credits to cover their emission deficit. The Greenhouse Gas Rule provides the opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Furthermore, the regulation does not limit the number of battery-electric credits sold within the same commercial vehicle categories.
Greenhouse Gas Credits — California Air Resources Board
California also has a greenhouse gas emissions standard which follows very closely to the EPA Greenhouse Gas Emissions Standard. The delivery and placement into service of our zero-emission vehicles in California under the Greenhouse Gas Rule will earn Phoenix tradable credits that can be sold. Under CARB greenhouse gas regulations, each BEV will also earn a credit multiplier of 4.5 for use in the calculation of emission credits. Commercial vehicle manufacturers are required to ensure they meet the nitrogen oxide emission standard for each type of vehicle produced. This emission standard continues to lower the emission requirement over time, increasing the difficulty for conventional diesel vehicles to meet the standard.
Until technology catches up for commercial vehicles, manufacturers of diesel buses and trucks will need to purchase GHG credits to cover their emission deficit. The California timeline for reaching very low GHG emissions is more aggressive than the EPA. Commercial vehicle manufacturers will look to cover their emission deficits first for California. The Greenhouse Gas Rule provides an opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Furthermore, the regulation does not limit the number of battery-electric credits sold within the same commercial vehicle categories.
Legal Proceedings
From time to time, we may become involved in additional legal proceedings arising in the ordinary course of our business. We are currently not a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
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engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes — Oxley Act of 2002 (the “Sarbanes — Oxley Act”);
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation.
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards.
We will remain an “emerging growth company” until the earliest to occur of:
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our reporting $1.07 billion or more in annual gross revenues;
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our issuance, in a three-year period, of more than $1 billion in non-convertible debt;
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the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and
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[ ], 2026.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about our executive officers, key employees and directors as of the date of this Registration Statement. We intend to appoint [3] additional independent directors prior to the consummation of this offering.
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Name
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Age
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Position
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Xiaofeng Denton Peng
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46
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Chairman
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Joseph R. Mitchell
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60
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Chief Executive Officer
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Tarek Helou
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40
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Chief Operating Officer
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Ron Iacobelli
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53
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Chief Technology Officer
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Wenbing Chris Wang
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49
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Chief Financial Officer
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Ira Feintuch
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50
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SVP & Global Head of EV Charging Solutions
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Edmund Shen
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62
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VP, Product Management and Supply Chain
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HoongKhoeng Cheong
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56
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Director
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Liang Lance Zhou
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Director
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John F. Perkowski
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Independent Director Nominee
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Steven E. Stivers
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Independent Director Nominee
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Sam Van
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Independent Director Nominee
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Zhenxing Fu
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Independent Director Nominee
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Mr. Xiaofeng Denton Peng has served as our Chairman of the board of directors since December 2020. Mr. Peng has served as a director and the executive chairman of the board of directors of SPI Energy Co., Ltd., our parent company, since January 10, 2011 and as the chief executive officer of SPI Energy Co. Ltd. since March 25, 2016. Mr. Peng founded LDK Solar Co., Ltd., or LDK, in July 2005 and is LDK’s chairman of the board and chief executive officer. Prior to founding LDK, Mr. Peng founded Suzhou Liouxin Co., Ltd., or Suzhou Liouxin, in March 1997 and was its chief executive officer until February 2006. Suzhou Liouxin is a leading manufacturer of personal protective equipment in Asia. Mr. Peng graduated from Jiangxi Foreign Trade School with a diploma in international business in 1993 and from Beijing University Guanghua School of Management with an executive MBA degree in 2002.
Mr. Joseph R. Mitchell has served as our Chief Executive Officer since March 2021. Mr. Mitchell is a veteran of the automotive and electric vehicle market with 30 years of Automotive experience with 20 of those years directly in the Electric Vehicle market. Most recently, Mr. Mitchell served as President and CEO of UQM Technologies, a previously NYSE/Amex listed leading global developer of electric powertrains for the automotive and commercial vehicle markets from 2015 to 2019 and as Senior VP of Operations from 2012 and 2015. While at UQM, Mr. Mitchell led the company to win a number of major electric commercial vehicle contracts globally. In 2019, Mr. Mitchell led the merger of UQM with Danfoss, a large Denmark based global industrial company and stayed on to support integration and served as VP of the post-merger, newly formed Editron division of Danfoss with focus on the development of Electric Powertrains for the commercial on and off highway EV markets along with the Marine EV market. Mr. Mitchell started his career with Ford Motor Company of Canada in Operations and Quality and had a number of positions of increasing responsibility throughout the US, Canada and Mexico. In 1999 Mr. Mitchell was introduced to the EV and fuel cell vehicle market taking on a position to run the electric powertrain operations for a newly formed JV between Ford, Daimler and Ballard Power to develop a fuel cell electric powertrain system for this emerging market. Through a number of mergers and restructurings, Mr. Mitchell continued with this organization leading the electric powertrain group under the ownership of the Ballard, Siemens VDO and Continental Automotive. Mr. Mitchell has an MBA from Vanderbilt University along with a BSc from Niagara University and diploma in Operations and Industrial Management from Niagara College in Canada.
Mr. Tarek Helou has served as our Chief Operating Officer since December 2020. Mr. Helou served as Chief Operating Officer of Phoenix Motorcars from August 2019 to December 2020. Prior to that, Mr. Helou oversaw the Sales Division of the company as VP of Sales from August 2016 to August 2019. He joined Phoenix Motorcars as Director of Sales in February 2014. Mr. Helou worked for TD Bank in Toronto, Canada in its corporate banking head office in Treasury, Capital Markets and Marketing from 2011 to 2014. From 2003 to 2011, Mr. Helou started his career at Bombardier Aerospace with increasing responsibilities
as Avionics and Telecommunication Engineer, Integrations team lead and Product Planning Manager. Mr. Helou has an Electrical Engineering Degree from McGill University and a Master’s in Business Administration from HEC — Montreal.
Mr. Ronald Iacobelli has served as our Chief Technology Officer since May 2021. Mr. Iacobelli is an experienced technology executive with 30 years of advanced automotive technology experience including 20 years in electrification. He is one of a group of pioneers in the modern electrified vehicle industry having developed some of the earliest hybrid electric commercial vehicles in the era of the original Prius and launching the first production light duty van in North America and Europe at the time of the original Nissan Leaf. As a serial entrepreneur, Mr. Iacobelli has grown three companies from concept to production, and launched vehicles at both a major OEM and at a start-up which became a vehicle manufacturer. Most recently in April 2020, Mr. Iacobelli Co-founded INTGR8 Technologies, a business focused on vehicle automation and electrification for fleets. From 2017 to 2019 Mr. Iacobelli served on the Technology Advisory Board of one of China’s largest new energy vehicle companies. Prior to that, Mr. Iacobelli co-founded Spur Innovations in 2013 developing connected fleet vehicle controls from concept to production readiness. Spur was acquired by telematics developer, Streamline Transportation Technologies in 2016 where Mr. Iacobelli assumed the COO role leading the growth of Streamline’s cloud-based vehicle telematics and electronics log SAAS business. From 2001 to 2013, Mr. Iacobelli served as CTO then Interim CEO of Azure Dynamics. At Azure, he led the implementation of processes, technology and partnerships from a clean sheet to the market leading commercial hybrid and electric vehicle manufacturer in North America with major OEM and Tier 1 partnerships. Under Mr. Iacobelli’s leadership, Azure successfully launched the Transit Connect Electric Van in North America and Europe in collaboration with Ford Motor Company in 2010, a milestone event in modern EV history. From 1999 to 2001, he worked for Ballard Power, where he pioneered the company’s fuel cell supplier development program. Mr. Iacobelli spent his early career at Ford Motor Company engineering vehicle electrical and chassis systems, then managing supplier quality and continuous improvements for the Crown Victoria and Grand Marquis Carlines. Mr. Iacobelli holds a B.A.Sc in Mechanical Engineering from the University of Windsor.
Mr. Wenbing Chris Wang has served as our Chief Financial Officer since June 2021. Mr. Wang was the senior vice president of finance of our parent company SPI Energy Co., Ltd (Nasdaq: SPI) and interim CFO of Phoenix Motorcars from November 2020 to June 2021. Prior to joining SPI, Mr. Wang served as Chief Executive Officer of Redwood Group International, a Hong Kong-based merchant bank focused on Greater-China growth and venture opportunities, from February 2017 to November 2020, and a partner with SAIF Xinhuihuang Asset Management Co., Ltd. from December 2018 to March 2020. Prior to that, Mr. Wang served as President of Fushi Copperweld, Inc. (previously NasdaqGS: FSIN) from 2009 to 2016 and its Chief Financial Officer from 2005 to 2010. At Fushi Copperweld, Mr. Wang led the company’s public listing on the Nasdaq and the acquisition of Copperweld Bimetallics in 2007, $290 million in total equity and debt financing from 2005 to 2012, and its $345 million privatization transaction in 2012. Prior to that, Mr. Wang worked for Cornerstone China Opportunities Fund, Redwood Capital, Credit Suisse, VCChina from 2001 to 2005 with progressive responsibilities. Mr. Wang obtained a BSc from the University of Science and Technology Beijing and an MBA degree in Finance and Corporate Accounting from the University of Rochester. Mr. Wang is currently a board member of IT Tech Packaging, Inc. (NYSE/Amex: ITP) and Dragon Victory International Ltd (Nasdaq: LYL), starting from October 2009 and December 2017 respectively.
Mr. Ira B. Feintuch has served as our SVP & Global Head of EV Charging Solutions since June 14, 2021. Mr. Feintuch has over 10 years of operational experience in the electric vehicle charging infrastructure business, with a focus around the deployment of charging equipment, software/technology needs, and EV charging sales. Prior to joining Phoenix Motorcars, Mr. Feintuch served as the Chief Operating Officer of Blink Charging (Nasdaq: BLNK) from March 2015 to October 2018, and its VP of Operations from Dec 2009 to March 2015. At Blink, Mr. Feintuch was part of the executive team that led the company’s listing on the Nasdaq market. Mr. Feintuch was one of the first employees at Car Charging Group, and was a key contributor in Blink charging becoming one of the largest owner/operators in the EV infrastructure space. He was involved in strategic planning, negotiating key contracts with host partners across all market segments (commercial, retail, municipalities, real estate developers, multi family/apartment owners) and was a key contributor in designing many of the owner/operator business models in use today. He also oversaw the integration of a number of acquisitions as well as thousands of charging station deployments, both with L2
and DCFC charging stations. Mr. Feintuch served on the board of the ROEV Association, which was a collaborative effort between both EV charging networks and EV manufacturers, with a goal of creating the framework of interoperability between network providers, by using one RFID card or one account, across all participating networks (2015-2016). Mr. Feintuch received a B.S in management from Touro College.
Mr. Edmund Shen has served as our Vice President of Product Management and Supply Chain since January 2021. Prior to that, Shen was one of the earliest founding members of SERES EV as the company’s head of Product and Sr. Director of Global Supply Chain Development & Management, and Sr. Director of Product Marketing. He led the product development and launch programs for SF-5 and SF-7 EVs. Prior to that, Shen worked in Tesla when the company was still as small startup in 2009. He was interviewed and hired by Elon Musk as an early Tesla employee. During his seven years at Tesla, he led many key projects of Tesla EV product development and global launch programs, contributing to Tesla’s Roadster, Model S, Model X, Model 3, Powerwall, and Powerpack programs, as well as OEM programs for Mercedes Benz B-Class EV, and Toyota Rav 4 EV programs. Previously, Shen held product manager, new product development program leader, marketing manager, electrical engineer, and systems engineer roles at leading global semiconductor companies, including Applied Materials, Lam Research, and KLA. As a Silicon Valley professional, Edmund has a proven track record specializing in leading new product development and new technology startups with experience taking products from concept to market launch, with limited resources and in fast-paced environments. He intuitively sees the threads of opportunity that wind through a market, brings them together into a coherent whole, and drives technology, productization, and business advantages.
Mr. HoongKhoeng Cheong has served as our director since December 2020. Mr. Cheong has served as chief operating officer of SPI Energy Co., Ltd. since May 2014. Mr. Cheong has more than 20 years of engineering and operation experience in the solar and electronics industries. He served in various management positions in LDK from 2011 to 2014 and he was appointed as the chairman of the Management Board and chief executive officer of Sunways AG, a publicly-listed company in Germany. He previously served as our general manager from 2007 to 2011 and was responsible for PV system design and development as well as the manufacturing of key components for PV modules and racking systems before joining LDK. Prior to joining the solar industry in 2007, Mr. Cheong spent 16 years in the electronics industry responsible for engineering development and manufacturing of liquid crystal display products and he served as the Vice President of Engineering of an affiliate of Flextronics International Ltd. Mr. Cheong holds a Bachelor of Science degree in mechanical engineering from the University of Louisiana and obtained his Master of Science in computer integrated manufacturing from Nanyang Technology University, Singapore in 1997.
Mr. Liang Lance Zhou will serve as our director starting from the SEC’s declaration of effectiveness of our registration statement on Form S-1. Dr. Zhou has been Chief Executive Officer of Karma Automotive since January 2018. Dr. Zhou was CEO and President of Beijing Foton-Daimler Automotive from July 2015 to January 2018, while serving as VP of Daimler AG Global from April 2014 to January 2018. Prior to joining Daimler, Dr. Zhou was CEO of NAVECO, a joint venture of Iveco of Fiat and Nanjing Auto, and served on its board of directors from March 2007 to April 2014. Dr. Zhou began his career as an engineer, progressed into sales and marketing, and then into general management, offering deep OEM experience across the full value chain and strong track record of developing new business and driving growth. Dr. Zhou earned Bachelor’s and Master’s degrees in Engineering from Northwestern Polytechnical University, and a PhD from Nanjing University of Science and Technology.
Mr. John F. Perkowski will serve as our director starting from the SEC’s declaration of effectiveness of our registration statement on Form S-1. Mr. Perkowski is the founder and managing partner of JFP Holdings, a merchant bank focused primarily on transactions in China. From March 2017 to May 2018, Mr. Perkowski served as the Chief Executive Officer of Green4U Technologies, Inc., a Georgia-based company that was founded to meet the growing demand for electric vehicles from taxi sleets, municipalities, military units, logistics companies and individual consumers. From 1994 through 2008, Mr. Perkowski served as the Chairman and Chief Executive Officer of ASIMCO Technologies, a supplier and manufacturer of automotive components headquartered in Beijing, China. From 1973 to 1993, Mr. Perkowski held various positions with PaineWebber. Mr. Perkowski serves on several boards of directors, including the China Advisory Council of Magna International, Inc. and Green4U Technologies, Inc. Mr. Perkowski received his Bachelor of Science degree in American Studies from Yale, and his Masters degree in Business Administration from Harvard Business School. Mr. Perkowski is qualified to serve as a director due to his experience in finance,
investment banking, mergers and acquisitions and the automotive industry, including his experience in China, as well as his experience as a director of a U.S. public company.
Mr. Steven E. Stivers will serve as our director starting from the SEC’s declaration of effectiveness of our registration statement on Form S-1. Former Congressman Stivers is a highly accomplished executive and leader in both the public and private sectors. He currently serves as the President & CEO of the Ohio Chamber of Commerce where he manages a large team and budget dedicated to building economic growth for Ohio’s future. Mr. Stivers was a Member of the U.S. House of Representatives from Ohio’s 15th district from January 2011 to May 2021, where he served on several committees and subcommittees including the House Financial Services Committee. Mr. Stivers was also Chair of the National Republican Congressional Committee from January 2017 to January 2019. Mr. Stivers was a Member of the Ohio Senate from the 15th district from January 2003 to December 2008. Mr. Stivers has been a member of the Ohio National Guard for over 30 years attaining the rank of Major General. Mr. Stivers previously spent a decade in the financial services industry at Banc One and The Ohio Company. Mr. Stivers earned a BA and MBA in business from The Ohio State University and a MA from the U.S. Army War College.
Mr. Sam Van will serve as our director starting from the SEC’s declaration of effectiveness of our registration statement on Form S-1. Mr. Van currently serves as a Managing Director and Head of Deltec Investment Advisers Limited, where he leads the effort in U.S. and International Exchange Listing Advisory practice since 2018. In 2019, Van was entrusted by the U.S. government’s Committee on Foreign Investment in the United States (CFIUS) to serve as co-chair and trustee member to oversee the liquidation of an investment project. Previously, Van served as an Associate Principal for the Financial Industry Regulatory Authority (FINRA) in various roles from 2012 to 2017, which included Trading and Financial Compliance Examinations, Sales Practice and Financial Risk Oversight & Operational Regulation. During Van’s tenure as Director at the New York Stock Exchange (NYSE) from 2001 to 2011, Van was responsible for new business development, specializing in the emerging capital markets throughout Asia. Van secured more than 60 companies on the NYSE with total market capitalization exceeding $7 billion. Van received his BS in Finance from St. John’s University and his MBA from Cornell University.
Mr. Zhenxing Fu will serve as our director starting from the SEC’s declaration of effectiveness of our registration statement on Form S-1. Mr. Fu is currently the Chief Technology Officer of Yudo Auto. Mr. Fu was the Chief Technology Officer of Faraday Future China and General Manager of Faraday (Shanghai) Automotive Technology Co., Ltd from June 2015 to April 2019. Mr. Fu served as Director of Power Systems at Shanghai E-Propulsion Auto Tech Co., Ltd. of SAIC Motor, Chief Engineer of Roewe E50’s Power System Platform as well as Vehicle Chief Engineer of its second generation vehicle from December 2008 to June 2015. From October 2005 to December 2008, Mr. Fu worked for DaimlerChrysler Corp. as a Technical Specialist. From August 2000 to October 2005, Mr. Fu worked for Visteon Corps as a Technical Fellow/Manager. From December 1997 to August 2000, Mr. Fu worked for Ford Motor Co. as a Technical Specialist. From July 1992 to December 1997, Mr. Fu served as Senior Engineer, Senior Design Engineer and Design Engineer at Prestolite Electric Inc., Buehler Motors Inc. and Scott Fetzer Company, respectively. Mr. Fu was a PostDoc at the Electric Engineering Department of University of Kentucky from 1991 to 1992. Mr. Fu is currently a member of the United States National Research Council and Society of Automotive Engineers, and a Senior Member of Institute of Electrical and Electronics Engineers.
CORPORATE GOVERNANCE
Controlled Company
We intend to apply to list the shares of our common stock offered in this offering on the Nasdaq Capital Market. As Edison Future will continue to control more than 50% of our combined voting power upon the completion of this offering, we will be considered a “controlled company” for the purposes of that exchange’s rules and corporate governance standards. However, we intend to follow all of the Nasdaq rules and requirements.
Director Independence
The board of directors has reviewed the independence of our directors based on the listing standards of the NASDAQ. Based on this review, the board of directors determined that each of John F. Perkowski, Sam Van, Steven E. Stivers and Zhenxing Fu are independent within the meaning of the NASDAQ rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.
Board Committees
Our Board has established the following three standing committees: audit committee; compensation committee; and nominating and governance committee, or nominating committee. Our board of directors has adopted written charters for each of these committees. Upon completion of this offering, copies of the charters will be available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
Audit Committee
The audit committee is responsible for, among other matters:
•
appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;
•
discussing with our independent registered public accounting firm the independence of its members from its management;
•
reviewing with our independent registered public accounting firm the scope and results of their audit;
•
approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
•
overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
•
reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;
•
coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures
•
establishing procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and
•
reviewing and approving related-person transactions.
Our audit committee consists of John F. Perkowski, Sam Van and Zhenxing Fu, with Mr. Perkowski serving as the chairman. The NASDAQ rules require us to have one independent audit committee member
upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent audit committee members within one year of the date of this prospectus. Our board of directors has affirmatively determined that John F. Perkowski, Sam Van and Zhenxing Fu meet the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 and NASDAQ rules. Our board of directors has determined that Mr. Perkowski qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Compensation Committee
The compensation committee is responsible for, among other matters:
•
reviewing key employee compensation goals, policies, plans and programs;
•
reviewing and approving the compensation of our directors and executive officers;
•
reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and
•
appointing and overseeing any compensation consultants or advisors.
Our compensation committee consists of Steven E. Stivers, John F. Perkowski and Sam Van, with Mr. Stivers serving as the chairman.
Nominating Committee
The purpose of the nominating committee is to assist the board in identifying qualified individuals to become board members, in determining the composition of the board and in monitoring the process to assess board effectiveness. Our nominating committee consists of Sam Van, John F. Perkowski, and Zhenxing Fu, with Mr. Van serving as the chairman.
Board Leadership Structure
Currently, our principal executive officer is Mr. Joseph R. Mitchell and our chairman of the board is Xiaofeng Denton Peng.
Risk Oversight
Our board of directors will oversee a company-wide approach to risk management. Our board of directors will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our board of directors will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.
Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our board of directors.
Code of Business Conduct and Ethics
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees. Upon completion of this offering, a copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information regarding the compensation paid during the years ended December 31, 2020 and 2019 to our principal executive officer, principal financial officer and chief technology officer, who are collectively referred to as “named executive officers” elsewhere in this prospectus.
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Name and Principal Position
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|
Year
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|
Salary
($)
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|
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Bonus
($)
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|
|
Stock
Awards
($)
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|
|
Option
Awards
($)(1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Non-qualified
Deferred
Compensation
Earnings
($)
|
|
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All Other
Compensation
($)(2)
|
|
|
Total
($)
|
|
|
Xiaofeng Denton Peng
Chairman
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2019
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2020
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Joseph R. Mitchell
Chief Executive Officer
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2019
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2020
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Tarek Helou
Chief Operating Officer
|
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|
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2019
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2020
|
|
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190,000
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|
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|
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|
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190,000
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Ronald Iacobelli
Chief Technology Officer
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2019
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2020
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Wenbing Chris Wang
Chief Financial Officer
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2019
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2020
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Employment Agreements
We have entered into employment agreements with each of our senior executive officers. Under these agreements, each of our senior executive officers is employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or any misdemeanor involving moral turpitude, willful misconduct or gross negligence, dishonest acts to our detriment, continued failure to satisfactorily perform agreed duties, or material breach of any provisions of the employment agreement. We may also terminate an officer’s employment without cause upon advance written notice.
Each of the executive officers has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment, any confidential information or trade secrets of ours, our customers or prospective customers, or the confidential or proprietary information of any third-party received by us and for which we have confidential obligations. Each of the executive officers has also agreed to disclose in confidence to us all inventions, discoveries, concepts and plans which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and to assist us in obtaining and enforcing those patents, copyrights and other legal rights.
We have also entered into indemnification agreements with our directors and senior executive officers. Under these agreements, we will agree to indemnify them against certain liabilities and expenses that they incur in connection with claims made by reason of their being a director or officer of our company.
Potential Payments Upon Termination or Change in Control
There are no potential payments payable to our named executive officers upon a termination of employment without cause or resignation for good reason or termination of employment without cause or resignation for good reason following a change in control.
Outstanding Equity Incentive Awards At Fiscal Year-End
The following table sets forth certain information concerning option awards held by Phoenix’s named executive officers as of November 22, 2021. Phoenix’s named executive officers did not hold any stock awards as of December 31, 2020 and November 22, 2021.
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Option Awards
|
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Name
|
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Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
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Option
Exercise
Price
($)
|
|
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Option
Expiration
Date
|
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Xiaofeng Denton Peng
|
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4,200,000(1)
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0.43
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|
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1/24/2028
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Joe Mitchell
|
|
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700,000(2)
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|
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0.43
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3/30/2031
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Tarek Helou
|
|
|
|
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|
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550,000(3)
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0.43
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3/30/2031
|
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Ronald Iacobelli
|
|
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500,000(4)
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0.43
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4/26/2031
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Wenbing Chris Wang
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|
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500,000(5)
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|
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|
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0.43
|
|
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3/30/2031
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(1)
On January 24, 2021, Mr. Peng, who’s the CEO of SPI, our parent company, and our Chairman, was granted options to purchase 4,200,000 shares of Phoenix’s common stock as a special one-time award in recognition of the work done related to the Business Combination. The options were vested immediately, exercisable at $0.43 per share and expiring seven years from the date of grant.
(2)
On March 30, 2021, Mr. Mitchell was granted options to purchase 700,000 shares of Phoenix’s common stock under its 2021 Stock Plan, which options vest over four years, provided Mr. Mitchell remains in continuous service with Phoenix during the vesting period, with 25% vesting on each of the first, second, third and fourth anniversary of the grant date, exercisable at $0.43 per share and expiring 10 years from the grant date.
(3)
On March 30, 2021, Mr. Helou was granted options to purchase 550,000 shares of Phoenix’s common stock under its 2021 Stock Plan, which options vest over four years, provided Mr. Helou remains in continuous service with Phoenix during the vesting period, with 25% vesting on each of the first, second, third and fourth anniversary of the grant date, exercisable at $0.43 per share and expiring 10 years from the grant date.
(4)
On April 26, 2021, Mr. Iacobelli was granted options to purchase 500,000 shares of Phoenix’s common stock under its 2021 Stock Plan, which options vest over four years, provided Mr. Iacobelli remains in continuous service with us during the vesting period, with 25% vesting on each of the first, second, third and fourth anniversary of the grant date, exercisable at $0.43 per share and expiring 10 years from the date of grant.
(5)
On March 30, 2021, Mr. Wang was granted options to purchase 500,000 shares of Phoenix’s common stock under its 2021 Stock Plan, which options vest over four years, provided Mr. Wang remains in continuous service with us during the vesting period, with 25% vesting on each of the first, second, third and fourth anniversary of the grant date, exercisable at $0.43 per share and expiring 10 years from the date of grant.
Non-Executive Director Compensation
The non-executive members of our board of directors have not received any compensation prior to this offering and no arrangements have been entered into in relating to compensation after this offering. Following this offering, the board of directors will establish a compensation package for the non-executive members of the board of directors.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our board of directors.
2021 Omnibus Equity Incentive Plan
Our board of directors and stockholders have adopted and approved the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to our officers, employees, directors, consultants and advisers. The purpose of the 2021 Plan is to help us attract, motivate and retain such persons with awards under the 2021 Plan and thereby enhance shareholder value.
Administration. The 2021 Plan is administered by the board, and upon consummation of this offering will be administered by a committee of the board, which shall consist of two of more members of the board, each of whom is a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and independent” for purposes of any applicable listing requirements. Among other things, the committee has complete discretion, subject to the express limits of the 2021 Plan, to determine the directors, employees and nonemployee consultants to be granted an award, the type of award to be granted the terms and conditions of the award, the form of payment to be made and/or the number of shares of common stock subject to each award, the exercise price of each option and base price of each stock appreciation right (“SAR”), the term of each award, the vesting schedule for an award, whether to accelerate vesting, the value of the common stock underlying the award, and the required withholding, if any. The compensation committee may amend, modify or terminate any outstanding award, provided that the participant’s consent to such action is required if the action would impair the participant’s rights or entitlements with respect to that award. The compensation committee is also authorized to construe the award agreements, and may prescribe rules relating to the 2021 Plan. Notwithstanding the foregoing, the compensation committee does not have any authority to grant or modify an award under the 2021 Plan with terms or conditions that would cause the grant, vesting or exercise thereof to be considered nonqualified “deferred compensation” subject to Code Section 409A.
Grant of Awards; Shares Available for Awards. The 2021 Plan provides for the grant of stock options, SARs, performance share awards, performance unit awards, distribution equivalent right awards, restricted stock awards, restricted stock unit awards and unrestricted stock awards to non-employee directors, officers, employees and nonemployee consultants of Phoenix or its affiliates. The aggregate number of shares of common stock that may be issued under the 2021 Plan shall not exceed ten percent (10%) of the issued and outstanding shares of common stock on a fully diluted basis. Shares shall be deemed to have been issued under the 2021 Plan solely to the extent actually issued and delivered pursuant to an award. If any award expires, is cancelled, or terminates unexercised or is forfeited, the number of shares subject thereto is again available for grant under the 2021 Plan.
Stock Options. The 2021 Plan provides for either “incentive stock options” (“ISOs”), which are intended to meet the requirements for special federal income tax treatment under the Code, or “nonqualified stock options” (“NQSOs”). Stock options may be granted on such terms and conditions as the compensation committee may determine; provided, however, that the per share exercise price under a stock option may not be less than the fair market value of a share of common stock on the date of grant and the term of the stock option may not exceed 10 years (110% of such value and five years in the case of an ISO granted to an employee who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of capital stock of our Company or a parent or subsidiary of our Company). ISOs may only be granted to employees. In addition, the aggregate fair market value of common stock covered by one or more ISOs (determined at the time of grant), which are exercisable for the first time by an employee during any calendar year may not exceed 100,000. Any excess is treated as a NQSO.
Stock Appreciation Rights. A SAR entitles the participant, upon exercise, to receive an amount, in cash or stock or a combination thereof, equal to the increase in the fair market value of the underlying common stock between the date of grant and the date of exercise. SARs may be granted in tandem with, or independently of, stock options granted under the 2021 Plan. A SAR granted in tandem with a stock option (i) is exercisable only at such times, and to the extent, that the related stock option is exercisable in accordance with the procedure for exercise of the related stock option; (ii) terminates upon termination or exercise of the related stock option (likewise, the common stock option granted in tandem with a SAR terminates upon exercise of the SAR); (iii) is transferable only with the related stock option; and (iv) if the related stock option is an ISO, may be exercised only when the value of the stock subject to the stock
option exceeds the exercise price of the stock option. A SAR that is not granted in tandem with a stock option is exercisable at such times as the compensation committee may specify.
Performance Shares and Performance Unit Awards. Performance share and performance unit awards entitle the participant to receive cash or shares of common stock upon the attainment of specified performance goals. In the case of performance units, the right to acquire the units is denominated in cash values.
Distribution Equivalent Right Awards. A distribution equivalent right award entitles the participant to receive bookkeeping credits, cash payments and/or common stock distributions equal in amount to the distributions that would have been made to the participant had the participant held a specified number of shares of common stock during the period the participant held the distribution equivalent right. A distribution equivalent right may be awarded as a component of another award under the 2021 Plan, where, if so awarded, such distribution equivalent right will expire or be forfeited by the participant under the same conditions as under such other award.
Restricted Stock Awards and Restricted Stock Unit Awards. A restricted stock award is a grant or sale of common stock to the participant, subject to our right to repurchase all or part of the shares at their purchase price (or to require forfeiture of such shares if issued to the participant at no cost) in the event that conditions specified by the compensation committee in the award are not satisfied prior to the end of the time period during which the shares subject to the award may be repurchased by or forfeited to us. Our restricted stock unit entitles the participant to receive a cash payment equal to the fair market value of a share of common stock for each restricted stock unit subject to such restricted stock unit award, if the participant satisfies the applicable vesting requirement.
Unrestricted Stock Awards. An unrestricted stock award is a grant or sale of shares of our common stock to the participant that is not subject to transfer, forfeiture or other restrictions, in consideration for past services rendered to Mullen or an affiliate or for other valid consideration.
Change-in-Control Provisions. In connection with the grant of an award, the compensation committee may provide that, in the event of a change in control, such award will become fully vested and immediately exercisable.
Amendment and Termination. The compensation committee may adopt, amend and rescind rules relating to the administration of the 2021 Plan, and amend, suspend or terminate the 2021 Plan, but no such amendment or termination will be made that materially and adversely impairs the rights of any participant with respect to any award received thereby under the 2021 Plan without the participant’s consent, other than amendments that are necessary to permit the granting of awards in compliance with applicable laws. We have attempted to structure the 2021 Plan so that remuneration attributable to stock options and other awards will not be subject to the deduction limitation contained in Code Section 162(m).]
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Predecessor
The Predecessor’s parent company, Al Yousuf, LLC (“Al Yousuf”), provided an operating line of credit to the Predecessor to provide funds for the purchase of materials to build EVs. There is no established payment schedule, but repayments are made when cash is collected from sales. The interest rate is variable and resets on January 1 of each new year. The Predecessor borrowed $1.7 million and accrued interest expenses of $$0.3 million during the year ended December 31, 2019. The balance of the loan payable was $2.8 million and the accrued interest payable was $0.6 million as of December 31, 2019. There was no change to loan payable balance and there was no additional interest accrued during the period from January 1, 2020 to November 12, 2020. This loan payable in amount of $2.8 million and accrued interest payable in amount of $0.6 million was cancelled and recorded in additional paid in capital by Al Yousuf on November 12, 2020.
The Predecessor also accrues a management fee payable to Al Yousuf as payment of management services provided to Predecessor. It is calculated as a percentage of the capital contributed to the Predecessor at a variable management fee rate, fixed for 12 months at a time, which resets on January 1 of each new year. The balance of the accrued management fee payable was $13.4 million as of December 31, 2019. No management fee was charged in the year ended December 31, 2019 and for the period from January 1, 2020 to November 12, 2020. This management fee payable was cancelled and recorded in additional paid in capital by Al Yousuf on November 12, 2020.
The capital structure of the Predecessor consists of one class of LLC interests. Al Yousuf, as the sole member, as well as the managing member, of both PCL and PML owns all of the common interests issued and outstanding of the Predecessor as of December 31, 2019. As such, Al Yousuf owns and controls 100% of the equity in the Predecessor as of December 31, 2019 until November 12, 2020 when the Predecessor was acquired.
During the period from January 1, 2020 to November 12, 2020 and the year ended December 31, 2019, Al Yousuf waived the receivables from the Predecessor of $16.8 million and $1.0 million, respectively, which was recorded in addition paid-in capital in the consolidated balance sheets. During the year ended December 31, 2019, Al Yousuf made contribution of $4.8 million to the Predecessor.
Successor
Our ultimate parent company, SPI, made a capital contribution of $17.0 million to us in December 2020. Before this offering, SPI beneficially owns 100% of our currently outstanding shares of common stock.
Except for the stock option grants outlined above, there was no related party transaction for the nine months ended September 30, 2021.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of November 22, 2021, and as adjusted to reflect the sale of common stock being offered in this offering by:
•
each person, or group of affiliated persons, known to us to own beneficially more than 5% of our common stock;
•
each of our current directors;
•
each of our named executive officers; and
•
all of our current directors and executive officers as a group.
The information in the following table has been presented in accordance with the rules of the SEC. Under such rules, beneficial ownership of a class of capital stock includes any shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or investment power within 60 days through the exercise of any stock option, warrant or other right. If two or more persons share voting power or investment power with respect to specific securities, each such person is deemed to be the beneficial owner of such securities. Except as we otherwise indicate below and under applicable community property laws, we believe that the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown. Except as otherwise indicated, each stockholder named in the table is assumed to have sole voting and investment power with respect to the number of shares listed opposite the stockholder’s name.
The calculations of beneficial ownership in this table are based on 70,000,000 shares of common stock outstanding at November 22, 2021.
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Name and Address of Beneficial Owner
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Shares Beneficially
Owned
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Percent of Class
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Percent of Class
after this Offering
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EdisonFuture, Inc.
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70,000,000(1)
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100%
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|
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|
|
4677 Old Ironsides Dr, Suite 190
Santa Clara, CA 95054
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|
|
|
|
|
Xiaofeng Peng
|
|
|
|
|
4,200,000(2)
|
|
|
|
|
|
5.7%
|
|
|
|
|
|
|
4677 Old Ironsides Dr, Suite 190
Santa Clara, CA 95054
|
|
|
|
|
(1)
All of our outstanding shares of common stock held by EdisonFuture, Inc., a Delaware corporation wholly owned by SPI Solar, Inc., a wholly owned subsidiary of SPI Energy Co., Ltd., which is a Cayman Islands company listed on Nasdaq. The principal address of SPI Solar, Inc. is at 4677 Old Ironsides Drive #190, Santa Clara, CA 95054.
(2)
Represents shares of common stock underlying options that are exercisable at $0.43 per share of common stock for a period ending February 2028.
DESCRIPTION OF SECURITIES
General
On August 3, 2021, the Company amended its Certificate of Incorporation and the Company’s authorized all classes of stock is amended to 500,000,000 shares, of which (i) 450,000,000 shares shall be common stock, par value $0.0001 per share, and (ii) 50,000,000 shares shall be preferred stock, par value $0.0001 per share. On August 3, 2021, the Company effectuated a 70,000 for 1 stock split on the Company’s issued and outstanding common stock. After that, the Company’s issued and outstanding common stock is 70,000,000 shares of common stock.
Common Stock
Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of the stockholders, including the election of directors. Our articles of incorporation and bylaws do not provide for cumulative voting rights.
Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of our outstanding shares of common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that are outstanding or that we may designate and issue in the future.
Preferred Stock
Our board of directors is empowered, without stockholder approval, to issue shares of preferred stock with dividend, liquidation, redemption, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Options
We currently have the following outstanding options to purchase shares of our common stock:
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|
|
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Number of unexercised
options-exercisable
|
|
|
Number of unexercised
options-unexercisable
|
|
|
Xiaofeng Denton Peng
|
|
|
|
|
4,200,000
|
|
|
|
|
|
|
|
|
|
Joe Mitchell
|
|
|
|
|
|
|
|
|
|
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700,000
|
|
|
|
Tarek Helou
|
|
|
|
|
|
|
|
|
|
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550,000
|
|
|
|
Ron Iacobelli
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
Wenbing Chris Wang
|
|
|
|
|
|
|
|
|
|
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500,000
|
|
|
|
Directors and other employees
|
|
|
|
|
|
|
|
|
|
|
3,825,000
|
|
|
All of these options are exercisable at $0.43 per share.
Warrants
We currently do not have any outstanding warrants to purchase shares of our common stock or other securities.
Transfer Agent
The transfer agent for our common stock is Vstock Transfer, LLC. The transfer agent and registrar’s address is 18 Lafayette Place, Woodmere, NY 11598.
Listing
We intend to apply to have our common stock listed on the NASDAQ Capital Market under the symbol [“PEV.”]
Holders
As of November 22, 2021, there were 70,000,000 shares of common stock outstanding, which were held by one record stockholder.
Anti-takeover Effects of Our Articles of Incorporation and By-laws
We will be subject to the provisions of Section 203 of Delaware General Corporation Law, or the DGCL, regulating corporate takeovers upon completion of this offering. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
•
a stockholder who owns 10% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);
•
an affiliate of an interested stockholder; or
•
an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.
A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
•
our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;
•
after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
•
on or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.
Special meeting of stockholders
Our bylaws provide that special meetings of our stockholders may be called only by resolution of the board of directors, or by the Chairman or the President.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, no public market for our common stock existed, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock from time to time and could impair our future ability to raise equity capital in the future. Furthermore, because only a limited number of shares of our common stock will be available for sale shortly after this offering due to certain contractual and legal restrictions on resale described below, sales of substantial amounts of our common stock in the public market after such restrictions lapse, or the anticipation of such sales, could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future.
Based upon the number of shares outstanding as of , 2021, upon the closing of this offering, we will have outstanding an aggregate of shares of common stock, assuming no exercise of the underwriters’ over-allotment option and no exercise of outstanding options and warrants, after giving effect to the conversion of all outstanding shares of our preferred stock into shares of common stock immediately prior to the closing of this offering. All of the shares sold in this offering by us will be freely tradable without restrictions or further registration under the Securities Act, unless held by our affiliates, as that term is defined under Rule 144 under the Securities Act, or subject to lock-up agreements. The remaining shares of common stock outstanding upon the closing of this offering are restricted securities as defined in Rule 144. Restricted securities may be sold in the U.S. public market only if registered or if they qualify for an exemption from registration, including by reason of Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. These remaining shares will generally become available for sale in the public market as follows:
•
no shares will be eligible for sale in the public market on the date of this prospectus; and
•
approximately shares will be eligible for sale in the public market upon expiration of lock-up agreements 181 days after the date of this prospectus, subject in certain circumstances to the volume, manner of sale and other limitations of Rule 144 and Rule 701.
As of , 2021, of the shares of common stock issuable upon exercise of outstanding options and warrants, approximately shares will be vested and eligible for sale 181 days after the date of this prospectus.
We may issue shares of common stock from time to time as consideration for future acquisitions, investments or other corporate purposes. In the event that any such acquisition, investment or other transaction is significant, the number of shares of common stock that we may issue may in turn be significant. We may also grant registration rights covering those shares of common stock issued in connection with any such acquisition and investment.
In addition, the shares of common stock reserved for future issuance under our 2021 Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements, a registration statement under the Securities Act or an exemption from registration, including Rule 144 and Rule 701.
Rule 144
In general, persons who have beneficially owned restricted shares of our common stock for at least six months, and any affiliate of the company who owns either restricted or unrestricted shares of our common stock, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144 under the Securities Act.
In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (1) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale, (2) we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (3) we are current in our Exchange Act reporting at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months, but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
•
1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after the closing of this offering based on the number of common shares outstanding as of , 2021.
•
the average weekly trading volume of our common stock on during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Rule 701
In general, under Rule 701, a person who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been one of our affiliates during the immediately preceding 90 days may sell these shares in reliance upon Rule 144, but without being required to comply with the notice, manner of sale, public information requirements or volume limitation provisions of Rule 144. Rule 701 also permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701. As of , 2021, shares of our outstanding common stock had been issued in reliance on Rule 701 as a result of exercises of stock options and issuance of restricted stock. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.]
Form S-8 Registration Statements
Following this offering, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act to register the offer and sale of shares of our common stock that are issuable pursuant to our equity incentive plan. Shares covered by this registration statement will then be eligible for sale in the public markets, subject to vesting restrictions, any applicable lock-up agreements described below and Rule 144 limitations applicable to affiliates.
Lock-Up Arrangements
We, all of our directors and executive officers and holders of one percent (1%) or more of our outstanding shares of common stock as of the effective date of the registration statement related to this offering (and all holders of securities exercisable for or convertible into shares of common stock), have agreed with the underwriters that, for a period of 180 days following the date of this prospectus, subject to certain exceptions, we and they will not, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, or otherwise dispose of or hedge any of our shares of common stock, any options, or any securities convertible into, or exchangeable for or that represent the right to receive shares of our common stock. These agreements are described in the section of this prospectus titled “Underwriting.”
Registration Rights
The Company has not granted registration rights to any party.
UNDERWRITING
We are offering our shares of common stock described in this prospectus through the underwriters named below. Maxim Group (or Maxim) is acting as representative of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase, and we have agreed to sell to the underwriters, the number of shares of common stock listed next to its name in the following table.
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Underwriters
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Number
of Shares
|
|
|
Maxim Group LLC
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|
|
|
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Roth Capital Partners
|
|
|
|
|
|
|
|
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EF Hutton
|
|
|
|
|
|
|
|
|
Total
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|
|
|
|
|
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|
The underwriting agreement provides that the underwriters must buy all of the shares of common stock if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares as described below.
Our shares of common stock are offered subject to a number of conditions, including:
•
receipt and acceptance of our shares of common stock by the underwriters; and
•
the underwriters’ right to reject orders in whole or in part.
We have been advised by Maxim that the underwriters intend to make a market in our shares of common stock but that they are not obligated to do so and may discontinue making a market at any time without notice.
In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.
Option to Purchase Additional Shares
We have granted the underwriters an option to buy up to an aggregate of additional shares of common stock. The underwriters have 45 days from the date of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares of common stock approximately in proportion to the amounts specified in the table above.
Underwriting Discount
Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. The underwriters may offer the shares through one or more of their affiliates or selling agents. If all the shares are not sold at the initial public offering price, The underwriters may change the offering price and the other selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein.
The following table shows the per share and total underwriting discount we will pay to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase up to additional shares.
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No
Exercise
|
|
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Full
Exercise
|
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Per share
|
|
|
|
$
|
|
|
|
|
|
$
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|
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|
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Total
|
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$
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
|
Per share
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
Total
|
|
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|
$
|
|
|
|
|
|
$
|
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|
We have agreed to pay Maxim’s out-of-pocket accountable expenses, including Maxim’s legal fees, up to a maximum amount of $100,000, irrespective of whether the offering is consummated.
We estimate that the total expenses of the offering payable by us, not including the underwriting discount, will be approximately $[ ] million. We have also agreed to reimburse the underwriters for certain expenses incurred by them.
Representative’s Warrants
We have also agreed to issue to the underwriters (or their permitted assignees) the warrants to purchase a number of our shares of common stock equal to an aggregate of 7% of the total number of shares of common stock sold in this offering (or Representative’s Warrants). The Representative’s Warrants will have an exercise price equal to 110% of the offering price of the shares of common stock sold in this offering and may be exercised on a cashless basis. The Representative’s Warrants are exercisable commencing six (6) months after the effective date of the registration statement related to this offering, and will expire five years after such date. The Representative’s Warrants are not redeemable by us. We have agreed to a one-time demand registration of the shares of common stock underlying the Representative’s Warrants for a period of five years from the closing date of this offering. The Representative’s Warrants also provide for unlimited “piggyback” registration rights at our expense with respect to the underlying shares of common stock during the
five-year period commencing from the closing date of this offering. The Representative’s Warrants and the shares of common stock underlying the Representative’s Warrants, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under the Rule) may not sell, transfer, assign, pledge or hypothecate the Representative’s Warrants or the securities underlying the Representative’s Warrants, nor will they engage in any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the Representative’s Warrants or the underlying securities for a period of six (6) months from the effective date of this offering, except to any FINRA member participating in the offering and their bona fide officers or partners. The Representative’s Warrants will provide for adjustment in the number and price of such Representative’s Warrants (and the shares of common stock underlying such Representative’s Warrants) to prevent dilution in the event of a forward or reverse stock split, stock dividend or similar recapitalization.
Right of First Refusal
We have agreed to grant the underwriters, for the twelve (12) month period following the effective date of the registration statement related to this offering, a right of first refusal to act as lead managing underwriter and book runner for any and all future public or private equity, equity-linked offerings during such twelve (12) month period by us, or any successor to or any subsidiary of our company subject to such procedures as agreed upon in the underwriting agreement.
Lock-Up Agreements
We and our directors, officers and holders of one percent (1%) or more of our outstanding shares of common stock as of the effective date of the registration statement related to this offering (and all holders of securities exercisable for or convertible into shares of common stock) shall enter into customary “lock-up” agreements in favor of Maxim pursuant to which such persons and entities shall agree, for a period of 180 days after the effective date of the registration statement related to this offering, that they shall neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities without Maxim’s prior written consent, including the issuance of shares of common stock upon the exercise of currently outstanding convertible securities.
Indemnification
We have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
No Public Market
Prior to this offering, there has not been a public market for our securities in the U.S. and the public offering price for our securities will be determined through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
We offer no assurances that the initial public offering price will correspond to the price at which our securities will trade in the public market subsequent to this offering or that an active trading market for our securities will develop and continue after this offering.
Stock Exchange
We have applied to have our shares of common stock approved for listing on the NASDAQ Capital Market under the symbol “PEV.”
Price Stabilization, Short Positions
In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our shares of common stock during and after this offering, including:
•
stabilizing transactions;
•
short sales;
•
purchases to cover positions created by short sales;
•
imposition of penalty bids; and
•
syndicate covering transactions.
Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our shares of common stock while this offering is in progress. Stabilization transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. These transactions may also include making short sales of our shares of common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering and purchasing shares of common stock on the open market to cover short positions created by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked short sales,” which are short positions in excess of that amount.
The underwriters may close out any covered short position by either exercising their option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.
Naked short sales are short sales made in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of common stock in the open market that could adversely affect investors who purchased in this offering.
The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because Maxim has repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
These stabilizing transactions, short sales, purchases to cover positions created by short sales, the imposition of penalty bids and syndicate covering transactions may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters may carry out these transactions on the NYSE American, in the over-the-counter market or otherwise. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of the shares. Neither we, nor any of the underwriters make any representation that the underwriters will engage in these stabilization transactions or that any transaction, once commenced, will not be discontinued without notice.
Determination of Offering Price
Prior to this offering, there was no public market for our shares of common stock. The initial public offering price will be determined by negotiation among us and Maxim. The principal factors to be considered in determining the initial public offering price include:
•
the information set forth in this prospectus and otherwise available to Maxim;
•
our history and prospects and the history and prospects for the industry in which we compete;
•
our past and present financial performance;
•
our prospects for future earnings and the present state of our development;
•
the general condition of the securities market at the time of this offering;
•
the recent market prices of, and demand for, publicly traded shares of generally comparable companies; and
•
other factors deemed relevant by the underwriters and us.
The estimated public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors. Neither we nor the underwriters can assure investors that an active trading market will develop for our shares of common stock or that the shares of common stock will trade in the public market at or above the initial public offering price.
Affiliations
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and their affiliates may from time to time in the future engage with us and perform services for us or in the ordinary course of their business for which they will receive customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of us. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of these securities or
instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby has been passed upon for us by Loeb & Loeb LLP, New York, New York. Pryor Cashman LLP, New York, New York, is acting as counsel to the underwriters.
EXPERTS
Our consolidated financial statements as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor) and for the period from November 13, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor) have been included herein and in the registration statement in reliance upon the report of Marcum Bernstein & Pinchuk LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement at the SEC’s website at http://www.sec.gov. We also maintain a website at www.Phoenix.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus. We have included our website in this prospectus solely as an inactive textual reference, and you should not consider the contents of our website in making an investment decision with respect to our common stock. The registration statement, including all exhibits and amendments to the registration statement, has been filed electronically with the SEC.
Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports, proxy statements, and other information with the SEC.
Phoenix Motor Inc.
Index to Consolidated Financial Statements
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Page
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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Unaudited condensed consolidated financial statements for the nine months ended September 30, 2021 and 2020
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F-21
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F-22
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F-23
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F-24
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F-25
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Phoenix Motor Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Phoenix Motor Inc. (the “Company”) as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the period from November 13, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), and the results of its operations and its cash flows for the period from November 13, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum Bernstein & Pinchuk llp
Marcum Bernstein & Pinchuk llp
We have served as the Company’s auditor since 2021.
Beijing, China
August 24, 2021
PHOENIX MOTOR INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
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Successor
|
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Predecessor
|
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December 31,
2020
|
|
|
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December 31,
2019
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|
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ASSETS
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Current assets:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
15,699
|
|
|
|
|
|
$
|
29
|
|
|
|
Accounts receivable, net
|
|
|
|
|
1,157
|
|
|
|
|
|
|
1,695
|
|
|
|
Inventories, net
|
|
|
|
|
1,545
|
|
|
|
|
|
|
3,176
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
848
|
|
|
|
|
|
|
652
|
|
|
|
Total current assets
|
|
|
|
|
19,249
|
|
|
|
|
|
|
5,552
|
|
|
|
Property and equipment, net
|
|
|
|
|
2,766
|
|
|
|
|
|
|
3,318
|
|
|
|
Intangible assets, net
|
|
|
|
|
2,941
|
|
|
|
|
|
|
85
|
|
|
|
Goodwill
|
|
|
|
|
4,271
|
|
|
|
|
|
|
—
|
|
|
|
Total assets
|
|
|
|
$
|
29,227
|
|
|
|
|
|
$
|
8,955
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
1,356
|
|
|
|
|
|
$
|
1,147
|
|
|
|
Accrued liabilities
|
|
|
|
|
450
|
|
|
|
|
|
|
281
|
|
|
|
Advance from customers
|
|
|
|
|
1,896
|
|
|
|
|
|
|
1,744
|
|
|
|
Amount due to related party, current
|
|
|
|
|
—
|
|
|
|
|
|
|
614
|
|
|
|
Warranty reserve
|
|
|
|
|
530
|
|
|
|
|
|
|
607
|
|
|
|
Long-term borrowing, current portion
|
|
|
|
|
22
|
|
|
|
|
|
|
15
|
|
|
|
Total current liabilities
|
|
|
|
|
4,254
|
|
|
|
|
|
|
4,408
|
|
|
|
Long-term borrowings
|
|
|
|
|
183
|
|
|
|
|
|
|
12
|
|
|
|
Amount due to related party, non-current
|
|
|
|
|
—
|
|
|
|
|
|
|
16,172
|
|
|
|
Total liabilities
|
|
|
|
|
4,437
|
|
|
|
|
|
|
20,592
|
|
|
|
Commitments and contingencies (Note 13)
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|
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|
|
|
|
|
|
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|
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Equity:
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Common stocks, par $0.0001, 450,000,000 shares authorized, 70,000,000 shares issued and outstanding as of December 31, 2020*
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7
|
|
|
|
|
|
|
—
|
|
|
|
Subscription receivable
|
|
|
|
|
(7)
|
|
|
|
|
|
|
—
|
|
|
|
Additional paid-in capital
|
|
|
|
|
26,033
|
|
|
|
|
|
|
49,558
|
|
|
|
Accumulated deficit
|
|
|
|
|
(1,243)
|
|
|
|
|
|
|
(61,195)
|
|
|
|
Total equity (deficit)
|
|
|
|
|
24,790
|
|
|
|
|
|
|
(11,637)
|
|
|
|
Total liabilities and equity (deficit)
|
|
|
|
$
|
29,227
|
|
|
|
|
|
$
|
8,955
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s recapitalization and stock split (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
PHOENIX MOTOR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Period from
November 13, 2020
to December 31,
2020
|
|
|
|
Period from
January 1, 2020
to November 12,
2020
|
|
|
For the Year
Ended
December 31,
2019
|
|
|
Net sales
|
|
|
|
$
|
377
|
|
|
|
|
|
$
|
4,132
|
|
|
|
|
$
|
3,990
|
|
|
|
Cost of revenue
|
|
|
|
|
479
|
|
|
|
|
|
|
4,451
|
|
|
|
|
|
4,288
|
|
|
|
Gross loss
|
|
|
|
|
(102)
|
|
|
|
|
|
|
(319)
|
|
|
|
|
|
(298)
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Total operating expenses
|
|
|
|
|
1,147
|
|
|
|
|
|
|
3,686
|
|
|
|
|
|
5,381
|
|
|
|
Operating loss
|
|
|
|
|
(1,249)
|
|
|
|
|
|
|
(4,005)
|
|
|
|
|
|
(5,679)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(4)
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
(300)
|
|
|
|
Others
|
|
|
|
|
12
|
|
|
|
|
|
|
587
|
|
|
|
|
|
8
|
|
|
|
Total other income (expense), net
|
|
|
|
|
8
|
|
|
|
|
|
|
583
|
|
|
|
|
|
(292)
|
|
|
|
Loss before income taxes
|
|
|
|
|
(1,241)
|
|
|
|
|
|
|
(3,422)
|
|
|
|
|
|
(5,971)
|
|
|
|
Income tax provision
|
|
|
|
|
(2)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(2)
|
|
|
|
Net loss
|
|
|
|
$
|
(1,243)
|
|
|
|
|
|
$
|
(3,422)
|
|
|
|
|
$
|
(5,973)
|
|
|
|
Net loss per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding*
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s recapitalization and stock split (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
PHOENIX MOTOR INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except for share and per share data)
|
|
|
|
Shares*
|
|
|
Common
Stocks
|
|
|
Subscription
Receivable
|
|
|
Additional
Paid -In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Equity
(deficit)
|
|
|
Predecessor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
43,741
|
|
|
|
|
$
|
(55,222)
|
|
|
|
|
$
|
(11,481)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(5,973)
|
|
|
|
|
|
(5,973)
|
|
|
|
Liabilities waived by a stockholder
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
999
|
|
|
|
|
|
—
|
|
|
|
|
|
999
|
|
|
|
Membership contribution
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
4,818
|
|
|
|
|
|
—
|
|
|
|
|
|
4,818
|
|
|
|
Balance as of December 31, 2019
|
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
49,558
|
|
|
|
|
$
|
(61,195)
|
|
|
|
|
$
|
(11,637)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(3,422)
|
|
|
|
|
|
(3,422)
|
|
|
|
Liabilities waived by a stockholder
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
16,847
|
|
|
|
|
|
—
|
|
|
|
|
|
16,847
|
|
|
|
Balance as of November 12, 2020
|
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
66,405
|
|
|
|
|
$
|
(64,617)
|
|
|
|
|
$
|
1,788
|
|
|
|
Successor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Predecessor equity
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(66,405)
|
|
|
|
|
|
64,617
|
|
|
|
|
|
(1,788)
|
|
|
|
Business combination consideration paid by a stockholder
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
9,033
|
|
|
|
|
|
—
|
|
|
|
|
|
9,033
|
|
|
|
Recapitalization
|
|
|
|
|
70,000,000
|
|
|
|
|
|
7
|
|
|
|
|
|
(7)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Balance as of November 13, 2020
|
|
|
|
|
70,000,000
|
|
|
|
|
$
|
7
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
9,033
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
9,033
|
|
|
|
Capital contributions
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
17,000
|
|
|
|
|
|
—
|
|
|
|
|
|
17,000
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,243)
|
|
|
|
|
|
(1,243)
|
|
|
|
Balance as of December 31, 2020
|
|
|
|
|
70,000,000
|
|
|
|
|
$
|
7
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
26,033
|
|
|
|
|
$
|
(1,243)
|
|
|
|
|
$
|
24,790
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s recapitalization and stock split (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
PHOENIX MOTOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Period from
November 13, 2020
to December 31,
2020
|
|
|
|
Period from
January 1, 2020
to November 12,
2020
|
|
|
Year Ended
December 31,
2019
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(1,243)
|
|
|
|
|
|
$
|
(3,422)
|
|
|
|
|
$
|
(5,973)
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
353
|
|
|
|
|
|
|
852
|
|
|
|
|
|
582
|
|
|
|
Reclassification of CIP project to research and development expenses
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
218
|
|
|
|
Expenses paid by the stockholder
|
|
|
|
|
—
|
|
|
|
|
|
|
61
|
|
|
|
|
|
701
|
|
|
|
Non-cash interest expense
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
297
|
|
|
|
Forgiveness of PPP loan
|
|
|
|
|
—
|
|
|
|
|
|
|
(551)
|
|
|
|
|
|
—
|
|
|
|
Provision for accounts receivable
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
15
|
|
|
|
Loss on disposition of property and equipment
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(4)
|
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
(65)
|
|
|
|
|
|
|
603
|
|
|
|
|
|
(1,335)
|
|
|
|
Inventories
|
|
|
|
|
(61)
|
|
|
|
|
|
|
1,793
|
|
|
|
|
|
(1,569)
|
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
(303)
|
|
|
|
|
|
|
108
|
|
|
|
|
|
938
|
|
|
|
Accounts payable
|
|
|
|
|
(93)
|
|
|
|
|
|
|
302
|
|
|
|
|
|
954
|
|
|
|
Accrued liabilities
|
|
|
|
|
(25)
|
|
|
|
|
|
|
194
|
|
|
|
|
|
(22)
|
|
|
|
Warranty reserve
|
|
|
|
|
(59)
|
|
|
|
|
|
|
(19)
|
|
|
|
|
|
229
|
|
|
|
Customer deposit
|
|
|
|
|
62
|
|
|
|
|
|
|
90
|
|
|
|
|
|
1,635
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
(1,434)
|
|
|
|
|
|
|
11
|
|
|
|
|
|
(3,334)
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
(80)
|
|
|
|
|
|
|
(556)
|
|
|
|
|
|
(2,865)
|
|
|
|
Proceeds from disposal of property and equipment
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
26
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(80)
|
|
|
|
|
|
|
(556)
|
|
|
|
|
|
(2,839)
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
—
|
|
|
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
Repayment of borrowings
|
|
|
|
|
(15)
|
|
|
|
|
|
|
(8)
|
|
|
|
|
|
(14)
|
|
|
|
Proceeds from borrowings – related party
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
1,697
|
|
|
|
Repayment of borrowings – related party
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(486)
|
|
|
|
Proceeds of capital contribution
|
|
|
|
|
17,000
|
|
|
|
|
|
|
—
|
|
|
|
|
|
4,818
|
|
|
|
Net cash generated from financing activities
|
|
|
|
|
16,985
|
|
|
|
|
|
|
744
|
|
|
|
|
|
6,015
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
|
15,471
|
|
|
|
|
|
|
199
|
|
|
|
|
|
(158)
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
|
|
228
|
|
|
|
|
|
|
29
|
|
|
|
|
|
187
|
|
|
|
Cash and cash equivalents at end of year
|
|
|
|
$
|
15,699
|
|
|
|
|
|
$
|
228
|
|
|
|
|
$
|
29
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
$
|
—
|
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
2
|
|
|
|
Income tax paid
|
|
|
|
$
|
—
|
|
|
|
|
|
$
|
2
|
|
|
|
|
$
|
2
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan forgiveness from by the stockholder
|
|
|
|
|
|
|
|
|
|
|
$
|
16,786
|
|
|
|
|
$
|
298
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
PHOENIX MOTOR INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$ thousands)
1.
Description of Business and Organization
Phoenix Motor Inc. (“Phoenix Motor” and “the Company”) and its subsidiaries (collectively the “Group”) is a leading techno-motive company that designs, assembles, and integrates electric drive systems for medium duty electric vehicles (“EVs”).
Phoenix Cars, LLC (“PCL”), a subsidiary of Phoenix Motor, designs and manufactures advanced zero-emission electric drivetrain systems for integration in medium to heavy-duty commercial fleet vehicles in United States. Phoenix Motorcars Leasing, LLC (“PML”), a subsidiary of Phoenix Motor, serves as a sales and leasing dealership for PCL in United States.
Phoenix Motor was incorporated in the state of Delaware in October 2020. EdisonFuture, Inc., a subsidiary of SPI Energy Co., Ltd (“SPI”), is the parent company of Phoenix Motor. On November 12, 2020, EdisonFuture, Inc. acquired 100% of the membership interest of PCL and PML. Simultaneously, EdisonFuture, Inc. effected the transfer of 100% membership interests of PCL and PML to Phoenix Motor. The acquisition has been accounted for under ASC 805 Business Combinations (see Note 3).
As a result of the Business Combination, the Company is the accounting acquirer and PCL and PML are the accounting acquirees and accounting predecessor. The Company’s financial statements for the year ended December 31, 2019 and for the period from January 1, 2020 to November 12, 2020 presented in this filing reflect the combined historical operations of PCL and PML (labeled “Predecessor”). The Company’s financial statements for the period from November 13, 2020 to December 31, 2020 reflect the operation of the Company after acquisition (labeled “Successor”).
As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the accompanying Consolidated Financial Statements include a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are, therefore, not comparable.
2.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The accompany consolidated financial statements of the Group are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The accompany consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the financial support from shareholder, the capital raises through issuance of common stock, and the Group’s ability to operate profitably, to generate cash flows from operations.
(b)
Principles of Consolidation
The consolidated financial statements include the financial statements of the Group and its subsidiaries. All material intercompany transactions and balances have been eliminated upon consolidation.
(c)
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Group’s consolidated financial statements include the allowance made for doubtful accounts receivable, inventory write-downs, the estimated useful lives of long-lived assets, the impairment of goodwill and long-lived assets, accrued warranty expenses, the purchase
price allocation in acquisition and fair value of financial instruments. Changes in facts and circumstances may result in revised estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
(e)
Fair Value of Financial Instruments
The Group measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:
•
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
•
Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs).
•
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions.
The Group uses quoted market prices to determine the fair value when available. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates.
(f) Business Combination
Business combinations are recorded using the acquisition method of accounting and, accordingly, the acquired assets and liabilities are recorded at their fair market value at the date of acquisition. Any excess of acquisition cost over the fair value of the acquired assets and liabilities, including identifiable intangible assets, is recorded as goodwill. The Group charges acquisition related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred. Those costs typically include transaction and integration costs, such as legal, accounting, and other professional fees.
The Group adopted Accounting Standard Update (“ASU”) 2017-01 “Business Combination (Topic 805): Clarifying the Definition of a Business” on January 1, 2019. Upon the adoption of ASU 2017-01, a new screen test is introduced to evaluate whether a transaction should be accounted for as an acquisition and/or disposal of a business versus assets. In order for a purchase to be considered an acquisition of a business, and receive business combination accounting treatment, the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. The adoption of this standard requires future purchases to be evaluated under the new framework.
(h)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash accounts, interest bearing savings accounts and all highly liquid investments with original maturities of three months or less, and which are unrestricted as to withdrawal and use. There were no cash equivalents as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor).
(j)
Accounts Receivable, net
The Group grants open credit terms to credit-worthy customers. Accounts receivable are primarily related to sales of EV and EV components. The Group maintains allowances for doubtful accounts. The Group regularly monitors and assesses the risk of not collecting amounts owed by customers. This evaluation is based upon a variety of factors, including an analysis of amounts current and past due along with relevant history and facts particular to the customer. The Group does not have any off-balance-sheet credit exposure related to its customers.
(k)
Inventories, net
Inventories are stated at the lower of cost or net realizable value (market value). The cost of inventories is determined on the basis of first in first out method. The cost of finished goods comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less selling expenses and any further costs expected to be incurred for completion. Adjustments to reduce the cost of inventory to net realizable value are made, if required, for estimated excess, obsolescence, or impaired balances.
(l)
Property and Equipment
The Group accounts for its property and equipment at cost, less accumulated depreciation. Cost includes the prices paid to acquire or construct the assets and any expenditure that substantially extends the useful life of an existing asset. The Group expenses repair and maintenance costs when they are incurred. Depreciation is recorded on the straight-line method based on the estimated useful lives of the assets as follows:
|
|
Furniture, fixtures and equipment
|
|
|
3 to 7 years
|
|
|
|
Automobile
|
|
|
3 to 5 years
|
|
|
|
Leased automobile
|
|
|
3 years
|
|
|
|
Leasehold improvements
|
|
|
The shorter of the estimated life or the lease term
|
|
(m)
Intangible Assets other than Goodwill
Intangible assets consist of technology, tradename and others. Amortization is recorded on the straight-line method based on the estimated useful lives of the assets.
(o)
Impairment of Long-lived Assets
The Group’s long-lived assets include property and equipment and other intangible assets with finite lives. The Group evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Group first compare undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Any impairment write-downs would be treated as permanent reductions in the carrying amounts of the assets and a charge to operations would be recognized.
(q)
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of the acquired entity as a result of the Group’s acquisitions of interests in its subsidiaries. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Group has an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than the carrying amount, the quantitative impairment test is performed.
In performing the two-step quantitative impairment test, the first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is
determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and goodwill to reporting units, and determining the fair value of each reporting unit.
(n)
Income Taxes
The Group accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.
The Group recognizes in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, management presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. In addition, a tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Group’s tax liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of the tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Group records interest and penalties related to an uncertain tax position, if and when required, as part of income tax expense in the consolidated statements of operations. No reserve for uncertainty tax position was recorded by the Group during any period presented.
(o)
Revenue Recognition
On January 1, 2019, the Group adopted Accounting Standards Codification (“ASC”) No. 606, “Revenue from Contracts with Customers” (“ASC 606” or “Topic 606”) and applied the modified retrospective method to all contracts that were not completed as of January 1, 2019. The Group has determined that the impact of the transition to the new standard is immaterial to the Group’s revenue recognition model. Accordingly, the Group has not made any adjustments to opening retained earnings and revenues for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor) were presented under ASC 606.
The Group’s accounting practices under ASC Topic 606 are as followings:
Sale of EVs
The Group generates revenue from sales of EVs and identifies the customers who purchase the vehicle as its customers. EV buyers in California are entitled to government grants when they purchase EV that qualifies certain government grant project. The Group applies for and collect such government grants on behalf of the customers. Accordingly, customers only pay the amount after deducting government grants.
The Group recognizes revenue on sale of EVs at a point in time following the transfer of control of such products to the customer, which typically occurs upon the delivery to the customer. The Group determined that the government grants should be considered as part of the transaction price because it is granted to the EV buyer and the buyer remains liable for such amount in the event the grants were not received by the Group or returned due to the buyer breaks the government grant terms and conditions.
Lease of EVs
EV leasing revenue includes revenue recognized under lease accounting guidance for direct leasing programs. The Group accounts for these leasing transactions as operating leases under ASC 840 Leases, and revenues are recognized on a straight-line basis over the contractual term.
Other revenue
Other revenue consists of maintenance service, sales of component and charging stations, shipping and delivery fees and other.
Disaggregation of revenues
The Group disaggregates its revenue by three primary categories: sales of EVs, lease of EVs and others. The following is a summary of the Group’s disaggregated revenues:
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Period from November 13,
2020 to December 31, 2020
|
|
|
|
Period from January 1,
2020 to November 12, 2020
|
|
|
Year ended December 31, 2019
|
|
|
Sales of EVs
|
|
|
|
$
|
235
|
|
|
|
|
|
$
|
2,690
|
|
|
|
|
$
|
2,649
|
|
|
|
Lease of EVs
|
|
|
|
|
92
|
|
|
|
|
|
|
492
|
|
|
|
|
|
303
|
|
|
|
Others
|
|
|
|
|
50
|
|
|
|
|
|
|
950
|
|
|
|
|
|
1,038
|
|
|
|
|
|
|
|
$
|
377
|
|
|
|
|
|
$
|
4,132
|
|
|
|
|
$
|
3,990
|
|
|
A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The Group records contract liabilities as advance from customers. As of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), the balances of contract liabilities were $1,896 and $1,744, respectively.
(p)
Cost of Revenues
Cost of revenues for EV sales includes direct parts, material and labor costs, manufacturing overheads, and shipping and logistics costs. Cost of revenues for EV leasing primarily includes the depreciation of operating lease vehicles over the lease term and other leasing related charges including vehicle insurance. Cost of other revenue includes direct parts, material and labor costs, as well as shipping and delivery and other costs.
(q)
Segment Reporting
Operating segments are defined as components of a Group which separate financial information is available that is evaluated regularly by the operating decision maker in deciding how to allocate resources and assessing performance. The Group’s chief operating decision maker (“CODM”) is Chief Executive Officer, Mr. Joe Mitchell. Based on the financial information presented to and reviewed by the CODM, the Group has determined that it had a single operating and reporting segment for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor).
(s)
Product Warranties
The Group provides warranties on all vehicles or components sold in addition to pass through warranties from third party component suppliers. The Group accrues a warranty reserve for the products sold by the Group, which includes the Group’s best estimate of the projected costs to repair or replace items under warranties. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Group’s relatively short history of sales, and changes to the Group’s historical or projected warranty experience may cause material changes to the warranty reserve in the future. The Group considers the warranty provided is not providing incremental service to customers rather an assurance to the quality of the vehicle, and therefore is not a separate performance obligation and should be accounted for in accordance with ASC 460,
Guarantees. Warranty expense is recorded as a component of cost of sales in the consolidated statements of operations. The balance of warranty reserves was $530 and $607 as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), respectively.
(t)
Government Grant
The Group receives grants from government agencies related to sales and leases of its EVs. The government grants related to the sale of EVs are accounted under ASC 606. For government grants associated with leased vehicles under operating leases, the grants are recorded in advance from customers when received and are recognized to reduce the cost of sales during useful life of leased vehicles.
(u)
Recently Accounting Pronouncements
Recently Adopted Accounting Standards
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes the amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation processes for Level 3 fair value measurements; modifies certain disclosure requirements in Topic 820; and require additional disclosures such as the range and weighted average of significant unobservable inputs used to develop Level 3 measurements etc. ASU No. 2018-13 is effective for the Group beginning in the first quarter of fiscal year 2020. The Group adopted this ASU as of January 1, 2020 and it did not have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, the Group will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Group adopted this ASU as of January 1, 2020 and it did not have a material impact on its consolidated financial statements.
Accounting Pronouncements Issued But Not Yet Adopted
In February 2016, the FASB issued ASU 2016-12, Leases (ASC Topic 842), which amends the leases requirements in ASC Topic 840, Leases. Under the new lease accounting standard, a lessee will be required to recognize a right-of-use asset and lease liability for most leases on the balance sheet. The new standard also modifies the classification criteria and accounting for sales-type and direct financing leases, and enhances the disclosure requirements. Leases will continue to be classified as either finance or operating leases. In June 2020, ASU 2020-05, amendment to ASC Topic 842 modified the effective dates of all other entities. For all other entities, ASC Topic 842 is effective for fiscal years beginning after December 15, 2021. The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Group is evaluating the impact of this guidance on its consolidated financial statements and the impact is not expected to be material.
In December 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not subject to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment to subsidiary or vice versa, 5) elimination of exception to intraperiod allocation when there is gain in discontinued operations and a loss from continuing operations, 6) treatment of franchise taxes that are partially based on income. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other
entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2021 and interim periods beginning after December 15, 2022. The Group is evaluating the impact of this guidance on its consolidated financial statements and the impact is not expected to be material.
The Group does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
3. Business Combination
On November 12, 2020, the Company completed the acquisition of 100% equity interest of PCL and PML for total consideration of $9,033 in the form of issued and unissued ordinary shares of SPI, valued at $7.87 per share, subject to certain adjustments. PCL and PML are an electric drivetrain manufacturer for medium-duty commercial vehicles and final stage manufacturer that integrates its drivetrains into these vehicles. This acquisition provided the Company a strong foothold in the U.S. EV sector.
The Group accounted the acquisition using the purchase method of accounting under ASC 805, Business Combinations. The Group made estimates and judgments in determining the fair value of acquired assets and liabilities, based on management’s experiences with similar assets and liabilities. As of November 12, 2020, the allocation of the purchase price is as follows:
|
|
Identifiable assets acquired and liabilities assumed
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent
|
|
|
|
$
|
228
|
|
|
|
|
Account and other receivables, net
|
|
|
|
|
1,092
|
|
|
|
|
Inventories, net
|
|
|
|
|
1,565
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
2,864
|
|
|
|
|
Identifiable intangible assets, net
|
|
|
|
|
3,043
|
|
|
|
|
Prepaid expenses and other assets, current and non-current
|
|
|
|
|
537
|
|
|
|
|
Accounts payables
|
|
|
|
|
(1,449)
|
|
|
|
|
Accrued and other liabilities
|
|
|
|
|
(2,908)
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
(210)
|
|
|
|
|
Identifiable assets acquired and liabilities assumed (a)
|
|
|
|
|
4,762
|
|
|
|
|
Consideration (b)
|
|
|
|
|
9,033
|
|
|
|
|
Goodwill (b-a)
|
|
|
|
$
|
4,271
|
|
|
The excess of the purchase price over the tangible assets and identifiable intangible assets acquired reduced by liabilities assumed was initially recorded as goodwill and the goodwill is deductible for tax purposes.
Pro Forma Results (Unaudited)
The following summary, prepared on a pro forma basis pursuant to ASC 805, presents the Company’s unaudited consolidated results of operations for the years ended December 31, 2019 and 2020 as if acquisition had been completed on January 1, 2019. The pro forma results are not necessarily indicative of the results of operations that actually would have been achieved had acquisition been consummated as of January 1, 2019.
|
|
|
|
For the years ended December 31,
|
|
|
|
|
|
2020
Unaudited
|
|
|
2019
Unaudited
|
|
|
Revenue
|
|
|
|
$
|
4,509
|
|
|
|
|
$
|
3,990
|
|
|
|
Net loss
|
|
|
|
|
(4,665)
|
|
|
|
|
|
(5,973)
|
|
|
4.
Accounts Receivable, Net
The accounts receivable, net as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Accounts receivable
|
|
|
|
$
|
1,187
|
|
|
|
|
$
|
1,725
|
|
|
|
Less: Allowance for doubtful accounts
|
|
|
|
|
(30)
|
|
|
|
|
|
(30)
|
|
|
|
Accounts receivable, net
|
|
|
|
$
|
1,157
|
|
|
|
|
$
|
1,695
|
|
|
5.
Inventories, net
Inventories, net as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Raw materials
|
|
|
|
$
|
635
|
|
|
|
|
$
|
2,116
|
|
|
|
Work in process
|
|
|
|
|
910
|
|
|
|
|
|
1,060
|
|
|
|
Total inventories
|
|
|
|
$
|
1,545
|
|
|
|
|
$
|
3,176
|
|
|
During the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor), and the year ended December 31, 2019 (Predecessor), no inventories were written down to reflect the lower of cost or net realizable value.
6.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of December 31, 2020 and 2019 consist of the following:
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Prepaid expenses
|
|
|
|
$
|
360
|
|
|
|
|
$
|
—
|
|
|
|
Vendor deposits
|
|
|
|
|
223
|
|
|
|
|
|
438
|
|
|
|
Prepaid insurance
|
|
|
|
|
169
|
|
|
|
|
|
159
|
|
|
|
Others
|
|
|
|
|
96
|
|
|
|
|
|
55
|
|
|
|
Total prepaid and other current assets
|
|
|
|
$
|
848
|
|
|
|
|
$
|
652
|
|
|
7.
Intangible Assets
Intangible assets as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
Useful Life
(in months)
|
|
|
Gross
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
84
|
|
|
|
|
$
|
168
|
|
|
|
|
$
|
(83)
|
|
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
168
|
|
|
|
|
$
|
(83)
|
|
|
|
|
$
|
85
|
|
|
|
Successor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology
|
|
|
|
|
60
|
|
|
|
|
$
|
1,574
|
|
|
|
|
$
|
(52)
|
|
|
|
|
$
|
1,522
|
|
|
|
Tradename
|
|
|
|
|
60
|
|
|
|
|
|
1,400
|
|
|
|
|
|
(47)
|
|
|
|
|
|
1,353
|
|
|
|
Other
|
|
|
|
|
84
|
|
|
|
|
|
168
|
|
|
|
|
|
(102)
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,142
|
|
|
|
|
$
|
(201)
|
|
|
|
|
$
|
2,941
|
|
|
The tradename and developed technology were contributed by the acquisition of PCL and PML in the year of 2020. As the tradename and developed technology was the key driver of the revenue for PCL and PML, which will bring further economic benefit to the Group’s business. Therefore, the tradename and developed technology were separately identified as an intangible asset on the acquisition date. The balance is amortized over the useful life of 5 years.
No impairment loss was provided for intangible assets for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor), and the year ended December 31, 2019 (Predecessor). Amortization expense for intangible assets was $94, $24 and $29 for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), respectively.
As of December 31, 2020, the estimated future amortization expense related to intangible assets is as follows:
|
|
|
|
USD
|
|
|
2021
|
|
|
|
$
|
613
|
|
|
|
2022
|
|
|
|
|
613
|
|
|
|
2023
|
|
|
|
|
611
|
|
|
|
2024
|
|
|
|
|
609
|
|
|
|
2025
|
|
|
|
|
495
|
|
|
|
|
|
|
|
$
|
2,941
|
|
|
8.
Property and Equipment, Net
Property and equipment, net as of December 31, 2020 and 2019 consisted of the following:
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Furniture, fixtures and equipment
|
|
|
|
$
|
1,364
|
|
|
|
|
$
|
1,346
|
|
|
|
Automobile
|
|
|
|
|
2,163
|
|
|
|
|
|
2,603
|
|
|
|
Leased automobile
|
|
|
|
|
3,030
|
|
|
|
|
|
2,255
|
|
|
|
Leasehold improvements
|
|
|
|
|
394
|
|
|
|
|
|
391
|
|
|
|
Construction in progress
|
|
|
|
|
248
|
|
|
|
|
|
219
|
|
|
|
|
|
|
|
|
7,199
|
|
|
|
|
|
6,814
|
|
|
|
Less: accumulated depreciation
|
|
|
|
|
(4,433)
|
|
|
|
|
|
(3,496)
|
|
|
|
|
|
|
|
$
|
2,766
|
|
|
|
|
$
|
3,318
|
|
|
Depreciation of property and equipment was $259, $828 and $553 for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2020, respectively.
9.
Long-term Borrowings, current and non-current
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Current portion of long-term borrowings
|
|
|
|
$
|
22
|
|
|
|
|
$
|
15
|
|
|
|
Long-term borrowings, excluding current portion
|
|
|
|
|
183
|
|
|
|
|
|
12
|
|
|
|
Total long-term borrowings
|
|
|
|
$
|
205
|
|
|
|
|
$
|
27
|
|
|
As of December 31, 2020, the maturities of the long-term borrowings are as follows:
|
|
|
|
USD
|
|
|
2021
|
|
|
|
$
|
22
|
|
|
|
2022
|
|
|
|
|
15
|
|
|
|
2023
|
|
|
|
|
15
|
|
|
|
2024
|
|
|
|
|
15
|
|
|
|
2025
|
|
|
|
|
10
|
|
|
|
Thereafter
|
|
|
|
|
128
|
|
|
|
|
|
|
|
$
|
205
|
|
|
Vehicle loans with Ford Motor Credit
One vehicle loan from Ford Motor Credit was established on September 21, 2018 with an original balance of $44 and interest rate of 7.34% and a 3-year term with maturity on October 5, 2021. Another vehicle loan from Ford Motor Credit was established on June 4, 2020 with an original balance of $50 with no interest and a 5-year term with maturity on June 19, 2025.
PPP Loan
On May 5, 2020, the Group was granted a loan from Zions Bancorporation, N.A. dba California Bank & Trust in the aggregate amount of $551, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted on March 27, 2020 (the “PPP Loan”).
The PPP Loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt. The amount that will be forgiven will be calculated in part with reference to the Group’s full time headcount during the eight-week period following the funding of the PPP Loan. On October 21, 2020, the Group received approval from the lender for the formal forgiveness of the PPP Loan. As a result, a gain in the amount of $551 has been recognized in the consolidated statement of operations within other income for the period from January 1, 2020 to November 12, 2020 (Predecessor).
EIDL Loan
On May 26, 2020, the Group was granted a loan from the U.S. Small Business Association in the aggregate amount of $150, pursuant to the Economic Injury Disaster Loan under Section 7(b) of the Small Business Act, as amended (the “EIDL Loan”).
The EIDL Loan, which was in the form of a promissory note (the “EIDL Note”) dated May 26, 2020 issued by the Group, matures on May 26, 2050 and bears interest at a rate of 3.75% per annum, payable monthly commencing on May 26, 2021. The EIDL Note may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the EIDL Loan may only be used for working capital purposes to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter cause by the coronavirus pandemic. The Group has used the entire EIDL Loan amount for what management believes to be qualifying expenses.
10.
Related Party Transactions
Predecessor
The Predecessor’s parent company, Al Yousuf, LLC (“Al Yousuf”), provided an operating line of credit to the Predecessor to provide funds for the purchase of materials to build EVs. There is no established payment schedule, but repayments are made when cash is collected from sales. The interest rate is variable and resets on January 1 of each new year. The Predecessor borrowed $1,697 and accrued interest expenses of $297 during the year ended December 31, 2019. The balance of the loan payable was $2,775 and the accrued interest payable was $614 as of December 31, 2019. There was no change to loan payable balance and
there was no additional interest accrued during the period from January 1, 2020 to November 12, 2020. This loan payable in amount of $2,775 and accrued interest payable in amount of $614 was cancelled and recorded in additional paid in capital by Al Yousuf on November 12, 2020.
The Predecessor also accrues a management fee payable to Al Yousuf as payment of management services provided to Predecessor. It is calculated as a percentage of the capital contributed to the Predecessor at a variable management fee rate, fixed for 12 months at a time, which resets on January 1 of each new year. The balance of the accrued management fee payable was $13,396 as of December 31, 2019. No management fee was charged in the year ended December 31, 2019 and for the period from January 1, 2020 to November 12, 2020. This management fee payable was cancelled and recorded in additional paid in capital by Al Yousuf on November 12, 2020.
11.
Equity
Predecessor
The capital structure of the Predecessor consists of one class of LLC interests. Al Yousuf, as the sole member, as well as the managing member, of both PCL and PML owns all of the common interests issued and outstanding of the Predecessor as of December 31, 2019. As such, Al Yousuf owns and controls 100% of the equity in the Predecessor as of December 31, 2019 until November 12, 2020 when the Predecessor was acquired.
During the period from January 1, 2020 to November 12, 2020 and the year ended December 31, 2019, Al Yousuf waived the receivables from the Predecessor of $16,847 and $999, respectively, which was recorded in addition paid-in capital in the consolidated balance sheets. During the year ended December 31, 2019, Al Yousuf made contribution of $4,818 to the Predecessor.
Successor
(a) Shares of common stock and recapitalization
In October 2020, the Company issued 1,000 shares of common stock par value of $0.001 each to EdisonFuture, Inc., which is a subsidiary of SPI.
On August 3, 2021, the Company amended its Certificate of Incorporation and the Company’s authorized all classes of stock is amended to 500,000,000 shares, of which (i) 450,000,000 shares shall be common stock, par value $0.0001 per share, and (ii) 50,000,000 shares shall be preferred stock, par value $0.0001 per share. On August 3, 2021, the Company effectuated a 70,000 for 1 stock split on the Company’s issued and outstanding common stock. After that, the Company’s issued and outstanding common stock is 70,000,000 shares. As a result of the amendment of authorized stock and the stock split, all share and per share amounts in the consolidated financial statements have been retrospectively adjusted.
The issued and outstanding shares of common stock were 70,000,000 shares of a par value of $0.0001, as of December 31, 2020 (Successor).
(b) Additional paid-in capital
The Company’s ultimate parent company, SPI, made a capital contribution of $17,000 in December 2020 to the Company.
12.
Income Taxes
The provision for income taxes consists of the following for the period from November 13, 2020 to December 2020 (Successor):
|
|
|
|
Successor
|
|
|
Current tax:
|
|
|
|
|
|
|
|
|
Federal tax
|
|
|
|
$
|
—
|
|
|
|
State tax
|
|
|
|
|
2
|
|
|
|
Total current tax
|
|
|
|
|
|
|
|
|
Deferred tax:
|
|
|
|
|
|
|
|
|
Federal tax
|
|
|
|
$
|
—
|
|
|
|
State tax
|
|
|
|
|
—
|
|
|
|
Total deferred tax
|
|
|
|
|
|
|
|
|
Total provision for income taxes
|
|
|
|
$
|
2
|
|
|
The reconciliation between the actual income tax expense and income tax computed by applying the statutory U.S. Federal income tax rate for the period from November 13, 2020 to December 31, 2020 (Successor) is as follows:
|
|
|
|
Successor
|
|
|
Provision for income taxes at U.S. Federal statutory rate
|
|
|
|
|
21.00%
|
|
|
|
State taxes, net of federal benefit
|
|
|
|
|
6.87%
|
|
|
|
Permanent differences
|
|
|
|
|
(0.04)%
|
|
|
|
Change in valuation allowance
|
|
|
|
|
(27.96)%
|
|
|
|
|
|
|
|
|
(0.13)%
|
|
|
Deferred income taxes reflect the net tax effects of loss carry forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Group’s deferred tax assets and liabilities for federal and state income taxes at December 31, 2020 (Successor) are presented below:
|
|
|
|
Successor
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
|
$
|
378
|
|
|
|
Property and equipment
|
|
|
|
|
(46)
|
|
|
|
Deferred revenue
|
|
|
|
|
10
|
|
|
|
Gross deferred tax assets
|
|
|
|
|
342
|
|
|
|
Valuation allowance
|
|
|
|
|
(342)
|
|
|
|
Total deferred tax assets
|
|
|
|
$
|
—
|
|
|
As of December 31, 2020, the Group had a net operating loss carry forward for federal income tax purposes of approximately $1,352 which will never expire. The Group had a total state net operating loss carry forward of approximately $1,350 which will start to expire in the year 2040.
The Predecessor entity is exempt from filing federal income tax returns as a single member LLC. The Predecessor entity was treated as a partnership, or a flow-through entity, for U.S. federal and state tax purposes. The Successor entity is treated as a corporation for U.S. federal and state tax purposes. As such, income taxes are presented on a different basis and are, therefore, not comparable.
The Group recognizes deferred tax assets if it is more likely than not that those deferred tax assets will be realized. Management reviews deferred tax assets periodically for recoverability and makes estimates and
judgments regarding the expected geographic sources of taxable income in assessing the need for a valuation allowance to reduce deferred tax assets to their estimated realizable value. Realization of the Group’s deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
The Group had no unrecognized tax benefits as of December 31, 2020. The Group currently files income tax returns in the U.S., as well as California. The Group is currently not the subject of any income tax examinations. The Group’s tax returns generally remain open for tax years after 2020.
The Group has analyzed the impact of adopting ASC 606 on the Group’s financial statements and disclosures. There is no material impact on the financial statements of adopting ASC 606. Therefore, there is no material tax impact either.
The Coronavirus Aid, Relief and Economy Security (CARES) Act (“the CARES Act, H.R. 748”) was signed into law on 27 March 2020. The CARES Act temporarily eliminates the 80% taxable income limitation (as enacted under the Tax Cuts and Jobs Act of 2017) for NOL deductions for 2018-2020 tax years and reinstated NOL carrybacks for the 2018-2020 tax years. Moreover, the CARES Act also temporarily increases the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year. Lastly, the Tax Act technical correction classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactively as if it was included in the Tax Act at the time of enactment. The Group does not anticipate a material impact on its financial statements as of December 31, 2020 due to the recent enactment.
13.
Commitments and Contingencies
Lease commitment — The Group leases offices and facilities under various operating leases. Rental expenses under operating leases included in the consolidated statement of operations were $65, $247 and $301 for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and for the year ended December 31, 2019 (Predecessor), respectively.
Future minimum payments under non-cancelable operating leases are as follows as of December 31, 2020:
|
|
|
|
USD
|
|
|
2021
|
|
|
|
$
|
173
|
|
|
|
Total
|
|
|
|
$
|
173
|
|
|
Contingency — In the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. In the opinion of management, there were no pending or threatened claims and litigation as of December 31, 2020 and through the issuance date of these consolidated financial statements.
14.
Concentration Risk
Concentration of Credit Risk
Assets that potentially subject the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents, accounts receivable. As of December 31, 2020 (Successor), the cash and cash equivalents are deposit with federally insured banks, which are typically in excess of insured limits. As of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), there’s one customer of which the accounts receivable accounts for 13.0% and 10.6% of total accounts receivable, respectively.
Concentration of Customers
For the period from January 1, 2020 to November 12, 2020 (Predecessor), there were three customers representing 13.0%, 12.4% and 11.4% of total revenue. For the year ended December 31, 2019 (Predecessor), there were three customers representing 12.3%, 11.6% and 10.4% of total revenue. For the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor), there was no vendor representing more than 10% of total purchase. For the year ended December 31, 2019 (Predecessor), there was one vendor representing 27% of total purchase.
15.
Subsequent Events
(a) Recapitalization
On August 3, 2021, the Company amended its Certificate of Incorporation and the Company’s authorized all classes of stock is amended to 500,000,000 shares, of which (i) 450,000,000 shares shall be common stock, par value $0.0001 per share, and (ii) 50,000,000 shares shall be preferred stock, par value $0.0001 per share.
On August 3, 2021, the Company effectuated a 70,000 for 1 stock split on the Company’s issued and outstanding common stock. The authorized number of shares and par value per share of common stock shall not be affected by the stock split. After that, the Company’s issued and outstanding common stock is 70,000,000 shares.
(b) Issuance of stock options
On January 24, 2021, an option to purchase 4,200,000 fully vested common stocks, which has been retrospectively adjusted to reflect the recapitalization as disclosed in Note 15(a), at an exercise price of $0.43 per share was granted to Mr. Xiaofeng Denton Peng, the chairman of the board of directors of the Group. The grant of options is a special one-time award in recognition of the work done related to the Business Combination. The options are valued using the weighted average of the values under income approach, guideline public company method and transaction method, and apply a discount for marketability to come up with the fair value.
(c) 2021 Omnibus Equity Incentive Plan
On January 24, 2021, the Group has adopted the 2021 Omnibus Equity Incentive Plan. Equity awards under the 2021 Omnibus Equity Incentive Plan will be designed to reward the managements and other employees.
As of August 10, 2021, options to purchase 5,914,000 common stocks, which has been retrospectively adjusted to reflect the recapitalization as disclosed in Note 15(a), at an exercise price of $0.43 per share were granted to employees and directors according to 2021 Omnibus Equity Incentive plan.
The Group has evaluated subsequent events through August 24, 2021, the date of issuance of the consolidated financial statements, there were no other subsequent events occurred that would require recognition or disclosure in the consolidated financial statements.
PHOENIX MOTOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
5,976
|
|
|
|
|
$
|
15,699
|
|
|
|
Accounts receivable, net
|
|
|
|
|
1,137
|
|
|
|
|
|
1,157
|
|
|
|
Inventories
|
|
|
|
|
2,145
|
|
|
|
|
|
1,545
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
4,372
|
|
|
|
|
|
848
|
|
|
|
Total current assets
|
|
|
|
|
13,630
|
|
|
|
|
|
19,249
|
|
|
|
Property and equipment, net
|
|
|
|
|
2,526
|
|
|
|
|
|
2,766
|
|
|
|
Intangible assets, net
|
|
|
|
|
2,477
|
|
|
|
|
|
2,941
|
|
|
|
Goodwill
|
|
|
|
|
4,271
|
|
|
|
|
|
4,271
|
|
|
|
Other non-current assets
|
|
|
|
|
62
|
|
|
|
|
|
—
|
|
|
|
Total assets
|
|
|
|
$
|
22,966
|
|
|
|
|
$
|
29,227
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
957
|
|
|
|
|
$
|
1,356
|
|
|
|
Accrued liabilities
|
|
|
|
|
476
|
|
|
|
|
|
450
|
|
|
|
Advance from customers
|
|
|
|
|
1,881
|
|
|
|
|
|
1,896
|
|
|
|
Warranty reserve
|
|
|
|
|
415
|
|
|
|
|
|
530
|
|
|
|
Long-term borrowing, current portion
|
|
|
|
|
9
|
|
|
|
|
|
22
|
|
|
|
Total current liabilities
|
|
|
|
|
3,738
|
|
|
|
|
|
4,254
|
|
|
|
Long-term borrowings
|
|
|
|
|
765
|
|
|
|
|
|
183
|
|
|
|
Total liabilities
|
|
|
|
|
4,503
|
|
|
|
|
|
4,437
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks, par $0.0001, 450,000,000 shares authorized, 70,000,000
shares issued and outstanding as of September 30, 2021 and December 31,
2020*
|
|
|
|
|
7
|
|
|
|
|
|
7
|
|
|
|
Subscription receivable
|
|
|
|
|
(7)
|
|
|
|
|
|
(7)
|
|
|
|
Additional paid-in capital
|
|
|
|
|
26,082
|
|
|
|
|
|
26,033
|
|
|
|
Accumulated deficit
|
|
|
|
|
(7,619)
|
|
|
|
|
|
(1,243)
|
|
|
|
Total equity
|
|
|
|
|
18,463
|
|
|
|
|
|
24,790
|
|
|
|
Total liabilities and equity
|
|
|
|
$
|
22,966
|
|
|
|
|
$
|
29,227
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s stock split (Note 6)
The accompanying notes are an integral part of these condensed consolidated financial statements.
PHOENIX MOTOR INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share data)
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
2021
|
|
|
|
Nine months ended
September 30,
2020
|
|
|
|
|
|
Net revenues
|
|
|
|
$
|
1,680
|
|
|
|
|
|
$$
|
3,802
|
|
|
|
|
|
|
Cost of revenues
|
|
|
|
|
1,836
|
|
|
|
|
|
|
4,159
|
|
|
|
|
|
|
Gross loss:
|
|
|
|
|
(156)
|
|
|
|
|
|
|
(357)
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
6,216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
6,216
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
(6,372)
|
|
|
|
|
|
|
(3,191)
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
(2)
|
|
|
|
|
|
|
(139)
|
|
|
|
|
|
|
Other income, net
|
|
|
|
|
1
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
Total other expense, net
|
|
|
|
|
(1)
|
|
|
|
|
|
|
(94)
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
|
(6,373)
|
|
|
|
|
|
|
(3,285)
|
|
|
|
|
|
|
Income tax provision
|
|
|
|
|
(3)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(6,376)
|
|
|
|
|
|
$
|
(3,285)
|
|
|
|
|
|
|
Net loss per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
|
$
|
(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding*
|
|
|
|
|
70,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s stock split (Note 6)
The accompanying notes are an integral part of these condensed consolidated financial statements.
PHOENIX MOTOR INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares*
|
|
|
Common
Stock
Amount
|
|
|
Subscription
Receivable
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
(Deficit) Equity
|
|
|
Predecessor:
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2020
|
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
49,558
|
|
|
|
|
$
|
(61,195)
|
|
|
|
|
$
|
(11,637)
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(3,285)
|
|
|
|
|
|
(3,285)
|
|
|
|
Liabilities waived by a stockholder
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,037
|
|
|
|
|
|
—
|
|
|
|
|
|
3,037
|
|
|
|
Balance as of September 30, 2020
|
|
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
52,595
|
|
|
|
|
$
|
(64,480)
|
|
|
|
|
$
|
(11,885)
|
|
|
|
Successor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2021
|
|
|
|
|
70,000,000
|
|
|
|
|
$
|
7
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
26,033
|
|
|
|
|
$
|
(1,243)
|
|
|
|
|
$
|
24,790
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(6,376)
|
|
|
|
|
|
(6,376)
|
|
|
|
Stock-based compensation
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
49
|
|
|
|
|
|
—
|
|
|
|
|
|
49
|
|
|
|
Balance as of September 30, 2021
|
|
|
|
|
70,000,000
|
|
|
|
|
$
|
7
|
|
|
|
|
$
|
(7)
|
|
|
|
|
$
|
26,082
|
|
|
|
|
$
|
(7,619)
|
|
|
|
|
$
|
18,463
|
|
|
*
The shares are presented on a retrospective basis to reflect the Company’s stock split (Note 6)
The accompanying notes are an integral part of these condensed consolidated financial statements.
PHOENIX MOTOR INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
Nine months ended
September 30,
2021
|
|
|
|
Nine months ended
September 30,
2020
|
|
|
Net cash (used in) provided by operating activities:
|
|
|
|
|
(9,612)
|
|
|
|
|
|
|
114
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
(680)
|
|
|
|
|
|
|
(639)
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(680)
|
|
|
|
|
|
|
(639)
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
586
|
|
|
|
|
|
|
752
|
|
|
|
Repayment of borrowings
|
|
|
|
|
(17)
|
|
|
|
|
|
|
(14)
|
|
|
|
Net cash generated from financing activities
|
|
|
|
|
569
|
|
|
|
|
|
|
738
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
|
(9,723)
|
|
|
|
|
|
|
213
|
|
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
|
|
15,699
|
|
|
|
|
|
|
29
|
|
|
|
Cash and cash equivalents as of end of the period
|
|
|
|
$
|
5,976
|
|
|
|
|
|
$
|
242
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
|
$
|
—
|
|
|
|
|
|
$
|
—
|
|
|
|
Income tax paid:
|
|
|
|
$
|
2
|
|
|
|
|
|
$
|
2
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan forgiveness from by the stockholder
|
|
|
|
$
|
—
|
|
|
|
|
|
$
|
3,037
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PHOENIX MOTOR INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$ thousands except for shares)
1.
Description of Business and Organization
Phoenix Motor Inc. (“Phoenix Motor” and “the Company”) and its subsidiaries (collectively the “Group”) is a leading techno-motive company that designs, assembles, and integrates electric drive systems for medium duty electric vehicles (“EVs”).
Phoenix Cars, LLC (“PCL”), a subsidiary of Phoenix Motor, designs and manufactures advanced zero-emission electric drivetrain systems for integration in medium to heavy-duty commercial fleet vehicles in United States. Phoenix Motorcars Leasing, LLC (“PML”), a subsidiary of Phoenix Motor, serves as a sales and leasing dealership for PCL in United States.
Phoenix Motor was incorporated in the state of Delaware in October 2020. EdisonFuture, Inc., a subsidiary of SPI Energy Co., Ltd (“SPI”), is the parent company of Phoenix Motor. On November 12, 2020, EdisonFuture, Inc. acquired 100% of the membership interest of PCL and PML. Simultaneously, EdisonFuture, Inc. effected the transfer of 100% membership interests of PCL and PML to Phoenix Motor (the “Business Combination”). The acquisition has been accounted for under ASC 805 Business Combinations.
As a result of the Business Combination, the Company is the accounting acquirer and PCL and PML are the accounting acquirees and accounting predecessor. The unaudited condensed financial statements for the nine months ended September 30, 2020 presented in this filing reflect the combined historical operations of PCL and PML (labeled “Predecessor”). The Group’s unaudited condensed financial statements for the nine months ended September 30, 2021 reflect the operation of the Group after the Business Combination (labeled “Successor”).
As a result of the application of the acquisition method of accounting as of the effective time of the Business Combination, the accompanying unaudited condensed consolidated financial statements include a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are, therefore, not comparable.
2.
Summary of Significant Accounting Policies
(a)
Basis of Presentation
The accompany condensed consolidated financial statements of the Group are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s consolidated financial statements as of December 31, 2020 (Successor), November 12, 2020 (Predecessor) and December 31, 2019 (Predecessor).
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group’s consolidated financial statements for the period from November 13, 2020 to December 31, 2020 (Successor), the period from January 1, 2020 to November 12, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor). The results of operations for the nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results for the full years or any future periods.
(b)
Revenue Recognition
On January 1, 2019, the Group adopted Accounting Standards Codification (“ASC”) No. 606, “Revenue from Contracts with Customers” (“ASC 606” or “Topic 606”) and applied the modified
retrospective method to all contracts that were not completed as of January 1, 2019. The Group has determined that the impact of the transition to the new standard is immaterial to the Group’s revenue recognition model. Accordingly, the Group has not made any adjustments to opening retained earnings, and revenues for the nine months ended September 30, 2021(Successor) and the nine months ended September 30, 2020 (Predecessor) were presented under ASC 606.
The Group’s accounting practices under ASC Topic 606 are as followings:
Sale of EVs
The Group generates revenue from sales of EVs and identifies the customers who purchase the vehicle as its customers. EV buyers in California are entitled to government grants when they purchase EV that qualifies certain government grant project. The Group applies for and collect such government grants on behalf of the customers. Accordingly, customers only pay the amount after deducting government grants.
The Group recognizes revenue on sale of EVs at a point in time following the transfer of control of such products to the customer, which typically occurs upon the delivery to the customer. The Group determined that the government grants should be considered as part of the transaction price because it is granted to the EV buyer and the buyer remains liable for such amount in the event the grants were not received by the Group or returned due to the buyer breaks the government grant terms and conditions.
Lease of EVs
EV leasing revenue includes revenue recognized under lease accounting guidance for direct leasing programs. The Group accounts for these leasing transactions as operating leases under ASC 840 Leases, and revenues are recognized on a straight-line basis over the contractual term.
Other revenue
Other revenue consists of maintenance service, sales of component and charging stations, shipping and delivery fees and other.
Disaggregation of revenues
The Group disaggregates its revenues by three primary categories: sales of EVs, lease of EVs and others. The following is a summary of the Group’s disaggregated revenues:
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
Nine months
ended
September 30,
2021
|
|
|
Nine months
ended
September 30,
2020
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Sales of EVs
|
|
|
|
$
|
796
|
|
|
|
|
$
|
2,465
|
|
|
|
Lease of EVs
|
|
|
|
|
458
|
|
|
|
|
|
433
|
|
|
|
Others
|
|
|
|
|
426
|
|
|
|
|
|
904
|
|
|
|
|
|
|
|
$
|
1,680
|
|
|
|
|
$
|
3,802
|
|
|
A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The Group records contract liabilities as advance from customers. As of September 30, 2021 (Successor) and December 31, 2020 (Successor), the balances of contract liabilities were $1,881 and $1,896, respectively.
(c)
Stock-Based Compensation
The Group granted employees and directors stock-based incentive awards. These awards are in the form of options for Successor. The Group measure stock-based compensation expense for all stock-based
awards granted based on the estimated fair value of those awards on their grant date expensed over the period during which an employee or director is required to provide service in exchange for the award (the vesting period).
3.
Accounts Receivable, Net
The accounts receivable, net as of September 30, 2021 and December 31, 2020 consisted of the following:
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
$
|
1,167
|
|
|
|
|
$
|
1,187
|
|
|
|
Less: Allowance for doubtful accounts
|
|
|
|
|
(30)
|
|
|
|
|
|
(30)
|
|
|
|
Accounts receivable, net
|
|
|
|
$
|
1,137
|
|
|
|
|
$
|
1,157
|
|
|
4.
Inventories
Inventories as of September 30, 2021 and December 31, 2020 consisted of the following:
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
|
$
|
1,192
|
|
|
|
|
$
|
635
|
|
|
|
Work in process
|
|
|
|
|
953
|
|
|
|
|
|
910
|
|
|
|
Total inventories
|
|
|
|
$
|
2,145
|
|
|
|
|
$
|
1,545
|
|
|
During the nine months ended September 30, 2021 (Successor) and the nine months ended September 30, 2020 (Predecessor), no inventories were written down to reflect the lower of cost or net realizable value.
5.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of September 30, 2021 and December 31, 2020 consist of the following:
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
|
$
|
3,853
|
|
|
|
|
$
|
360
|
|
|
|
Vendor deposits
|
|
|
|
|
262
|
|
|
|
|
|
223
|
|
|
|
Prepaid insurance
|
|
|
|
|
218
|
|
|
|
|
|
169
|
|
|
|
Others
|
|
|
|
|
39
|
|
|
|
|
|
96
|
|
|
|
Total prepaid and other current assets
|
|
|
|
$
|
4,372
|
|
|
|
|
$
|
848
|
|
|
6.
Equity
On August 3, 2021, the Company amended its Certificate of Incorporation and the Company’s authorized all classes of stock is amended to 500,000,000 shares, of which (i) 450,000,000 shares shall be common stock, par value $0.0001 per share, and (ii) 50,000,000 shares shall be preferred stock, par value $0.0001 per share. On August 3, 2021, the Company effectuated a 70,000 for 1 stock split on the Company’s issued and outstanding common stock. After that, the Company’s issued and outstanding common stock is 70,000,000 shares. As a result of the amendment of authorized stock and the stock split, all share and per share amounts in the condensed consolidated financial statements have been retrospectively adjusted.
The issued and outstanding shares of common stock were 70,000,000 shares of a par value of $0.0001, as of September 30, 2021 and December 31, 2020 (Successor).
7.
Stock-based Compensation
On January 24, 2021, an option to purchase 4,200,000 fully vested common stocks at an exercise price of $0.43 per share was granted to Mr. Xiaofeng Denton Peng, the chairman of the board of directors of the Group. The grant of options is a special one-time award in recognition of the work done related to the Business Combination.
On January 24, 2021, the Group has adopted the 2021 Omnibus Equity Incentive Plan. Equity awards under the 2021 Omnibus Equity Incentive Plan will be designed to reward the managements and other employees. During the nine months ended September 30, 2021, 7,095,000 options were granted to a group of managements and employees with the Company, which are subject to an annual vesting schedule that vests 25% of granted options over the next four years. The exercise price was $0.43 per share.
The Group estimates the grant date fair value of service-based stock options granted using the Black-Scholes option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.
Assumptions used in the determination of the fair value of share-based payment awards using the Black-Scholes model were as follows:
|
|
|
|
For the nine months
ended September 30,
2021
|
|
|
Expected term
|
|
|
2 years
|
|
|
Risk-free interest rate
|
|
|
1.52%
|
|
|
Expected volatility
|
|
|
64.4%
|
|
|
Expected dividend yield
|
|
|
0%
|
|
Expected Term — The Group’s expected term represents the period that the Group’s share-based awards are expected to be outstanding, which is the estimated period of time from issuance to exit in terms of a major liquidity event such as going public, major mergers and acquisitions, or other significant liquidity plan.
Risk-Free Interest Rate — The Group bases the risk-free interest rate used in the Black-Scholes valuation model upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
Expected Volatility — The Group uses the average historical volatility of the comparable public companies to calculate the volatility for its granted options.
Expected Dividend yield — The Group has never paid dividends on its ordinary shares and currently does not intend to do so, and accordingly, the dividend yield percentage is zero.
During the nine months period ended September 30, 2021 (Successor) and September 30, 2020 (Predecessor), the total share-based compensation expense was $49 and nil, respectively, which were recorded in selling, general and administrative expenses in the unaudited condensed consolidated financial statements.
8.
Income Taxes
The reconciliation between the actual income tax expense and income tax computed by applying the statutory U.S. Federal income tax rate for nine months ended September 30, 2021 (Successor) is as follows:
|
|
|
|
Successor
|
|
|
Provision for income taxes at U.S. Federal statutory rate
|
|
|
|
|
21.00%
|
|
|
|
State taxes, net of federal benefit
|
|
|
|
|
6.90%
|
|
|
|
Permanent differences
|
|
|
|
|
(0.17)%
|
|
|
|
Change in valuation allowance
|
|
|
|
|
(27.77)%
|
|
|
|
|
|
|
|
|
(0.04)%
|
|
|
Deferred income taxes reflect the net tax effects of loss carry forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Group’s deferred tax assets and liabilities for federal and state income taxes at September 30, 2021 (Successor) and December 31, 2020 (Successor) are presented below:
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
|
$
|
2,368
|
|
|
|
|
$
|
378
|
|
|
|
Accruals and reserves
|
|
|
|
|
38
|
|
|
|
|
|
—
|
|
|
|
Property and equipment
|
|
|
|
|
(46)
|
|
|
|
|
|
(46)
|
|
|
|
Deferred revenue
|
|
|
|
|
(248)
|
|
|
|
|
|
10
|
|
|
|
Gross deferred tax assets
|
|
|
|
|
2,112
|
|
|
|
|
|
342
|
|
|
|
Valuation allowance
|
|
|
|
|
(2,112)
|
|
|
|
|
|
(342)
|
|
|
|
Total deferred tax assets, net
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
The Group had no unrecognized tax benefits as of September 30, 2021 and December 31, 2020 (Successor). The Group currently files income tax returns in the U.S., as well as California. The Group is currently not the subject of any income tax examinations. The Group’s tax returns generally remain open for tax years after 2020.
9.
Commitments and Contingencies
Lease commitment — The Group leases offices and facilities under various operating leases. Rental expenses under operating leases included in the unaudited condensed consolidated statement of operations were $480 and $127 for the nine months ended September 30, 2021 (Successor) and for the nine months ended September 30, 2020 (Predecessor), respectively.
The following is a schedule of future minimum lease payments as of September 30, 2021:
|
|
|
|
Operating Leases
|
|
|
|
|
|
(In thousands)
|
|
|
3 months ending December 31, 2021
|
|
|
|
$
|
119
|
|
|
|
Year ending December 31,
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
483
|
|
|
|
2023
|
|
|
|
|
494
|
|
|
|
2024
|
|
|
|
|
506
|
|
|
|
2025
|
|
|
|
|
518
|
|
|
|
Thereafter
|
|
|
|
|
665
|
|
|
|
Total minimum lease payments
|
|
|
|
$
|
2,785
|
|
|
Contingency — In the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. In the opinion of management, there were no pending or threatened claims and litigation as of September 30, 2021 and through the issuance date of these unaudited condensed consolidated financial statements.
10.
Concentration Risk
Concentration of Credit Risk
Assets that potentially subject the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents, accounts receivable. As of September 30, 2021(Successor) and December 31,
2020 (Successor), the cash and cash equivalents are deposit with federally insured banks, which are typically in excess of insured limits. As of September 30, 2021 (Successor), there were two customer of which the accounts receivable balance accounts for 13.2% and 10.3% of total accounts receivable, respectively. As December 31, 2020 (Successor), there was one customer of which the accounts receivable balance accounts for 13.0% of total accounts receivable.
Concentration of Customers
For the nine months ended September 30, 2021 (Successor), there were two customers representing 22.2% and 17.6% of total net revenues, respectively. For the nine months ended September 30, 2020 (Predecessor), there was one customer representing 10.2% of total net revenues. For the nine months ended September 30, 2021 (Successor), there was one vendor representing 35.3% of total purchase. For the nine months ended September 30, 2020 (Predecessor), there was one vendor representing 12.0% of total purchase.
11.
Subsequent Events
The Group has evaluated subsequent events through November 26, 2021, the date of issuance of the unaudited condensed consolidated financial statements, there were no other subsequent events occurred that would require recognition or disclosure in the consolidated financial statements.
Shares
Common Stock
PROSPECTUS
Maxim Group LLCRoth Capital Partners
EF Hutton
division of Benchmark Investments, LLC
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or membership.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be borne by the registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.
|
|
SEC registration fee
|
|
|
|
$
|
|
|
|
|
|
FINRA fees
|
|
|
|
$
|
|
|
|
|
|
Printing and engraving expenses
|
|
|
|
$
|
|
|
|
|
|
Accounting fees and expenses
|
|
|
|
$
|
|
|
|
|
|
Legal fees and expenses
|
|
|
|
$
|
|
|
|
|
|
Miscellaneous
|
|
|
|
$
|
|
|
|
|
|
Total
|
|
|
|
$
|
|
|
|
*
To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
Our certificate of incorporation provides that all directors, officers, employees and agents of the registrant shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law concerning indemnification of officers, directors, employees and agents is set forth below.
“Section 145. Indemnification of officers, directors, employees and agents; insurance.
(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
(c) (1) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. For indemnification with respect to any act or omission occurring after December 31, 2020, references to “officer” for purposes of this paragraphs (c)(1) and (2) of this section shall mean only a person who at the time of such act or omission is deemed to have consented to service by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10 (for purposes of this sentence only, treating residents of this State as if they were nonresidents to apply § 3114(b) of Title 10 to this sentence).
(2) The corporation may indemnify any other person who is not a present or former director or officer of the corporation against expenses (including attorneys’ fees) actually and reasonably incurred by such person to the extent he or she has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein.
(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination:
(1) By a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum; or
(2) By a committee of such directors designated by majority vote of such directors, even though less than a quorum; or
(3) If there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or
(4) By the stockholders.
(e) Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or the bylaws after the
occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
(h) For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).”
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
In accordance with Section 102(b)(7) of the DGCL, our certificate of incorporation, will provide that no director shall be personally liable to us or any of our stockholders for monetary damages resulting from breaches of their fiduciary duty as directors, except to the extent such limitation on or exemption from liability is not permitted under the DGCL unless they violated their duty of loyalty to the company or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit
from their actions as directors. The effect of this provision of our certificate of incorporation is to eliminate our rights and those of our stockholders (through stockholders’ derivative suits on our behalf) to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except, as restricted by Section 102(b)(7) of the DGCL. However, this provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care.
If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then, in accordance with our certificate of incorporation, the liability of our directors to us or our stockholders will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or amendment of provisions of our certificate of incorporation limiting or eliminating the liability of directors, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to further limit or eliminate the liability of directors on a retroactive basis.
Our certificate of incorporation will also provide that we will, to the fullest extent authorized or permitted by applicable law, indemnify our current and former officers and directors, as well as those persons who, while directors or officers of our corporation, are or were serving as directors, officers, employees or agents of another entity, trust or other enterprise, including service with respect to an employee benefit plan, in connection with any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, against all expense, liability and loss (including, without limitation, attorney’s fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by any such person in connection with any such proceeding. Notwithstanding the foregoing, a person eligible for indemnification pursuant to our certificate of incorporation will be indemnified by us in connection with a proceeding initiated by such person only if such proceeding was authorized by our board of directors, except for proceedings to enforce rights to indemnification.
The right to indemnification conferred by our certificate of incorporation is a contract right that includes the right to be paid by us the expenses incurred in defending or otherwise participating in any proceeding referenced above in advance of its final disposition; provided, however, that, if the DGCL requires, an advancement of expenses incurred by our officer or director (solely in the capacity as an officer or director of our corporation) will be made only upon delivery to us of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified for such expenses under our certificate of incorporation or otherwise.
The rights to indemnification and advancement of expenses will not be deemed exclusive of any other rights which any person covered by our certificate of incorporation may have or hereafter acquire under law, our certificate of incorporation, our bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
Any repeal or amendment of provisions of our certificate of incorporation affecting indemnification rights, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. Our certificate of incorporation will also permit us, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other that those specifically covered by our certificate of incorporation.
Our bylaws, which we intend to adopt immediately prior to the closing of this offering, include the provisions relating to advancement of expenses and indemnification rights consistent with those set forth in our certificate of incorporation. In addition, our bylaws provide for a right of indemnity to bring a suit in the event a claim for indemnification or advancement of expenses is not paid in full by us within a specified period of time. Our bylaws also permit us to purchase and maintain insurance, at our expense, to protect us and/or any director, officer, employee or agent of our corporation or another entity, trust or other enterprise
against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.
Any repeal or amendment of provisions of our bylaws affecting indemnification rights, whether by our board of directors, stockholders or by changes in applicable law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing thereunder with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
We will enter into indemnity agreements with each of our officers and directors a form of which is filed as an exhibit to this Registration Statement. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, we have agreed to indemnify the underwriters and the underwriters have agreed to indemnify us against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
The information below lists all of the securities sold by us during the past three years which were not registered under the Securities Act:
For each of the transactions referred to above, we relied upon an exemption from registration afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, which exempt transactions by an issuer not involving any public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this Registration Statement:
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1.1
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Form of Underwriting Agreement*
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3.1
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3.2
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3.3
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3.4
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4.1
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4.2
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Form of Underwriter Warrant*
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4.3
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Stock Option Agreement dated January 24, 2021 between the Company and Xiaofeng Peng.
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5.1
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Opinion of Loeb & Loeb LLP regarding legality*
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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10.11
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10.12
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10.13
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14.1
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21.1
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23.1
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23.2
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Consent of Loeb & Loeb LLP (included in Exhibit 5.1)*
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24.1
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99.1
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99.2
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99.3
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99.4
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99.5
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99.6
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99.7
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*
To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Ontario, California, on November 26, 2021.
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PHOENIX MOTOR INC.
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By:
/s/ Joseph R. Mitchell
Name: Joseph R. Mitchell
Title: Chief Executive Officer (principal executive officer)
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POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph R. Mitchell and Chris Wang his true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this registration statement (and to any registration statement filed pursuant to Rule 462 under the Securities Act of 1933, as amended), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.
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Signature
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Title
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Date
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/s/ Joseph R. Mitchell
Joseph R. Mitchell
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Chief Executive Officer and Director
(principal executive officer)
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November 26, 2021
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/s/ Chris Wang
Chris Wang
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Chief Financial Officer
(principal financial and accounting officer)
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November 26, 2021
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/s/ Tarek Helou
Tarek Helou
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Chief Operating Officer
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November 26, 2021
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/s/ Denton Peng
Denton Peng
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Chairman and Director
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November 26, 2021
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/s/ HoongKhoeng Cheong
HoongKhoeng Cheong
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Director
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November 26, 2021
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Exhibit 3.1
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Delaware
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Page 1
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The First State
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I,
JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF INCORPORATION OF “PHOENIX MOTOR INC.”, FILED IN THIS OFFICE ON THE TWENTIETH DAY OF OCTOBER, A.D. 2020, AT
4:40 O'CLOCK P.M.
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/s/ Jeffrey W. Bullock
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Jeffrey W. Bullock, Secretary of State
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3929882 8100
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Authentication: 203905267
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SR# 20207933737
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Date: 10-21-20
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You may verify this certificate online at corp.delaware.gov/authver.shtml
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State
of Delaware
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Secretary
of State
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Division
of Corporations
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Delivered
04:40 PM 10/20/2020
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FILED
04:40 PM 10/20/2020
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SR
20207933737 - File Number 3929882
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CERTIFICATE OF INCORPORATION
OF
PHOENIX MOTOR INC.
THE UNDERSIGNED, for the
purpose of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware, does hereby execute
this Certificate of Incorporation and does hereby certify as follows:
FIRST:
The name of the corporation is Phoenix Motor Inc.(hereinafter called the “Corporation”).
SECOND:
The registered office of the Corporation is to be located at 3411 Silverside Road, Tatnall Building, #104, in the City of Wilmington,
in the County of New Castle, Delaware 19810. The name of its Registered Agent at such address is Corporate Creations Network Inc.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH:
The name and mailing address of the incorporator is: Jaszick Maldonado, c/o Loeb & Loeb LLP, 345 Park Avenue, New
York NY 10154.
FIFTH:
The total number of shares which the Corporation shall have authority to issue is one thousand (1,000) shares of common stock,
$0.0001 par value.
SIXTH:
A Director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director of the Corporation, except to the extent that exculpation from liability is not permitted under the General
Corporation Law of the State of Delaware as in effect at the time such liability is determined. No amendment or repeal of this paragraph
shall apply to or have any effect on the liability or alleged liability of any Director of the Corporation for or with respect to any
acts or omissions of such Director occurring
SEVENTH:
In furtherance and not in imitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized
to make, alter or repeal the By-Laws of the Corporation; provided, however, that no By-Laws hereafter adopted by the Board of Directors
or stockholders shall invalidate any prior act of the Directors which would have been valid if such By-Laws had not been adopted.
EIGHTH: The
Corporation shall, to the maximum extent permitted from time to time under the law of the State of Delaware, indemnify and upon
request advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that
such person is or was or has agreed to be a Director or officer of the Corporation or while a Director or officer is or was serving
at the request of the Corporation as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including
attorneys’ fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred (and not otherwise
recovered) in connection with the investigation, preparation to defend or defense of such action, suit, proceeding or claim;
provided, however, that the foregoing shall not require the Corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person. Such indemnification shall not be
exclusive of other indemnification rights arising under any By-Law, agreement, vote of Directors or stockholders or otherwise and
shall inure to the benefits of the heirs and legal representatives of such person. Any person seeking indemnification under this
paragraph shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be
established. Any repeal or modification of the foregoing provisions of this paragraph shall not adversely affect any right or
protection of a Director or officer of the Corporation with respect to any acts or omissions of such Director or officer occurring
prior to such repeal or modification.
NINTH:
In furtherance of and not in limitation of powers conferred by statute, it is further provided:
1. Election
of Directors need not be by written ballot unless the By-Laws of the Corporation so provide.
2. Meetings
of stockholders may be held within or without the State of Delaware, as the By Laws may provide.
3. To
the extent permitted by law, the books of the Corporation may be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
TENTH:
Except as otherwise provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained
in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN
WITNESS WHEREOF, the undersigned, being the incorporator herein before named, has executed this Certificate of Incorporation
this 20th day of October, 2019.
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/s/
Jaszick Maldonado
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Jaszick Maldonado, Incorporator
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Exhibit
3.2
The First State
I,
JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF AMENDMENT OF “PHOENIX MOTOR INC.”, FILED IN THIS OFFICE ON THE THIRD DAY OF AUGUST, A.D. 2021, AT 12:28 O'CLOCK
P.M.
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/s/ Jeffrey W. Bullock
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Jeffrey W. Bullock, Secretary of State
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3929882 8100
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Authentication: 203829029
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SR# 20212874888
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Date: 08-03-21
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You may verify this certificate online at corp.delaware.gov/authver.shtml
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State
of Delaware
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Secretary
of State
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CERTIFICATE OF AMENDMENT
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Division
of Corporations
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OF
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Delivered
12:28 PM 08/03/2021
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CERTIFICATE OF INCORPORATION
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FILED
12:28 PM 08/03/2021
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OF
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SR
20212874888 - File Number 3929882
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PHOENIX MOTOR INC.
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I, Xiaofeng Peng, being
the Chief Executive Officer of Phoenix Motor Inc., a corporation existing under the laws of the State of Delaware (the “Corporation”),
does hereby certify as follows:
FIRST: The
name of the Corporation is: Phoenix Motor Inc.
SECOND: The
certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 20, 2020
(the “Certificate of Incorporation”).
THIRD: The
Certificate of Incorporation is hereby amended by striking Article FIFTH thereof in its entirety and substituting in lieu thereof
a new Article FIFTH which shall read in its entirety as follows:
“FIFTH:
The total number of shares of all classes of stock which the Corporation shall have authority to issue is five hundred million
(500,000,000) shares of which (i) four hundred fifty million (450,000,000) shares shall be common stock, par value $0.0001 per share
(the “Common Stock”), and (ii) fifty million (50,000,000) shares shall be preferred stock, par value $0.0001 per share
(the “Preferred Stock”). Shares of Preferred Stock may be issued from time to time in one or more series as may be established
from time to time by resolution of the Board of Directors of the Corporation (the “Board of Directors”), each of which series
shall consist of such number of shares and have such distinctive designation or title as shall be fixed by resolutions of the Board of
Directors prior to the issuance of any shares of such series. Each such class or series of Preferred Stock shall have such voting powers,
full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolutions of the Board of Directors providing for the issuance of such
series Preferred Stock. The Board of Directors is further authorized to increase or decrease (but not below the number of shares of such
class or series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series.”
FOURTH: This
Certificate of Amendment of Certificate of Incorporation has been duly adopted in accordance with the provisions of Section 242 of
the Delaware General Corporation Law.
FIFTH: Pursuant
to a resolution of the Board of Directors and in accordance with Section 228 of the Delaware General Corporation Law, a written
consent of the stockholders of the Corporation approved the amendment by a vote of the necessary number of shares required by statute.
IN WITNESS WHEREOF, the
undersigned affirms that the statements made herein are true under the penalties of perjury, this 30 day of June, 2021.
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/s/ Xiaofeng Peng
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Xiaofeng Peng
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Chief Executive Officer
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Exhibit 3.3
BYLAWS
OF
Phoenix
Motor inc.
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A Delaware Corporation -
BY-LAWS
OF
Phoenix
Motor inc.
ARTICLE I
OFFICES
SECTION 1. Principal
Office. The registered office of the corporation shall be located in such place as may be provided from time to time in the Certificate
of Incorporation.
SECTION 2. Other Offices.
The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may
from time to time determine or as the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meetings.
The annual meeting of the stockholders of the corporation shall be held wholly or partially by means of remote communication or at such
place, within or without the State of Delaware, on such date and at such time as may be determined by the board of directors and as shall
be designated in the notice of said meeting.
SECTION 2. Special Meetings.
Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be held wholly or partially by means of remote communication or at any place, within or without the State of Delaware, and may be
called by resolution of the board of directors, or by the Chairman or the President.
SECTION 3. Notice and
Purpose of Meetings. Written or printed notice of the meeting stating the place, day and hour of the meeting and, in case of a special
meeting, stating the purpose or purposes for which the meeting is called, and in case of a meeting held by remote communication stating
such means, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally, or by mail, or
if prior consent has been received by a stockholder by electronic transmission, by or at the direction of the Chairman or the President,
the Secretary, or the persons calling the meeting, to each stockholder of record entitled to vote at such meeting.
SECTION 4. Quorum.
The holders of a majority of the shares of capital stock issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute
or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders,
the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been transacted at the meeting as originally notified.
SECTION 5. Voting Process.
If a quorum is present or represented, the affirmative vote of a majority of the shares of stock present or represented at the meeting,
by ballot, proxy or electronic ballot, shall be the act of the stockholders unless the vote of a greater number of shares of stock is
required by law, by the Certificate of Incorporation or by these by-laws. Each outstanding share of stock having voting power, shall be
entitled to one vote on each matter submitted to a vote at a meeting of stockholders. A stockholder may vote either in person, by proxy
executed in writing by the stockholder or by his duly authorized attorney-in-fact, or by an electronic ballot from which it can be determined
that the ballot was authorized by a stockholder or proxyholder. The term, validity and enforceability of any proxy shall be determined
in accordance with the General Corporation Law of the State of Delaware.
SECTION 6. Written Consent
of Stockholders Without a Meeting. Whenever the stockholders are required or permitted to take any action by vote, such action may
be taken without a meeting, without prior notice and without a vote, if a written consent or electronic transmission, setting forth the
action so taken, shall be signed or e-mailed by the holders of outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting called for such purpose.
ARTICLE III
DIRECTORS
SECTION 1. Powers.
The business affairs of the corporation shall be managed by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required
to be exercised or done by the stockholders. The board of directors may adopt such rules and regulations, not inconsistent with the
Certificate of Incorporation or these by-laws or applicable laws, as it may deem proper for the conduct of its meetings and the management
of the Corporation.
SECTION 2. Number, Qualifications,
Term. The board of directors shall consist of one or more members. The number of directors shall be fixed by the board of directors
and may thereafter be changed from time to time by resolution of the board of directors. Directors need not be residents of the State
of Delaware nor stockholders of the corporation.
SECTION 3. Vacancies.
Vacancies and newly created directorships resulting from any increase in the number of directors may be filled by a majority of the directors
then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify. A vacancy created by the removal of a director by the stockholders may be filled by the
stockholders.
SECTION 4. Place of
Meetings. Meetings of the board of directors, regular or special, may be held either within or without the State of Delaware.
SECTION 5. Regular Meetings.
Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall
from time to time be determined by the board.
SECTION 6. Special Meetings.
Special meetings of the board of directors may be called by the Chairman or the President or by the number of directors who then legally
constitute a quorum. Notice of the time and place of all special meetings of the board of directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph
or telex, or by electronic mail or other electronic means, during normal business hours, at least 24 hours before the date and time of
the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, charges prepaid, at least three days before the date
of the meeting. .
SECTION 7. Notice; Waiver.
Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express
purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 8. Quorum.
A majority of the directors then in office shall constitute a quorum for the transaction of business unless a greater number is required
by law, by the Certificate of Incorporation or by these by-laws. If a quorum shall not be present at any meeting of directors, the directors
present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall
be present.
SECTION 10. Action Without
A Meeting. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent
in writing or by electronic transmission, setting forth the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof. In addition, meetings of the board may be held by means of conference telephone or voice communication
as permitted by the General Corporation Law of the State of Delaware.
SECTION 11. Action.
Except as otherwise provided by law or in the Certificate of Incorporation or these by-laws, if a quorum is present, the affirmative vote
of a majority of the members of the board of directors will be required for any action.
SECTION 12. Removal
of Directors. Subject to any provisions of applicable law, any or all of the directors may be removed by vote of the stockholders.
ARTICLE IV
COMMITTEES
SECTION 1. Designation
of Committees. The board of directors may, by resolution adopted by a majority of the whole board, designate one or more committees,
each of which shall, except as otherwise prescribed by law, have such authority of the board of directors as shall be specified in the
resolution of the board designating such committee. The board of directors shall have the power at any time to change the membership of,
to fill all vacancies in and to discharge any such committee, either with or without cause.
SECTION 4. Procedure;
Meetings; Quorum. Committee meetings, of which no notice shall be necessary, may be held at such times and places as shall be fixed
by resolution adopted by a majority of the members thereof. So far as applicable, the provisions of Article III of these by-laws
relating to notice, quorum and voting requirements applicable to meetings of the board of directors shall govern meetings of any committee
of the board. Each committee of the board of directors shall keep written minutes of its proceedings and circulate summaries of such written
minutes to the board of directors before or at the next meeting of the board.
ARTICLE V
OFFICERS
SECTION 1. Number.
The board of directors at its first meeting after each annual meeting of stockholders shall choose a Chief Executive Officer, a Secretary
and a Treasurer, none of whom need be a member of the board. The board of directors may also choose a Chairman from among the directors,
one or more Executive Vice Presidents, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The board of directors
may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by the board of directors. More than two offices may be held
by the same person.
SECTION 2. Compensation.
The salaries or other compensation of all officers of the corporation shall be fixed by the board of directors. No officer shall be prevented
from receiving a salary or other compensation by reason of the fact that he is also a director.
SECTION 3. Term; Removal;
Vacancy. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer may be removed
at any time, with or without cause, by the affirmative vote of a majority of the whole board of directors. Any vacancy occurring in any
office of the corporation shall be filled by the board of directors.
SECTION 4. Chairman.
The Chairman shall, if one be elected, preside at all meetings of the board of directors.
SECTION 5. Chief Executive
Officer. The Chief Executive Officer shall be the chief executive officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors in the absence of the Chairman, shall have general supervision over the business of the corporation
and shall see that all directions and resolutions of the board of directors are carried into effect.
SECTION 6. President.
The President shall, in the absence or disability of the Chief Executive Officer, perform the duties and exercise the powers of the Chief
Executive Officer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
SECTION 7. Vice President.
The Executive Vice Presidents shall, in the absence or disability of the President, perform the duties and exercise the powers of the
President and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. If
there shall be more than one Executive Vice President, the Executive Vice Presidents shall perform such duties and exercise such powers
in the absence or disability of the President, in the order determined by the board of directors. The Vice Presidents shall, in the absence
or disability of the President and of the Executive Vice Presidents, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the board of directors may from time to time prescribe. If there shall be more
than one vice president, the vice presidents shall perform such duties and exercise such powers in the absence or disability of the President
and of the Executive Vice President, in the order determined by the board of directors.
SECTION 8. Secretary.
The Secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties
as may be prescribed by the board of directors or President, under whose supervision he shall be. He shall have custody of the corporate
seal of the corporation and he, or an assistant secretary, shall have the authority to affix the same to an instrument requiring it and
when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give
general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
SECTION 9. Assistant
Secretary. The Assistant Secretary, if there shall be one, or if there shall be more than one, the assistant secretaries in the order
determined by the board of directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers
of the Secretary and shall perform such other duties and have such powers as the board of directors may from time to time prescribe.
SECTION 10. Treasurer.
The Treasurer or Chief Financial Officer shall have the custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be designated by the board of directors. He shall disburse the
funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render
to the Chairman, the President and the board of directors, at its regular meetings, or when the board of directors so requires, an account
of all of his transactions as Treasurer and of the financial condition of the corporation.
SECTION 11. Assistant
Treasurer. The Assistant Treasurer, if there shall be one, or, if there shall be more than one, the Assistant Treasurers in the order
determined by the board of directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
ARTICLE VI
CAPITAL STOCK
SECTION 1. Form.
The shares of the capital stock of the corporation shall be represented by certificates in such form as shall be approved by the board
of directors and shall be signed by the Chairman, the President, an Executive Vice President or a Vice President, and by the Treasurer
or an assistant treasurer or the Secretary or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation
or a facsimile thereof.
SECTION 2. Lost and
Destroyed Certificates. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued
by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in
its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and
may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
SECTION 3. Transfer
of Shares. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person
entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the corporation.
ARTICLE VII
INDEMNIFICATION
SECTION 1. (a) The
corporation shall indemnify, subject to the requirements of subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) The corporation shall
indemnify, subject to the requirements of subsection (d) of this Section, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of
Delaware or such other court shall deem proper.
(c) To the extent that
a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections (a) and (b) of this Section, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification
under subsections (a) and (b) of this Section (unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section. Such determination
shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by
a director, officer, employee or agent in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer
to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in
this Section. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
(f) The indemnification
and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section shall not limit the corporation
from providing any other indemnification or advancement of expenses permitted by law nor shall they be deemed exclusive of any other rights
to which a person seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding
such office.
(g) The corporation may
purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions
of this Section.
(h) For the purposes of
this Section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Section with respect to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this
Section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include
any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the
corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to any employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation”
as referred to in this Section.
(j) The indemnification
and advancement of expenses provided by, or granted pursuant to, this Section shall, unless otherwise provided when authorized or
ratified by the Board of Directors, continue as to a person who has ceased to be a director, officer, employee or agent of the corporation
and shall inure to the benefit of the heirs executors and administrators of such a person.
(k) The officers and directors
of the Company, as individuals, shall not be liable until all funds of the Company have been distributed, with the exception of the proceeds
contained in a trust account, that is subject to the trust agreement to be entered into by the Company.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Checks.
All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons
as the board of directors may from time to time designate.
SECTION 2. Fiscal Year.
The fiscal year of the corporation shall be determined, and may be changed, by resolution of the board of directors.
SECTION 3. Seal.
The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate
Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE IX
AMENDMENTS
SECTION 1. These by-laws
may be altered, amended, supplemented or repealed or new by-laws may be adopted (a) at any regular or special meeting of stockholders
at which a quorum is present or represented, by the affirmative vote of the holders of a majority of the shares entitled to vote, provided
notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting, or (b) by a resolution adopted
by a majority of the whole board of directors at any regular or special meeting of the board. The stockholders shall have authority to
change or repeal any by-laws adopted by the directors.
Exhibit 3.4
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Delaware
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Page 1
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The
First State
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I,
JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF AMENDMENT OF “PHOENIX MOTOR INC.”, FILED IN THIS OFFICE ON THE FOURTH DAY OF AUGUST, A.D. 2021, AT 10:51
O'CLOCK A.M.
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/s/
Jeffrey W. Bullock
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Jeffrey
W. Bullock Secretary of State
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3929882
8100
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Authentication:
203838963
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SR# 20212885865
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Date:
08-04-21
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You
may verify this certificate online at corp.delaware.gov/authver.shtml
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State of Delaware
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Secretary of State
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Division of Corporations
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Delivered 10:51 AM 08/04/2021
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FILED 10:51 AM 08/04/2021
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CERTIFICATE OF AMENDMENT
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SR 20212885865 - File Number 3929882
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TO
AMENDED CERTIFICATE
OF INCORPORATION
OF
PHOENIX MOTOR INC.
PHOENIX MOTOR INC. (the
“Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
FIRST: The name of the
Corporation is: Phoenix Motor Inc.
SECOND: The amended certificate
of incorporation of the Corporation was filed with the Secretary of State on August 3, 2021 (“Amended Certificate of Incorporation”);
THIRD: The Board of Directors
of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware,
adopted resolutions amending its Amended Certificate of Incorporation as follows:
Article V shall be
amended to add the following provision in its entirety to the existing provisions of Article V, after the first paragraph:
“Upon
the effective time (the “Effective Time”) of the filing of this Certificate of Amendment, each one (1) share of
the Corporation’s Common Stock that is issued and outstanding or held by the Corporation as treasury stock immediately prior to
the Effective Time (which shall include each fractional interest in Common Stock in excess of one (1) share held by any stockholder),
is and shall be subdivided and reclassified into seventy thousand (70,000) fully paid, nonassessable shares of Common Stock (the “Forward
Stock Split”). Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old
Certificates”) shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented
by the Old Certificate shall have been subdivided and reclassified. The authorized number of shares, and par value per share, of Common
Stock shall not be affected by the Forward Stock Split.”
FOURTH: This Certificate
of Amendment to the Amended Certificate of Incorporation was submitted to the stockholders of the Corporation and was duly adopted and
approved in accordance with the provisions of Sections 228 and 242 of the General Corporate Law of the State of Delaware at the annual
meeting of the stockholders of the
Corporation.
IN WITNESS WHEREOF, Phoenix
Motor Inc. has caused this Certificate of Amendment to be signed by its Chief Executive Officer as of August 3, 2021.
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/s/ Xiaofeng Peng
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Xiaofeng Peng
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Chief Executive Officer
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Exhibit 4.1
C ______
PHOENIX MOTOR INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
PAR VALUE $0.0001 PER SHARE
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
PHOENIX MOTOR INC.
transferable on the books of the Company in person or
by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by
the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Company and the facsimile
signatures of its duly authorized officers.
[Corporate Seal]
Dated:
The following abbreviations,
when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to
applicable laws or regulations:
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TEN COM –
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as tenants in common
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UNIF GIFT MIN ACT - _____ Custodian
______
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TEN ENT –
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as tenants by the entireties
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(Cust)
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(Minor)
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JT TEN –
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as joint tenants with right of
survivorship
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under Uniform Gifts to Minors
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and not as tenants in common
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Act ________________
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(State)
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Additional Abbreviations may also be used though not in
the above list.
PHOENIX MOTOR INC.
The Company will furnish
without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other
special rights of each class of shares or series thereof of the Company and the qualifications, limitations, or restrictions of such
preferences and/or rights. This certificate and the shares represented thereby are issued and shall be held subject to all the provisions
of the Company’s Amended and Restated Certificate of Incorporation and all amendments thereto and resolutions of the Board of Directors
providing for the issue of preferred stock (copies of which may be obtained from the secretary of the Company), to all of which the holder
of this certificate by acceptance hereof assents.
For value received, ___________________________ hereby
sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE(S)
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP
CODE, OF ASSIGNEE(S))
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
to transfer the said
stock on the books of the within named Company will full power of substitution in the premises.
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Notice:
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The signature to this assignment must correspond with the
name as written upon the face of the certificate in every particular, without alteration
or enlargement or any change whatever.
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Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
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Exhibit 4.3
Stock
Option Agreement
This Stock Option Agreement
(this “Agreement”) is dated as of January 24, 2021 by and between Phoenix Motors, Inc., a Delaware corporation
(the “Company”) and Xiaofeng Peng (“Optionee”).
For value received, parties
agree as follows:
1.
Grant of Option. The Company hereby grants to Optionee, an option (the “Option”) to purchase from the
Company Four Million Two Hundred Thousand (4,200,000) shares of its common stock, $0.0001 par value per share (the “Common
Stock”) for a period ending seven (7) years from the date hereof. The number, type of security and Exercise Price (as defined
below) of shares issuable upon the exercise of this Option are subject to adjustment as set forth in Section 12 below.
2.
Exercise Price. The exercise price per share at which this Option may be exercised shall equal $0.43 per share of Common
Stock (the “Exercise Price”), as adjusted pursuant to Section 12 hereof if applicable.
3.
Exercise of Option.
(a)
Exercise. The purchase rights represented by this Option are only exercisable by Optionee, at the option of Optionee at
any time, by the surrender of this Agreement and the Notice of Exercise annexed hereto duly completed and executed on behalf of Optionee
(the “Notice of Exercise”) at the address of the Company (or such other address or agency of the Company as
it may designate by notice in writing to Optionee at the address of Optionee hereunder), upon payment in cash, by cashier’s check
acceptable to the Company, or by wire transfer of immediately funds in the amount of the full Exercise Price of the shares of Common
Stock to be purchased.
(b)
Effective Date of Exercise. This Option shall be deemed to have been exercised immediately prior to the close of business
on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon
such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly
as practicable on or after such date, the Company at its expense shall cause the Company to issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise.
4.
No Fractional Shares. No fractional shares of capital stock shall be issued upon the exercise of this Option. If any fractional
interest in a share would, except for the provision of this Section 4, be delivered upon such exercise, the Company, in lieu of delivery
of a fractional share thereof, shall pay to Optionee an amount in cash equal to the current market price of such fractional share.
5.
Rights of Stockholder. Nothing contained in this Option shall be construed as conferring upon the Optionee hereof the right
to vote or to consent or to receive notice as a stockholder of the Comapny or any other matters or any rights whatsoever as a stockholder
of the Company. No dividends or interest shall be payable or accrued in respect of this Option or the interest represented hereby or
the Option hereunder until, and only to the extent that, this Option shall have been exercised and the Common Stock paid for in full.
6.
Option Not Transferable. This Option and the rights hereunder are not transferable and/or assignable, in whole or in part,
by Optionee; provided, however, that Optionee may assign this Option and the rights hereunder to one or more of its affiliates.
7.
Compliance with Securities Laws.
(a)
Optionee acknowledges that this Option and the shares of Common Stock to be issued upon exercise hereof are being acquired solely
for Optionee’s own account and not as a nominee for any other party, and for investment, and that Optionee will not offer, sell,
or otherwise dispose of this Option or any shares of Common Stock to be issued upon exercise hereof or conversion thereof except under
circumstances that will not result in a violation of the Securities Act of 1933 (the “Act”), or any state securities
laws. Upon exercise of this Option, Optionee shall, if reasonably requested by the Company, confirm in writing, in a form reasonably
satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for Optionee’s own account
and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.
(b)
Optionee further acknowledges that it is familiar with the definition of “accredited investor” in Rule 501 of Regulation
D promulgated under the Act and certifies that Optionee is an accredited investor as defined in such rule.
(c)
Optionee understands that neither this Option nor the Common Stock have been registered under the Act, and therefore they may
not be sold, assigned or transferred unless (i) a registration statement under the Act is in effect with respect thereto or (ii) an exemption
from registration is found to be available to the satisfaction of the Company.
(d)
Optionee further acknowledges and agrees that the stock certificates evidencing the Common Stock shall bear a restrictive legend,
substantially in the following form (in addition to such other restrictive legends as are required or deemed advisable under the provisions
of this Option and any applicable law or any other agreement to which Optionee is a party):
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE
STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
8.
Notice of Certain Events. Whenever the Exercise Price, type or number of shares purchasable hereunder shall be adjusted
pursuant to Section 12 hereof, the Company shall, within ten (10) days of such adjustment event, issue a certificate setting forth in
reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price, type and number of shares purchasable hereunder after giving effect to such adjustment and shall cause a copy
of such certificate to be delivered to Optionee.
9.
Valid Issuance of Option and Common Stock. With respect to the exercise of this Option, the
Company hereby represents, covenants and agrees (as applicable):
(a)
This Option is, and any Option issued in substitution for or replacement of this Option shall be, upon issuance, duly authorized,
validly issued and fully vested; and
(b)
All shares of Common Stock issuable upon the exercise of this Option pursuant to the terms hereof
shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such shares of
Common Stock are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any
stockholder of the Company and free and clear of all taxes, liens and charges.
10.
Amendments; Waivers.
(a)
The provisions of this Agreement may be amended (either generally or in a particular instance and either retroactively or prospectively),
only by an instrument in writing signed by the Company and Optionee.
(b)
No waivers of or exceptions to any term, condition or provision of this Option, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such term, condition or provision.
11.
Lock-Up Agreement. The Optionee agrees, in connection with the Company’s initial public offering of the Company’s
securities, upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of this Option or any of the Common
Stock or other Company securities issuable upon exercise of this Option or upon conversion of any Common Stock (other than those included
in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the underwriters; provided
however that such 180 day period may be extended to the extent necessary to permit any managing underwriter to comply with NASD Rule
2711(f)(4). The holder of this Option acknowledges that the Company will be caused to be placed on any securities issued directly or
indirectly upon exercise this Option the following legend:
“THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH LOCKUP PERIOD
IS BINDING ON TRANSFEREES OF THESE SHARES.”
12.
Adjustments. The Company has 450 million shares of Common Stock authorized and has 70 million shares of Common Stock issued
and outstanding. The Exercise Price and the number and type of shares purchasable hereunder are subject to adjustment from time to time
as follows:
(a)
If, while this Option remains outstanding and unexpired, the Company shall, by reclassification of securities or otherwise, change
any of the securities as to which purchase rights under this Option exist into the same or a different number of securities of any other
class or classes, this Option shall thereafter represent the right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject to the purchase rights under this Option immediately prior
to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment
as provided in this Section 12.
(b)
If, while this Option remains outstanding and unexpired, the Company shall split, subdivide or combine the securities as to which
purchase rights under this Option exist into a different number of securities of the same class, the Exercise Price for such securities
shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. Upon
an adjustment in the Exercise Price pursuant to this Section 12(b), the number of shares subject to this Option (which were the subject
of such split, subdivision or combination) shall be adjusted accordingly such that the aggregate Exercise Price payable for the purchase
of such shares shall remain the same as before such split, subdivision or combination.
13.
Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
14.
Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with the internal laws
of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any jurisdiction other than those of the State of Delaware. With
respect to any disputes arising out of or related to this Agreement, the Company and the Optionee consent to the exclusive jurisdiction
of the federal or state courts located in the State of Delaware.
15.
Notices. Any notice required or permitted hereunder shall be in writing and shall be deemed to have been given (a) when
delivered personally, (b) on the date sent by email if sent during normal business hours of the recipient, and on the next business day
if sent after normal business hours of the recipient or (c) 48 hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and in each case, addressed to the party to be notified at such party’s address or email as set forth
below or as subsequently modified by written notice.
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If to the Company:
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Phoenix Motors Inc.
401 Doubleday Ave
Ontario, CA 91761
Phone: (909) 987-0815
Attn: Joe Mitchell, Chief Executive Officer
E-mail:
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with a copy to:
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Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Attention: David Fischer, Esq.
Phone: (212) 407-4827
E-mail: dfischer@loeb.com
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If to the Optionee:
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Xiaofeng Peng
Phone:
E-mail:
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16.
Entire Agreement. This Agreement, including the exhibits attached thereto, constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and thereof. The Optionee and the Company agree that no party shall
be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warrants, representations or
covenants except as specifically set forth herein or therein.
[SIGNATURE PAGE FOLLOWS]
The parties have executed this Agreement as of
the date first set forth above.
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Company
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PHOENIX MOTOR INC.
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By:
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/s/
Joseph Mitchell
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Name: Joseph Mitchell
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Title: Chief Executive Officer
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Optionee
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By:
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/s/
Xiaofeng Peng
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Name: Xiaofeng Peng
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[Signature Page to Stock
Option Agreement]
NOTICE OF EXERCISE
401 Doubleday Ave
Ontario, CA 91761
Attn: Joe Mitchell, Chief Executive Office
(1)
The undersigned (“Optionee”), pursuant to the provisions set forth in the Stock Option Agreement dated
________, 2021 (the “Option”), hereby elects to exercise the Option in whole at an Exercise Price of $0.43
per share, pursuant to Section 3(a) of the Option.
(2)
In exercising the Option, the Optionee confirms and acknowledges that (a) the shares of Common Stock are being acquired solely
for the account of the Optionee and not as a nominee for any other party, and for investment, and (b) the Optionee will not offer, sell,
or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws.
(3)
Please cause the Company to issue a certificate representing said shares of Common Stock in the name of Optionee.
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LDK New Energy Holding Limited
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By:
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Name:
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Title:
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[Date]
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Exhibit
10.1
PRIVILEGED AND CONFIDENTIAL
PHOENIX MOTOR, INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
PHOENIX MOTOR, INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
Article I
PURPOSE
The purpose of this Phoenix Motor, Inc. 2021
Omnibus Equity Incentive Plan (the “Plan”) is to benefit Phoenix Motor, Inc., a Delaware corporation (the “Company”)
and its stockholders, by assisting the Company and its subsidiaries to attract, retain and provide incentives to key management employees,
directors, and consultants of the Company and its Affiliates, and to align the interests of such service providers with those of the
Company’s stockholders. Accordingly, the Plan provides for the granting of Non-qualified Stock Options, Incentive Stock Options,
Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Performance Stock Awards, Performance Unit Awards,
Unrestricted Stock Awards, Distribution Equivalent Rights or any combination of the foregoing.
Article II
DEFINITIONS
The following definitions shall be applicable
throughout the Plan unless the context otherwise requires:
2.1 “Affiliate”
shall mean any corporation which, with respect to the Company, is a “subsidiary corporation” within the meaning of Section 424(f) of
the Code or other entity in which the Company has a controlling interest in such entity or another entity which is part of a chain of
entities in which the Company or each entity has a controlling interest in another entity in the unbroken chain of entities ending with
the applicable entity.
2.2 “Aggregate
Number of Shares Available for Awards” shall mean 10% of the Company’s outstanding Shares on a fully diluted basis.
2.3 “Award”
shall mean, individually or collectively, any Option, Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award, Performance
Unit Award, Stock Appreciation Right, Distribution Equivalent Right or Unrestricted Stock Award.
2.4 “Award
Agreement” shall mean a written agreement between the Company and the Holder with respect to an Award, setting forth the terms
and conditions of the Award, as amended.
2.5 “Board”
shall mean the Board of Directors of the Company.
2.6 “Base
Value” shall have the meaning given to such term in Section 14.2.
Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan
2.7 “Cause”
shall mean (i) if the Holder is a party to an employment or service agreement with the Company or an Affiliate which agreement defines
“Cause” (or a similar term), “Cause” shall have the same meaning as provided for in such agreement, or
(ii) for a Holder who is not a party to such an agreement, “Cause” shall mean termination by the Company or an
Affiliate of the employment (or other service relationship) of the Holder by reason of the Holder’s (A) intentional failure
to perform reasonably assigned duties, (B) dishonesty or willful misconduct in the performance of the Holder’s duties, (C) involvement
in a transaction which is materially adverse to the Company or an Affiliate, (D) breach of fiduciary duty involving personal profit,
(E) willful violation of any law, rule, regulation or court order (other than misdemeanor traffic violations and misdemeanors not
involving misuse or misappropriation of money or property), (F) commission of an act of fraud or intentional misappropriation or
conversion of any asset or opportunity of the Company or an Affiliate, or (G) material breach of any provision of the Plan or the
Holder’s Award Agreement or any other written agreement between the Holder and the Company or an Affiliate, in each case as determined
in good faith by the Board, the determination of which shall be final, conclusive and binding on all parties.
2.8 “Change
of Control” shall mean, except as otherwise provided in an Award Agreement, (i) for
a Holder who is a party to an employment or consulting agreement with the Company or an Affiliate which agreement defines “Change
of Control” (or a similar term), “Change of Control” shall have the same meaning as provided for in such agreement,
or (ii) for a Holder who is not a party to such an agreement, “Change of Control” shall mean the satisfaction
of any one or more of the following conditions (and the “Change of Control” shall be deemed to have occurred as of the first
day that any one or more of the following conditions shall have been satisfied):
(a) Any
person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition, “Person”),
other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate, becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities;
(b) The
closing of a merger, consolidation or other business combination (a “Business Combination”) other than a Business
Combination in which holders of the Shares immediately prior to the Business Combination have substantially the same proportionate ownership
of the common stock or ordinary shares, as applicable, of the surviving corporation immediately after the Business Combination as immediately
before;
(c) The
closing of an agreement for the sale or disposition of all or substantially all of the Company’s assets to any entity that is not
an Affiliate;
(d) The
approval by the holders of shares of Shares of a plan of complete liquidation of the Company, other than a merger of the Company into
any subsidiary or a liquidation as a result of which persons who were stockholders of the Company immediately prior to such liquidation
have substantially the same proportionate ownership of shares of common stock or ordinary shares, as applicable, of the surviving corporation
immediately after such liquidation as immediately before; or
Phoenix Motor, Inc. 2021 Omnibus Equity
Incentive Plan
(e) Within
any twenty-four (24) month period, the Incumbent Directors shall cease to constitute at least a majority of the Board or the board of
directors of any successor to the Company; provided, however, that any director elected to the Board, or nominated for
election, by a majority of the Incumbent Directors then still in office, shall be deemed to be an Incumbent Director for purposes of
this paragraph (e), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of an individual, entity or “group” other than the Board (including, but not limited
to, any such assumption that results from paragraphs (a), (b), (c), or (d) of this definition).
Unless otherwise provided in an applicable Award
Agreement, solely for the purpose of determining the timing of any payments pursuant to any Award constituting a “deferral of compensation”
subject to Code Section 409A, a Change of Control shall be limited to a “change in the ownership of the Company,” a
“change in the effective control of the Company,” or a “change in the ownership of a substantial portion of the assets
of the Company” as such terms are defined in Section 1.409A-3(i)(5) of the U.S. Treasury Regulations.
2.9 “Code”
shall mean the United States of America Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall
be deemed to include any amendments or successor provisions to any section and any regulation under such section.
2.10 “Committee”
shall mean a committee comprised of two (2) or more members of the Board who are selected by the Board as provided in Section 4.1.
2.11 “Company”
shall have the meaning given to such term in the introductory paragraph, including any successor thereto.
2.12 “Consultant”
shall mean any natural person that provides bona fide services as an independent contractor and who qualifies as a consultant or advisor
under Instruction A.1.(a)(1) of Form S-8 of the Securities Act of 1933, as amended.
2.13 “Director”
shall mean a member of the Board or a member of the board of directors of an Affiliate, in either case, who is not an Employee.
2.14 “Distribution
Equivalent Right” shall mean an Award granted under Article XIII of the Plan which entitles the Holder to receive bookkeeping
credits, cash payments and/or Share distributions equal in amount to the distributions that would have been made to the Holder had the
Holder held a specified number of Shares during the period the Holder held the Distribution Equivalent Right.
Phoenix Motor, Inc. 2021 Omnibus Equity
Incentive Plan
2.15 “Distribution
Equivalent Right Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Distribution
Equivalent Right Award.
2.16 “Effective
Date” shall mean _______, 2021.1
2.17 “Employee”
shall mean any employee, including any officer, of the Company or an Affiliate.
2.18 “Exchange
Act” shall mean the United States of America Securities Exchange Act of 1934, as amended.
2.19 “Fair
Market Value” shall mean, as of any specified date, the closing sales price of the Shares for such date (or, in the event that
the Shares are not traded on such date, on the immediately preceding trading date) on the NASDAQ Stock Market (“NASDAQ”),
as reported by NASDAQ, or such other domestic or foreign national securities exchange on which the Shares may be listed. If the Shares
are not listed on NASDAQ or on a national securities exchange, but are quoted on the OTC Bulletin Board or by the National Quotation
Bureau, the Fair Market Value of the Shares shall be the mean of the highest bid and lowest asked prices per Share for such date. If
the Shares are not quoted or listed as set forth above, Fair Market Value shall be determined by the Board in good faith by any fair
and reasonable means (which means may be set forth with greater specificity in the applicable Award Agreement). The Fair Market Value
of property other than Shares shall be determined by the Board in good faith by any fair and reasonable means consistent with the requirements
of applicable law.
2.20 “Family
Member” of an individual shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships,
any person sharing the Holder’s household (other than a tenant or employee of the Holder), a trust in which such persons have more
than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets,
and any other entity in which such persons (or the Holder) own more than fifty percent (50%) of the voting interests.
2.21 “Holder”
shall mean an Employee, Director or Consultant who has been granted an Award or any such individual’s beneficiary, estate or representative,
who has acquired such Award in accordance with the terms of the Plan, as applicable.
2.22 “Incentive
Stock Option” shall mean an Option which is intended by the Committee to constitute an “incentive stock option”
and conforms to the applicable provisions of Section 422 of the Code.
2.23 “Incumbent
Director” shall mean, with respect to any period of time specified under the Plan for purposes of determining whether or not
a Change of Control has occurred, the individuals who were members of the Board at the beginning of such period.
1 TBD
Phoenix Motor, Inc. 2021 Omnibus Equity
Incentive Plan
2.24 “Non-qualified
Stock Option” shall mean an Option which is not an Incentive Stock Option or which is designated as an Incentive Stock Option
but does not meet the applicable requirements of Section 422 of the Code.
2.25 “Option”
shall mean an Award granted under Article VII of the Plan of an option to purchase Shares and shall include both Incentive Stock
Options and Non-qualified Stock Options.
2.26 “Option
Agreement” shall mean a written agreement between the Company and a Holder with respect to an Option.
2.27 “Performance
Criteria” shall mean the criteria selected by the Committee for purposes of establishing the Performance Goal(s) for a
Holder for a Performance Period.
2.28 “Performance
Goals” shall mean, for a Performance Period, the written goal or goals established by the Committee for the Performance Period
based upon the Performance Criteria, which may be related to the performance of the Holder, the Company or an Affiliate.
2.29 “Performance
Period” shall mean one or more periods of time, which may be of varying and overlapping durations, selected by the Committee,
over which the attainment of the Performance Goals shall be measured for purposes of determining a Holder’s right to, and the payment
of, a Performance Stock Award or a Performance Unit Award.
2.30 “Performance
Stock Award” or “Performance Stock” shall mean an Award granted under Article XII of the Plan under
which, upon the satisfaction of predetermined Performance Goals, Shares are paid to the Holder.
2.31 “Performance
Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to a Performance Stock Award.
2.32 “Performance
Unit Award” or “Performance Unit” shall mean an Award granted under Article XI of the Plan under which,
upon the satisfaction of predetermined Performance Goals, a cash payment shall be made to the Holder, based on the number of Units awarded
to the Holder.
2.33 “Performance
Unit Agreement” shall mean a written agreement between the Company and a Holder with respect to a Performance Unit Award.
2.34 “Plan”
shall mean this Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan, as amended from time to time, together with each of the
Award Agreements utilized hereunder.
Phoenix Motor, Inc. 2021 Omnibus Equity
Incentive Plan
2.35 “Restricted
Stock Award” and “Restricted Stock” shall mean an Award granted under Article VIII of the Plan of Shares,
the transferability of which by the Holder is subject to Restrictions.
2.36 “Restricted
Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.
2.37 “Restricted
Stock Unit Award” and “RSUs” shall refer to an Award granted under Article X of the Plan under which,
upon the satisfaction of predetermined individual service-related vesting requirements, a payment in cash or Shares shall be made to
the Holder, based on the number of Units awarded to the Holder.
2.38 “Restricted
Stock Unit Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Stock Award.
2.39 “Restriction
Period” shall mean the period of time for which Shares subject to a Restricted Stock Award shall be subject to Restrictions,
as set forth in the applicable Restricted Stock Agreement.
2.40 “Restrictions”
shall mean the forfeiture, transfer and/or other restrictions applicable to Shares awarded to an Employee, Director or Consultant under
the Plan pursuant to a Restricted Stock Award and set forth in a Restricted Stock Agreement.
2.41 “Rule 16b-3”
shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such may be amended from
time to time, and any successor rule, regulation or statute fulfilling the same or a substantially similar function.
2.42 “Shares”
or “Stock” shall mean the Class A common stock of the Company, par value $0.0001 per share.
2.43 “Stock
Appreciation Right” or “SAR” shall mean an Award granted under Article XIV of the Plan of a right,
granted alone or in connection with a related Option, to receive a payment equal to the increase in value of a specified number of Shares
between the date of Award and the date of exercise.
2.44 “Stock
Appreciation Right Agreement” shall mean a written agreement between the Company and a Holder with respect to a Stock Appreciation
Right.
2.45 “Tandem
Stock Appreciation Right” shall mean a Stock Appreciation Right granted in connection with a related Option, the exercise of
some or all of which results in termination of the entitlement to purchase some or all of the Shares under the related Option, all as
set forth in Article XIV.
2.46 “Ten
Percent Stockholder” shall mean an Employee who, at the time an Option is granted to him or her, owns shares possessing more
than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent corporation or subsidiary
corporation thereof (both as defined in Section 424 of the Code), within the meaning of Section 422(b)(6) of the Code.
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2.47 “Termination
of Service” shall mean a termination of a Holder’s employment with, or status as a Director or Consultant of, the Company
or an Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent Disability or death, except as provided
in Section 6.4. In the event Termination of Service shall constitute a payment event with respect to any Award subject to Code Section 409A,
Termination of Service shall only be deemed to occur upon a “separation from service” as such term is defined under Code
Section 409A and applicable authorities.
2.48 “Total
and Permanent Disability” of an individual shall mean the inability of such individual to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than twelve (12) months, within the meaning of Section 22(e)(3) of
the Code.
2.49 “Unit”
shall mean a bookkeeping unit, which represents such monetary amount as shall be designated by the Committee in each Performance Unit
Agreement, or represents one Share for purposes of each Restricted Stock Unit Award.
2.50 “Unrestricted
Stock Award” shall mean an Award granted under Article IX of the Plan of Shares which are not subject to Restrictions.
2.51 “Unrestricted
Stock Agreement” shall mean a written agreement between the Company and a Holder with respect to an Unrestricted Stock Award.
Article III
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the Effective
Date, provided that the Plan is approved by the stockholders of the Company within twelve (12) months of such date.
Article IV
ADMINISTRATION
4.1 Composition
of Committee. The Plan shall be administered by the Committee, which shall be appointed by the Board. If necessary, in the Board’s
discretion, to comply with Rule 16b-3 under the Exchange Act or relevant securities exchange or inter-dealer quotation service,
the Committee shall consist solely of two (2) or more Directors who are each (i) “non-employee directors” within
the meaning of Rule 16b-3 and (ii) “independent” for purposes of any applicable listing requirements;. If a member
of the Committee shall be eligible to receive an Award under the Plan, such Committee member shall have no authority hereunder with respect
to his or her own Award.
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4.2 Powers.
Subject to the other provisions of the Plan, the Committee shall have the sole authority, in its discretion, to make all determinations
under the Plan, including but not limited to (i) determining which Employees, Directors or Consultants shall receive an Award, (ii) the
time or times when an Award shall be made (the date of grant of an Award shall be the date on which the Award is awarded by the Committee),
(iii) what type of Award shall be granted, (iv) the term of an Award, (v) the date or dates on which an Award vests, (vi) the
form of any payment to be made pursuant to an Award, (vii) the terms and conditions of an Award (including the forfeiture of the
Award, and/or any financial gain, if the Holder of the Award violates any applicable restrictive covenant thereof), (viii) the Restrictions
under a Restricted Stock Award, (ix) the number of Shares which may be issued under an Award, (x) Performance Goals applicable
to any Award and certification of the achievement of such goals, and (xi) the waiver of any Restrictions or Performance Goals, subject
in all cases to compliance with applicable laws. In making such determinations the Committee may take into account the nature of the
services rendered by the respective Employees, Directors and Consultants, their present and potential contribution to the Company’s
(or the Affiliate’s) success and such other factors as the Committee in its discretion may deem relevant.
4.3 Additional
Powers. The Committee shall have such additional powers as are delegated to it under the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Award Agreements executed hereunder,
to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the intent of the Plan, to determine
the terms, restrictions and provisions of each Award and to make all other determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in any Award Agreement in the manner
and to the extent the Committee shall deem necessary, appropriate or expedient to carry it into effect. The determinations of the Committee
on the matters referred to in this Article IV shall be conclusive and binding on the Company and all Holders.
4.4 Committee
Action. Subject to compliance with all applicable laws, action by the Committee shall require the consent of a majority of the members
of the Committee, expressed either orally at a meeting of the Committee or in writing in the absence of a meeting. No member of the Committee
shall have any liability for any good faith action, inaction or determination in connection with the Plan.
Article V
SHARES SUBJECT TO PLAN AND LIMITATIONS THEREON
5.1 Authorized
Shares and Award Limits. The Committee may from time to time grant Awards to one or more Employees, Directors and/or Consultants
determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI. Subject to Article XV,
the aggregate number of Shares that may be issued under the Plan shall not exceed the Aggregate Number of Shares Available for Awards.
Shares shall be deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights
of its Holder terminate, any Shares subject to such Award shall again be available for the grant of a new Award. Notwithstanding any
provision in the Plan to the contrary, the maximum number of Shares that may be subject to Awards of Incentive Stock Options shall not
be more than the Aggregate Number of Shares Available for Awards (subject to adjustment in the same manner as provided in Article XV
with respect to Shares subject to Awards then outstanding).
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5.2 Types
of Shares. The Shares to be issued pursuant to the grant or exercise of an Award may consist of authorized but unissued Shares, Shares
purchased on the open market or Shares previously issued and outstanding and reacquired by the Company.
Article VI
ELIGIBILITY AND TERMINATION OF SERVICE
6.1 Eligibility.
Awards made under the Plan may be granted solely to individuals who, at the time of grant, are Employees, Directors or Consultants. An
Award may be granted on more than one occasion to the same Employee, Director or Consultant, and, subject to the limitations set forth
in the Plan, such Award may include, a Non-qualified Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, an Unrestricted
Stock Award, a Distribution Equivalent Right Award, a Performance Stock Award, a Performance Unit Award, a Stock Appreciation Right,
a Tandem Stock Appreciation Right, or any combination thereof, and solely for Employees, an Incentive Stock Option.
6.2 Termination
of Service. Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions of Section 6.3
or 6.4, the following terms and conditions shall apply with respect to a Holder’s Termination of Service with the Company or an
Affiliate, as applicable:
(a) The
Holder’s rights, if any, to exercise any then exercisable Options and/or Stock Appreciation Rights shall terminate:
(i) If
such termination is for a reason other than the Holder’s Total and Permanent Disability or death, ninety (90) days after the date
of such Termination of Service;
(ii) If
such termination is on account of the Holder’s Total and Permanent Disability, one (1) year after the date of such Termination
of Service; or
(iii) If
such termination is on account of the Holder’s death, one (1) year after the date of the Holder’s death.
Upon such applicable date the Holder (and such
Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect
to any such Options and Stock Appreciation Rights. Notwithstanding the foregoing, the Committee, in its sole discretion, may provide
for a different time period in the Award Agreement, or may extend the time period, following a Termination of Service, during which the
Holder has the right to exercise any vested Non-qualified Stock Option or Stock Appreciation Right, which time period may not extend
beyond the expiration date of the Award term.
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(b) In
the event of a Holder’s Termination of Service for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions,
vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock Unit Award, such Restricted
Stock and/or RSUs shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal
representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock and/or RSUs.
6.3 Special
Termination Rule. Except to the extent inconsistent with the terms of the applicable Award Agreement, and notwithstanding anything
to the contrary contained in this Article VI, if a Holder’s employment with, or status as a Director of, the Company or an
Affiliate shall terminate, and if, within ninety (90) days of such termination, such Holder shall become a Consultant, such Holder’s
rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to
the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for the entire period during which
such Award or portion thereof had been outstanding. Should the Committee effect such determination with respect to such Holder, for all
purposes of the Plan, such Holder shall not be treated as if his or her employment or Director status had terminated until such time
as his or her Consultant status shall terminate, in which case his or her Award, as it may have been reduced in connection with the Holder’s
becoming a Consultant, shall be treated pursuant to the provisions of Section 6.2, provided, however, that any such Award which
is intended to be an Incentive Stock Option shall, upon the Holder’s no longer being an Employee, automatically convert to a Non-qualified
Stock Option. Should a Holder’s status as a Consultant terminate, and if, within ninety (90) days of such termination, such Holder
shall become an Employee or a Director, such Holder’s rights with respect to any Award or portion thereof granted thereto prior
to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such
Holder had been an Employee or a Director, as applicable, for the entire period during which such Award or portion thereof had been outstanding,
and, should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not
be treated as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate,
or his or her Director status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions
of Section 6.2.
6.4 Termination
of Service for Cause. Notwithstanding anything in this Article VI or elsewhere in the Plan to the contrary, and unless a Holder’s
Award Agreement specifically provides otherwise, in the event of a Holder’s Termination of Service for Cause, all of such Holder’s
then outstanding Awards shall expire immediately and be forfeited in their entirety upon such Termination of Service.
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Article VII
OPTIONS
7.1 Option
Period. The term of each Option shall be as specified in the Option Agreement; provided, however, that except as set
forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant.
7.2 Limitations
on Exercise of Option. An Option shall be exercisable in whole or in such installments and at such times as specified in the Option
Agreement
7.3 Special
Limitations on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all plans of the Company and any parent corporation or subsidiary corporation thereof (both as defined
in Section 424 of the Code) which provide for the grant of Incentive Stock Options exceeds One Hundred Thousand Dollars ($100,000)
(or such other individual limit as may be in effect under the Code on the date of grant), the portion of such Incentive Stock Options
that exceeds such threshold shall be treated as Non-qualified Stock Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Holder’s Options, which were intended
by the Committee to be Incentive Stock Options when granted to the Holder, will not constitute Incentive Stock Options because of such
limitation, and shall notify the Holder of such determination as soon as practicable after such determination. No Incentive Stock Option
shall be granted to an Employee if, at the time the Incentive Stock Option is granted, such Employee is a Ten Percent Stockholder, unless
(i) at the time such Incentive Stock Option is granted the Option price is at least one hundred ten percent (110%) of the Fair Market
Value of the Shares subject to the Incentive Stock Option, and (ii) such Incentive Stock Option by its terms is not exercisable
after the expiration of five (5) years from the date of grant. No Incentive Stock Option shall be granted more than ten (10) years
from the earlier of the Effective Date or date on which the Plan is approved by the Company’s stockholders. The designation by
the Committee of an Option as an Incentive Stock Option shall not guarantee the Holder that the Option will satisfy the applicable requirements
for “incentive stock option” status under Section 422 of the Code.
7.4 Option
Agreement. Each Option shall be evidenced by an Option Agreement in such form and containing such provisions not inconsistent with
the other provisions of the Plan as the Committee from time to time shall approve, including, but not limited to, provisions intended
to qualify an Option as an Incentive Stock Option. An Option Agreement may provide for the payment of the Option price, in whole or in
part, by the delivery of a number of Shares (plus cash if necessary) that have been owned by the Holder for at least six (6) months
and having a Fair Market Value equal to such Option price, or such other forms or methods as the Committee may determine from time to
time, in each case, subject to such rules and regulations as may be adopted by the Committee. Each Option Agreement shall, solely
to the extent inconsistent with the provisions of Sections 6.2, 6.3, and 6.4, as applicable, specify the effect of Termination of Service
on the exercisability of the Option. Moreover, without limiting the generality of the foregoing, a Non-qualified Stock Option Agreement
may provide for a “cashless exercise” of the Option, in whole or in part, by (a) establishing procedures whereby the
Holder, by a properly-executed written notice, directs (i) an immediate market sale or margin loan as to all or a part of Shares
to which he is entitled to receive upon exercise of the Option, pursuant to an extension of credit by the Company to the Holder of the
Option price, (ii) the delivery of the Shares from the Company directly to a brokerage firm and (iii) the delivery of the Option
price from sale or margin loan proceeds from the brokerage firm directly to the Company, or (b) reducing the number of Shares to
be issued upon exercise of the Option by the number of such Shares having an aggregate Fair Market Value equal to the Option price (or
portion thereof to be so paid) as of the date of the Option’s exercise. An Option Agreement may also include provisions relating
to: (i) subject to the provisions hereof, accelerated vesting of Options, including but not limited to, upon the occurrence of a
Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The
terms and conditions of the respective Option Agreements need not be identical.
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7.5 Option
Price and Payment. The price at which an Share may be purchased upon exercise of an Option shall be determined by the Committee;
provided, however, that such Option price (i) shall not be less than the Fair Market Value of an Share on the date
such Option is granted (or 110% of Fair Market Value for an Incentive Stock Option held by Ten Percent Stockholder, as provided in Section 7.3),
and (ii) shall be subject to adjustment as provided in Article XV. The Option or portion thereof may be exercised by delivery
of an irrevocable notice of exercise to the Company. The Option price for the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee as set forth in the Plan and the applicable Option Agreement, which manner, with the consent of the
Committee, may include the withholding of Shares otherwise issuable in connection with the exercise of the Option. Separate share certificates
shall be issued by the Company for those Shares acquired pursuant to the exercise of an Incentive Stock Option and for those Shares acquired
pursuant to the exercise of a Non-qualified Stock Option.
7.6 Stockholder
Rights and Privileges. The Holder of an Option shall be entitled to all the privileges and rights of a stockholder of the Company
solely with respect to such Shares as have been purchased under the Option and for which share certificates have been registered in the
Holder’s name.
7.7 Options
and Rights in Substitution for Stock or Options Granted by Other Corporations. Options may be granted under the Plan from time to
time in substitution for stock options held by individuals employed by entities who become Employees, Directors or Consultants as a result
of a merger or consolidation of the employing entity with the Company or any Affiliate, or the acquisition by the Company or an Affiliate
of the assets of the employing entity, or the acquisition by the Company or an Affiliate of stock or shares of the employing entity with
the result that such employing entity becomes an Affiliate. Any substitute Awards granted under this Plan shall not reduce the number
of Shares authorized for grant under the Plan.
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7.8 Prohibition
Against RePricing. Except to the extent (i) approved in advance by holders of a majority of the shares of the Company entitled
to vote generally in the election of directors, or (ii) as a result of any Change of Control or any adjustment as provided in Article XV,
the Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price under any outstanding
Option or Stock Appreciation Right, or to grant any new Award or make any payment of cash in substitution for or upon the cancellation
of Options and/or Stock Appreciation Rights previously granted.
Article VIII
RESTRICTED STOCK AWARDS
8.1 Award.
A Restricted Stock Award shall constitute an Award of Shares to the Holder as of the date of the Award which are subject to a “substantial
risk of forfeiture” as defined under Section 83 of the Code during the specified Restriction Period. At the time a Restricted
Stock Award is made, the Committee shall establish the Restriction Period applicable to such Award. Each Restricted Stock Award may have
a different Restriction Period, in the discretion of the Committee. The Restriction Period applicable to a particular Restricted Stock
Award shall not be changed except as permitted by Section 8.2.
8.2 Terms
and Conditions. At the time any Award is made under this Article VIII, the Company and the Holder shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.
The Company shall cause the Shares to be issued in the name of Holder, either by book-entry registration or issuance of one or more stock
certificates evidencing the Shares, which Shares or certificates shall be held by the Company or the stock transfer agent or brokerage
service selected by the Company to provide services for the Plan. The Shares shall be restricted from transfer and shall be subject to
an appropriate stop-transfer order, and if any certificate is issued, such certificate shall bear an appropriate legend referring to
the restrictions applicable to the Shares. After any Shares vest, the Company shall deliver the vested Shares, in book-entry or certificated
form in the Company’s sole discretion, registered in the name of Holder or his or her legal representatives, beneficiaries or heirs,
as the case may be, less any Shares withheld to pay withholding taxes. If provided for under the Restricted Stock Agreement, the Holder
shall have the right to vote Shares subject thereto and to enjoy all other stockholder rights, including the entitlement to receive dividends
on the Shares during the Restriction Period. At the time of such Award, the Committee may, in its sole discretion, prescribe additional
terms and conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the
effect of Termination of Service prior to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall,
to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in a Restricted Stock Agreement
made in conjunction with the Award. Such Restricted Stock Agreement may also include provisions relating to: (i) subject to the
provisions hereof, accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of
Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements) and (iii) any
other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The
terms and conditions of the respective Restricted Stock Agreements need not be identical. All Shares delivered to a Holder as part of
a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder at the time of
vesting.
8.3 Payment
for Restricted Stock. The Committee shall determine the amount and form of any payment from a Holder for Shares received pursuant
to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make any
payment for Shares received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.
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Article IX
UNRESTRICTED STOCK AWARDS
9.1 Award.
Shares may be awarded (or sold) to Employees, Directors or Consultants under the Plan which are not subject to Restrictions of any kind,
in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.
9.2 Terms
and Conditions. At the time any Award is made under this Article IX, the Company and the Holder shall enter into an Unrestricted
Stock Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee may determine to be appropriate.
9.3 Payment
for Unrestricted Stock. The Committee shall determine the amount and form of any payment from a Holder for Shares received pursuant
to an Unrestricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make
any payment for Shares received pursuant to an Unrestricted Stock Award, except to the extent otherwise required by law.
Article X
RESTRICTED STOCK UNIT AWARDS
10.1 Award.
A Restricted Stock Unit Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value of Shares) to the Holder
at the end of a specified vesting schedule. At the time a Restricted Stock Unit Award is made, the Committee shall establish the vesting
schedule applicable to such Award. Each Restricted Stock Unit Award may have a different vesting schedule, in the discretion of the Committee.
A Restricted Stock Unit shall not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends
or any other rights associated with ownership of Shares prior to the time the Holder shall receive a distribution of Shares pursuant
to Section 10.3.
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10.2 Terms
and Conditions. At the time any Award is made under this Article X, the Company and the Holder shall enter into a Restricted
Stock Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to
be appropriate. The Restricted Stock Unit Agreement shall set forth the individual service-based vesting requirement which the Holder
would be required to satisfy before the Holder would become entitled to distribution pursuant to Section 10.3 and the number of
Units awarded to the Holder. Such conditions shall be sufficient to constitute a “substantial risk of forfeiture” as such
term is defined under Section 409A of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe
additional terms and conditions or restrictions relating to Restricted Stock Unit Awards in the Restricted Stock Unit Agreement, including,
but not limited to, rules pertaining to the effect of Termination of Service prior to expiration of the applicable vesting period.
The terms and conditions of the respective Restricted Stock Unit Agreements need not be identical.
10.3 Distributions
of Shares. The Holder of a Restricted Stock Unit shall be entitled to receive Shares or a cash payment equal to the Fair Market Value
of a Share, or one Share, as determined in the sole discretion of the Committee and as set forth in the Restricted Stock Unit Agreement,
for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the applicable vesting requirement.
Such distribution shall be made no later than by the fifteenth (15th) day of the third (3rd) calendar month next
following the end of the calendar year in which the Restricted Stock Unit first becomes vested (i.e., no longer subject to a “substantial
risk of forfeiture”).
Article XI
PERFORMANCE UNIT AWARDS
11.1 Award.
A Performance Unit Award shall constitute an Award under which, upon the satisfaction of predetermined individual and/or Company (and/or
Affiliate) Performance Goals based on selected Performance Criteria, a cash payment shall be made to the Holder, based on the number
of Units awarded to the Holder. At the time a Performance Unit Award is made, the Committee shall establish the Performance Period and
applicable Performance Goals. Each Performance Unit Award may have different Performance Goals, in the discretion of the Committee. A
Performance Unit Award shall not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends
or any other rights associated with ownership of Shares.
11.2 Terms
and Conditions. At the time any Award is made under this Article XI, the Company and the Holder shall enter into a Performance
Unit Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.
The Committee shall set forth in the applicable Performance Unit Agreement the Performance Period, Performance Criteria and Performance
Goals which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to payment pursuant to
Section 11.3, the number of Units awarded to the Holder and the dollar value or formula assigned to each such Unit. Such payment
shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code. At the time of such Award, the
Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Unit Awards,
including, but not limited to, rules pertaining to the effect of Termination of Service prior to expiration of the applicable performance
period. The terms and conditions of the respective Performance Unit Agreements need not be identical.
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11.3 Payments.
The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value assigned to such Unit under the
applicable Performance Unit Agreement if the Holder and/or the Company satisfy (or partially satisfy, if applicable under the applicable
Performance Unit Agreement) the Performance Goals set forth in such Performance Unit Agreement. All payments shall be made no later than
by the fifteenth (15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal
year to which such performance goals and objectives relate.
Article XII
PERFORMANCE STOCK AWARDS
12.1 Award.
A Performance Stock Award shall constitute a promise to grant Shares (or cash equal to the Fair Market Value of Shares) to the Holder
at the end of a specified Performance Period subject to achievement of specified Performance Goals. At the time a Performance Stock Award
is made, the Committee shall establish the Performance Period and applicable Performance Goals based on selected Performance Criteria.
Each Performance Stock Award may have different Performance Goals, in the discretion of the Committee. A Performance Stock Award shall
not constitute an equity interest in the Company and shall not entitle the Holder to voting rights, dividends or any other rights associated
with ownership of Shares unless and until the Holder shall receive a distribution of Shares pursuant to Section 12.3.
12.2 Terms
and Conditions. At the time any Award is made under this Article XII, the Company and the Holder shall enter into a Performance
Stock Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.
The Committee shall set forth in the applicable Performance Stock Agreement the Performance Period, selected Performance Criteria and
Performance Goals which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to the receipt
of Shares pursuant to such Holder’s Performance Stock Award and the number of Shares subject to such Performance Stock Award. Such
distribution shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code. If such Performance
Goals are achieved, the distribution of Shares (or the payment of cash, as determined in the sole discretion of the Committee), shall
be made in accordance with Section 12.3, below. At the time of such Award, the Committee may, in its sole discretion, prescribe
additional terms and conditions or restrictions relating to Performance Stock Awards, including, but not limited to, rules pertaining
to the effect of the Holder’s Termination of Service prior to the expiration of the applicable performance period. The terms and
conditions of the respective Performance Stock Agreements need not be identical.
12.3 Distributions
of Shares. The Holder of a Performance Stock Award shall be entitled to receive a cash payment equal to the Fair Market Value of
a Share, or one Share, as determined in the sole discretion of the Committee, for each Performance Stock Award subject to such Performance
Stock Agreement, if the Holder satisfies the applicable vesting requirement. Such distribution shall be made no later than by the fifteenth
(15th) day of the third (3rd) calendar month next following the end of the Company’s fiscal year to which
such performance goals and objectives relate.
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Article XIII
DISTRIBUTION EQUIVALENT RIGHTS
13.1 Award.
A Distribution Equivalent Right shall entitle the Holder to receive bookkeeping credits, cash payments and/or Share distributions equal
in amount to the distributions that would have been made to the Holder had the Holder held a specified number of Shares during the specified
period of the Award.
13.2 Terms
and Conditions. At the time any Award is made under this Article XIII, the Company and the Holder shall enter into a Distribution
Equivalent Rights Award Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the applicable Distribution Equivalent Rights Award Agreement the terms
and conditions, if any, including whether the Holder is to receive credits currently in cash, is to have such credits reinvested (at
Fair Market Value determined as of the date of reinvestment) in additional Shares or is to be entitled to choose among such alternatives.
Such receipt shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code and, if such Award
becomes vested, the distribution of such cash or Shares shall be made no later than by the fifteenth (15th) day of the third
(3rd) calendar month next following the end of the Company’s fiscal year in which the Holder’s interest in the
Award vests. Distribution Equivalent Rights Awards may be settled in cash or in Shares, as set forth in the applicable Distribution Equivalent
Rights Award Agreement. A Distribution Equivalent Rights Award may, but need not be, awarded in tandem with another Award (other than
an Option or a SAR), whereby, if so awarded, such Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the
Holder, as applicable, under the same conditions as under such other Award.
13.3 Interest
Equivalents. The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may provide for the crediting
of interest on a Distribution Rights Award to be settled in cash at a future date (but in no event later than by the fifteenth (15th)
day of the third (3rd) calendar month next following the end of the Company’s fiscal year in which such interest is
credited and vested), at a rate set forth in the applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable
thereunder.
Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan
Article XIV
STOCK APPRECIATION RIGHTS
14.1 Award.
A Stock Appreciation Right shall constitute a right, granted alone or in connection with a related Option, to receive a payment equal
to the increase in value of a specified number of Shares between the date of Award and the date of exercise.
14.2 Terms
and Conditions. At the time any Award is made under this Article XIV, the Company and the Holder shall enter into a Stock Appreciation
Right Agreement setting forth each of the matters contemplated thereby and such other matters as the Committee may determine to be appropriate.
The Committee shall set forth in the applicable Stock Appreciation Right Agreement the terms and conditions of the Stock Appreciation
Right, including (i) the base value (the “Base Value”) for the Stock Appreciation Right, which shall be not less
than the Fair Market Value of a Share on the date of grant of the Stock Appreciation Right, (ii) the number of Shares subject to
the Stock Appreciation Right, (iii) the period during which the Stock Appreciation Right may be exercised; provided, however,
that no Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant, and (iv) any
other special rules and/or requirements which the Committee imposes upon the Stock Appreciation Right. Upon the exercise of some
or all of the portion of a Stock Appreciation Right, the Holder shall receive a payment from the Company, in cash or in the form of Shares
having an equivalent Fair Market Value or in a combination of both, as determined in the sole discretion of the Committee, equal to the
product of:
(a) The
excess of (i) the Fair Market Value of a Share on the date of exercise, over (ii) the Base Value, multiplied by,
(b) The
number of Shares with respect to which the Stock Appreciation Right is exercised.
14.3 Tandem
Stock Appreciation Rights. If the Committee grants a Stock Appreciation Right which is intended to be a Tandem Stock Appreciation
Right, the Tandem Stock Appreciation Right shall be granted at the same time as the related Option, and the following special rules shall
apply:
(a) The
Base Value shall be equal to or greater than the per Share exercise price under the related Option;
(b) The
Tandem Stock Appreciation Right may be exercised for all or part of the Shares which are subject to the related Option, but solely upon
the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related Option (and when a Share is
purchased under the related Option, an equivalent portion of the related Tandem Stock Appreciation Right shall be canceled);
(c) The
Tandem Stock Appreciation Right shall expire no later than the date of the expiration of the related Option;
Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan
(d) The
value of the payment with respect to the Tandem Stock Appreciation Right may be no more than one hundred percent (100%) of the difference
between the per Share exercise price under the related Option and the Fair Market Value of the Shares subject to the related Option at
the time the Tandem Stock Appreciation Right is exercised, multiplied by the number of the Shares with respect to which the Tandem Stock
Appreciation Right is exercised; and
(e) The
Tandem Stock Appreciation Right may be exercised solely when the Fair Market Value of the Shares subject to the related Option exceeds
the per Share exercise price under the related Option.
Article XV
RECAPITALIZATION OR REORGANIZATION
15.1 Adjustments
to Shares. The shares with respect to which Awards may be granted under the Plan are Shares as presently constituted; provided,
however, that if, and whenever, prior to the expiration or distribution to the Holder of Shares underlying an Award theretofore
granted, the Company shall effect a subdivision or consolidation of the Shares or the payment of an Share dividend on Shares without
receipt of consideration by the Company, the number of Shares with respect to which such Award may thereafter be exercised or satisfied,
as applicable, (i) in the event of an increase in the number of outstanding Shares, shall be proportionately increased, and the
purchase price per Share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding Shares,
shall be proportionately reduced, and the purchase price per Share shall be proportionately increased. Notwithstanding the foregoing
or any other provision of this Article XV, any adjustment made with respect to an Award (x) which is an Incentive Stock Option,
shall comply with the requirements of Section 424(a) of the Code, and in no event shall any adjustment be made which would
render any Incentive Stock Option granted under the Plan to be other than an “incentive stock option” for purposes of Section 422
of the Code, and (y) which is a Non-qualified Stock Option, shall comply with the requirements of Section 409A of the Code,
and in no event shall any adjustment be made which would render any Non-qualified Stock Option granted under the Plan to become subject
to Section 409A of the Code.
15.2 Recapitalization.
If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable,
of a previously granted Award, the Holder shall be entitled to receive (or entitled to purchase, if applicable) under such Award, in
lieu of the number of Shares then covered by such Award, the number and class of shares and securities to which the Holder would have
been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the Holder had been the holder
of record of the number of Shares then covered by such Award.
15.3 Other
Events. In the event of changes to the outstanding Shares by reason of an extraordinary cash dividend, reorganization, merger, consolidation,
combination, split-up, spin-off, exchange or other relevant change in capitalization occurring after the date of the grant of any Award
and not otherwise provided for under this Article XV, any outstanding Awards and any Award Agreements evidencing such Awards shall
be adjusted by the Board in its discretion in such manner as the Board shall deem equitable or appropriate taking into consideration
the applicable accounting and tax consequences, as to the number and price of Shares or other consideration subject to such Awards. In
the event of any adjustment pursuant to Sections 15.1, 15.2 or this Section 15.3, the aggregate number of Shares available under
the Plan pursuant to Section 5.1 may be appropriately adjusted by the Board, the determination of which shall be conclusive. In
addition, the Committee may make provision for a cash payment to a Holder or a person who has an outstanding Award.
Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan
15.4 Change
of Control. The Committee may, in its sole discretion, at the time an Award is made or at any time prior to, coincident with or after
the time of a Change of Control, cause any Award either (i) to be canceled in consideration of a payment in cash or other consideration
in amount per share equal to the excess, if any, of the price or implied price per Share in the Change of Control over the per Share
exercise, base or purchase price of such Award, which may be paid immediately or over the vesting schedule of the Award; (ii) to
be assumed, or new rights substituted therefore, by the surviving corporation or a parent or subsidiary of such surviving corporation
following such Change of Control; (iii) accelerate any time periods, or waive any other conditions, relating to the vesting, exercise,
payment or distribution of an Award so that any Award to a Holder whose employment has been terminated as a result of a Change of Control
may be vested, exercised, paid or distributed in full on or before a date fixed by the Committee; (iv) to be purchased from a Holder
whose employment has been terminated as a result of a Change of Control, upon the Holder’s request, for an amount of cash equal
to the amount that could have been obtained upon the exercise, payment or distribution of such rights had such Award been currently exercisable
or payable; or (v) terminate any then outstanding Award or make any other adjustment to the Awards then outstanding as the Committee
deems necessary or appropriate to reflect such transaction or change. The number of Shares subject to any Award shall be rounded to the
nearest whole number.
15.5 Powers
Not Affected. The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board
or of the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change of the Company’s
capital structure or business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting
Shares or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all
or any part of its assets or business or any other corporate act or proceeding.
15.6 No
Adjustment for Certain Awards. Except as hereinabove expressly provided, the issuance by the Company of shares of any class or securities
convertible into shares of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants
to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and
in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment by reason thereof shall be made
with respect to the number of Shares subject to Awards theretofore granted or the purchase price per Share, if applicable.
Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan
Article XVI
AMENDMENT AND TERMINATION OF PLAN
The Plan shall continue in effect, unless sooner
terminated pursuant to this Article XVI, until the tenth (10th) anniversary of the date on which it is adopted by the
Board (except as to Awards outstanding on that date). The Board in its discretion may terminate the Plan at any time with respect to
any shares for which Awards have not theretofore been granted; provided, however, that the Plan’s termination shall
not materially and adversely impair the rights of a Holder with respect to any Award theretofore granted without the consent of the Holder.
The Board shall have the right to alter or amend the Plan or any part hereof from time to time; provided, however, that
without the approval by a majority of the votes cast at a meeting of stockholders at which a quorum representing a majority of the shares
of the Company entitled to vote generally in the election of directors is present in person or by proxy, no amendment or modification
of the Plan may (i) materially increase the benefits accruing to Holders, (ii) except as otherwise expressly provided in Article XV,
materially increase the number of Shares subject to the Plan or the individual Award Agreements specified in Article V, (iii) materially
modify the requirements for participation in the Plan, or (iv) amend, modify or suspend Section 7.7 (re-pricing prohibitions)
or this Article XVI. In addition, no change in any Award theretofore granted may be made which would materially and adversely impair
the rights of a Holder with respect to such Award without the consent of the Holder (unless such change is required in order to exempt
the Plan or any Award from Section 409A of the Code).
Article XVII
MISCELLANEOUS
17.1 No
Right to Award. Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be deemed to give
an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement duly executed on behalf of
the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.
17.2 No
Rights Conferred. Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation of
employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate to terminate
the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation of such Director’s
membership on the Board, (iv) interfere in any way with any right of the Company or an Affiliate to terminate a Director’s
membership on the Board at any time, (v) confer upon any Consultant any right with respect to continuation of his or her consulting
engagement with the Company or any Affiliate, or (vi) interfere in any way with any right of the Company or an Affiliate to terminate
a Consultant’s consulting engagement with the Company or an Affiliate at any time.
Phoenix
Motor, Inc. 2021 Omnibus Equity Incentive Plan
17.3 Other
Laws; No Fractional Shares; Withholding. The Company shall not be obligated by virtue of any provision of the Plan to recognize the
exercise of any Award or to otherwise sell or issue Shares in violation of any laws, rules or regulations, and any postponement
of the exercise or settlement of any Award under this provision shall not extend the term of such Award. Neither the Company nor its
directors or officers shall have any obligation or liability to a Holder with respect to any Award (or Shares issuable thereunder) (i) that
shall lapse because of such postponement, or (ii) for any failure to comply with the requirements of any applicable law, rules or
regulations, including but not limited to any failure to comply with the requirements of Section 409A of this Code. No fractional
Shares shall be delivered, nor shall any cash in lieu of fractional Shares be paid. The Company shall have the right to deduct in cash
(whether under this Plan or otherwise) in connection with all Awards any taxes required by law to be withheld and to require any payments
required to enable it to satisfy its withholding obligations. In the case of any Award satisfied in the form of Shares, no Shares shall
be issued unless and until arrangements satisfactory to the Company shall have been made to satisfy any tax withholding obligations applicable
with respect to such Award. Subject to such terms and conditions as the Committee may impose, the Company shall have the right to retain,
or the Committee may, subject to such terms and conditions as it may establish from time to time, permit Holders to elect to tender,
Shares (including Shares issuable in respect of an Award) to satisfy, in whole or in part, the amount required to be withheld.
17.4 No
Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking
any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such
action would have an adverse effect on the Plan or any Award made under the Plan. No Employee, Director, Consultant, beneficiary or other
person shall have any claim against the Company or any Affiliate as a result of any such action.
17.5 Restrictions
on Transfer. No Award under the Plan or any Award Agreement and no rights or interests herein or therein, shall or may be assigned,
transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by will or by
the laws of descent and distribution, or (ii) where permitted under applicable tax rules, by gift to any Family Member of the Holder,
subject to compliance with applicable laws. An Award may be exercisable during the lifetime of the Holder only by such Holder or by the
Holder’s guardian or legal representative unless it has been transferred by gift to a Family Member of the Holder, in which case
it shall be exercisable solely by such transferee. Notwithstanding any such transfer, the Holder shall continue to be subject to the
withholding requirements provided for under Section 17.3 hereof.
17.6 Beneficiary
Designations. Each Holder may, from time to time, name a beneficiary or beneficiaries (who may be contingent or successive beneficiaries)
for purposes of receiving any amount which is payable in connection with an Award under the Plan upon or subsequent to the Holder’s
death. Each such beneficiary designation shall serve to revoke all prior beneficiary designations, be in a form prescribed by the Company
and be effective solely when filed by the Holder in writing with the Company during the Holder’s lifetime. In the absence of any
such written beneficiary designation, for purposes of the Plan, a Holder’s beneficiary shall be the Holder’s estate.
Phoenix
Motor, Inc. 2021 Omnibus Equity Incentive Plan
17.7 Rule 16b-3.
It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange Act shall meet all of the requirements
of Rule 16b-3. If any provision of the Plan or of any such Award would disqualify the Plan or such Award under, or would otherwise
not comply with the requirements of, Rule 16b-3, such provision or Award shall be construed or deemed to have been amended as necessary
to conform to the requirements of Rule 16b-3.
17.8 Clawback
Policy. Notwithstanding anything contained herein or in any incentive “performance based” award, Awards under the Plan
shall be subject to reduction, forfeiture or repayment by reason of a correction or restatement of the Company’s financial information
if and to the extent such reduction or repayment is required by any applicable law.
17.9 No
Obligation to Notify or Minimize Taxes. The Company shall have no duty or obligation to any Holder to advise such Holder as
to the time or manner of exercising any Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise
such Holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The
Company has no duty or obligation to minimize the tax consequences of an Award to any person.
17.10
Section 409A. Notwithstanding any
other provision of the Plan, the Committee shall have no authority to issue an Award under the Plan with terms and/or conditions
which would cause such Award to constitute non-qualified “deferred compensation” under Section 409A of the Code
unless such Award shall be structured to be exempt from or comply with all requirements of Code Section 409A. The Plan and all
Award Agreements are intended to comply with the requirements of Section 409A of the Code (or to be exempt therefrom) and shall
be so interpreted and construed and no amount shall be paid or distributed from the Plan unless and until such payment complies with
all requirements of Code Section 409A. If an Award is subject to Section 409A of the Code, (i) distributions
shall only be made in a manner and upon an event permitted under Section 409A of the Code, (ii) payments to be made upon a
termination of employment or service shall only be made upon a “separation from service” under section 409A of the Code,
(iii) unless the Award specifies otherwise, each installment payment shall be treated as a separate payment for purposes of
Section 409A of the Code, and (iv) in no event shall a Holder, directly or indirectly, designate the calendar year
in which a distribution is made except in accordance with Section 409A of the Code. Any Award that is subject to
Section 409A of the Code and that is to be distributed to a Key Employee (as defined below) upon separation from service shall
be administered so that any distribution with respect to such Award shall be postponed for six months following the date of the
Holder’s separation from service (unless an earlier death), if required by Section 409A. The determination of Key
Employees, including the number and identity of persons considered Key Employees and the identification date, shall be made by the
Committee or its delegate each year in accordance with section 416(i) of the Code and the “specified employee”
requirements of Section 409A of the Code. It is the intent of the Company that the provisions of
this Plan and all other plans and programs sponsored by the Company be interpreted to comply in all respects with Code
Section 409A, however, the Company shall have no liability to the Holder, or any successor or beneficiary thereof, in the event
taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by the Holder or
any successor or beneficiary thereof.
Phoenix
Motor, Inc. 2021 Omnibus Equity Incentive Plan
17.11 Indemnification.
Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred thereby in connection with or
resulting from any claim, action, suit, or proceeding to which such person may be made a party or may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts paid thereby in settlement thereof, with the Company’s
approval, or paid thereby in satisfaction of any judgment in any such action, suit, or proceeding against such person; provided,
however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before he or
she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive and shall
be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation
or By-laws, by contract, as a matter of law, or otherwise.
17.12 Other
Benefit Plans. No Award, payment or amount received hereunder shall be taken into account in computing an Employee’s salary
or compensation for the purposes of determining any benefits under any pension, retirement, life insurance or other benefit plan of the
Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award, payment or amount received. Nothing
in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees, in
cash or property, in a manner which is not expressly authorized under the Plan.
17.13 Limits
of Liability. Any liability of the Company with respect to an Award shall be based solely upon the contractual obligations created
under the Plan and the Award Agreement. None of the Company, any member of the Board nor any member of the Committee shall have any liability
to any party for any action taken or not taken, in good faith, in connection with or under the Plan.
17.14 Governing
Law. Except as otherwise provided herein, the Plan shall be construed in accordance with the laws of the State of Delaware, without
regard to principles of conflicts of law.
17.15 Subplans.
The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities
or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan setting forth (i) such
limitations on the Committee’s discretion under the Plan as the Board deems necessary or desirable and (ii) such additional
terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted
by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Holders within the affected jurisdiction
and the Company shall not be required to provide copies of any supplement to Holders in any jurisdiction that is not affected.
17.16 Severability
of Provisions. If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable provision had not been
included in the Plan.
17.17 No
Funding. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other
segregation of funds or assets to ensure the payment of any Award. Prior to receipt of Shares or a cash distribution pursuant to the
terms of an Award, such Award shall represent an unfunded unsecured contractual obligation of the Company and the Holder shall have no
greater claim to the Shares underlying such Award or any other assets of the Company or Affiliate than any other unsecured general creditor.
17.18 Headings.
Headings used throughout the Plan are for convenience only and shall not be given legal significance.
Exhibit 10.2
PHOENIX MOTOR, INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made as of _____________, 2021 [insert
date on which Committee grants the Option] (the “Grant Date”), by and between Phoenix Motor, Inc. (the “Company”),
and ____________________ (the “Optionee”).
WITNESSETH:
WHEREAS, the Company has adopted and maintains
the Phoenix Motor, Inc. 2021 Omnibus Equity Incentive Plan effective [____________], 2021 (the “Plan”), and
WHEREAS, the Committee has authorized the grant
to the Optionee of an Option under the Plan, on the terms and conditions set forth in the Plan and as hereinafter provided,
NOW, THEREFORE, in consideration of the premises
contained herein, the Company and the Optionee hereby agree as follows:
1. Plan.
This Option award is made pursuant to the terms of the Plan which are incorporated herein by reference. Terms used in this Agreement which
are defined in the Plan shall have the same meaning as set forth in the Plan.
2. Grant
of Option. The Company hereby grants to the Optionee an option to purchase [insert # of shares] of the Company’s Shares
for an Option price per Share equal to [insert price] (the Fair Market Value of a Share on the date of the grant of the Option)
[for more than 10% shareholders must be at least 110% of FMV]. The Option is intended
by the Committee to qualify as an Incentive Stock Option as provided in Section 9 and the provisions hereof shall be interpreted
on a basis consistent with such intent.
3. Exercise
Period.
(a) The
Option shall be exercisable on or after vesting of the Option pursuant to the terms of the Plan and this Agreement.
(b) All
or any part of the Option may be exercised by the Optionee no later than the tenth (10th) anniversary of the Grant Date. [for
more than 10% shareholders must be 5 years from Grant Date]
(c) This
Agreement and the Option shall terminate on the earlier of (i) the tenth (10th) anniversary of the Grant Date, or (ii) the date
as of which the Option has been fully exercised.
Phoenix Motor, Inc. Omnibus Equity Incentive Plan Incentive
Stock Option Agreement
4. Vesting.
Except as provided below and subject to the Optionee’s continuation of service with the Company during the vesting period, the Option
shall vest and become exercisable pursuant to the following schedule:
[Insert
Vesting Schedule]
5. Termination
of Service. In the event of the Optionee’s Termination of Service with the Company, the provisions of Article VI of the
Plan shall control.
6. [Change
of Control. Notwithstanding the foregoing, upon a Change of Control, the Option shall automatically
become fully vested and exercisable as of the date of such Change of Control.]1
7. Restrictions
on Transfer of Option. This Agreement and the Option shall not be transferable otherwise than by will or by the laws of descent and
distribution and the Option shall be exercisable, during the Optionee’s lifetime, solely by the Optionee.
8. Exercise
of Option.
(a) The
Option shall become exercisable at such time as shall be provided herein or in the Plan and shall be exercisable by written notice of
such exercise, in the form prescribed by the Committee, to the Secretary of the Company, at its principal office. The notice shall specify
the number of Shares for which the Option is being exercised.
(b) Except
as otherwise provided in Sections 8(c) and 8(d), Shares purchased pursuant to the Option shall be paid for in full at the time of
such purchase in cash, in Shares, including Shares acquired pursuant to the Plan, or part in cash and part in Shares. Shares transferred
in payment of the Option price shall be valued as of the date of transfer based on their Fair Market Value.
(c) The
Option price may be paid, in whole or in part, by (i) an immediate market sale or margin loan as to all or a part of the Shares which
the Optionee shall be entitled to receive upon exercise of the Option, pursuant to an extension of credit by the Company to the Optionee
of the Option price (or portion thereof to be so paid), (ii) the delivery of the Shares from the Company directly to a brokerage
firm, and (iii) the delivery of the Option price from sale or margin loan proceeds from the brokerage firm directly to the Company.
(d) The
Option price may be paid, in whole or in part, by reducing the number of Shares to be issued upon exercise of the Option by the number
of Shares having an aggregate Fair Market Value equal to the Option price (or portion thereof to be so paid) as of the date of the Option’s
exercise.
1 TBD
Phoenix Motor, Inc. Omnibus Equity Incentive Plan Incentive
Stock Option Agreement
9. Tax
Status of Option.
(a) Incentive
Stock Option. This Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code,
but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with the Optionee’s
own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under
Section 422 of the Code, including, but not limited to, holding period requirements. If at any time the Option shall fail or cease
to meet the requirements of Section 422 of the Code, it shall automatically convert to, and be treated as, a Non-qualified Stock
Option under the terms of the Plan.
(b) Exercise
Limitation. An Option shall not be treated as an Incentive Stock Option to the extent the aggregate Fair Market Value (determined
at the time the Option is granted) of the Shares with respect to which the Optionee may exercise the Option for the first time during
any calendar year, when added to the aggregate Fair Market Value of the shares subject to any other options designated as Incentive Stock
Options granted to the Optionee under all stock option plans of Company and any parent corporation or subsidiary corporation thereof (both
as defined in Section 424 of the Code) prior to the Grant Date with respect to which such options are exercisable for the first time
during the same calendar year, shall exceed One Hundred Thousand Dollars ($100,000), as and only to the extent necessary to comply with
the limitations under Code Section 422(d). For purposes of the preceding sentence, options designated as Incentive Stock Options
shall be taken into account in the order in which they were granted, and the Fair Market Value of shares of stock shall be determined
as of the time the option with respect to such shares is granted as required under Code Section 422(d).
(c) Notice
of Disqualifying Disposition. The Optionee shall promptly notify the Company if the Optionee disposes of any of the Shares acquired
pursuant to the Option within one (1) year after the date the Optionee exercises all or part of the Option or within two (2) years
after the Grant Date of Option. Until such time as the Optionee disposes of such Shares in a manner consistent with the provisions of
this Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all Shares acquired pursuant to the Option
in the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option
and the two-year period immediately after the Grant Date of the Option. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent
for the Company’s stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any
such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.
10. Regulation
by the Committee. This Agreement and the Option shall be subject to the administrative procedures and rules as the Committee
shall adopt. All decisions of the Committee upon any question arising under the Plan or under this Agreement, shall be conclusive and
binding upon the Optionee and any person or persons to whom any portion of the Option has been transferred by will, by the laws of descent
and distribution.
Phoenix Motor, Inc. Omnibus Equity Incentive Plan Incentive
Stock Option Agreement
11. Rights
as a Shareholder. The Optionee shall have no rights as a shareholder with respect to Shares subject to the Option until certificates
for Shares are issued to the Optionee.
12. Reservation
of Shares. With respect to the Option, the Company hereby agrees to at all times reserve for issuance and/or delivery upon payment
by the Optionee of the Option price, such number of Shares as shall be required for issuance and/or delivery upon such payment pursuant
to the Option.
13. Delivery
of Share Certificates. Within a reasonable time after the exercise of the Option the Company shall cause to be delivered to the Optionee,
his or her legal representative or his or her beneficiary, a certificate for the Shares purchased pursuant to the exercise of the Option.
14. Withholding.
In the event the Optionee elects to exercise the Option (or any part thereof), the Company or an Affiliate shall be entitled to deduct
and withhold the minimum amount necessary in connection with the issuance of Shares to the Optionee to satisfy its withholding obligations
under any and all federal, state or local tax rules or regulations.
15. Amendment.
The Committee may amend this Agreement at any time and from time to time; provided, however, that no amendment of this Agreement that
would materially and adversely impair the Optionee’s rights or entitlements with respect to the Option shall be effective without
the prior written consent of the Optionee.
16. Optionee
Acknowledgment. Optionee acknowledges and agrees that the vesting of Shares pursuant to this Option Agreement is earned only by continuing
service with the Company. Optionee further acknowledges and agrees that nothing in this Agreement, nor in the Plan shall confer upon the
Optionee any right to continue in the service of the Company, nor shall it interfere in any way with Optionee’s right or the Company’s
right to terminate Optionee’s service at any time, with or without Cause. Optionee acknowledges receipt of a copy of the Plan and
represents that he or she is familiar with the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety,
has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option.
By executing this Agreement, the Optionee hereby agrees to be bound by all of the terms of both the Plan and this Agreement.
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PHOENIX MOTOR, INC.
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By:
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Date
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Its:
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,Optionee
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Date
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Phoenix Motor, Inc.
Omnibus Equity Incentive Plan Incentive Stock Option Agreement
SAMPLE
NOTICE OF EXERCISE
Phoenix Motor, Inc.
Compensation Committee
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Date of Exercise:
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Ladies and Gentlemen:
This constitutes notice under
my stock Option that I elect to purchase the number of Shares for the price set forth below.
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Type of Option:
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Incentive Stock Option
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Grant Date:
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Number
of Shares as to which Option is exercised:
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Certificates
to be issued in name of:
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Total exercise price:
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$
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Cash payment delivered
herewith:
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$
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By this exercise, I agree
(i) to execute or provide such additional documents as Phoenix Motor, Inc. (the “Company”) may reasonably require
pursuant to the terms of this Notice of Exercise and the Company’s 2021 Omnibus Equity Incentive Plan (the “Plan”),
and (ii) to provide for the payment by me to the Company (in the manner designated by the Company) of the Company’s withholding
obligation, if any, relating to the exercise of this Option.
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Very truly yours,
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Optionee
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Exhibit 10.3
PHOENIX
CARS, LLC
OFFER
OF EMPLOYMENT
Date:
February 5, 2021
Joseph
R. Mitchell
1460 W, 141st Way
Westminster, CO, 80023
Dear
Mr. Joseph R. Mitchell.
We
are very excited that you will be joining Phoenix Cars LLC, a California Limited Liability Company (the “company”), as Chief
Executive Officer (CEO) reporting to Chairman Denton Peng, effective on February 15, 2021 (the “Effective
Date”). This letter will confirm the terms of your employment.
Term
of Employment. The initial term of your employment under this Agreement shall be at least twelve (12) months beginning from Effective
Date.
At-Will Employment
Employment with
the Company is employment at-will. Employment at-will may be terminated with or without cause and with or without notice at any time
at the will of either you or the Company. Terms and conditions of employment with the Company may be modified at the sole discretion
of the Company with or without cause and with or without notice. Other than the Company Chairman, no one has the authority to make any
agreement for employment other than for employment at-will or to make any agreement limiting the Company’s discretion to modify the terms
and conditions of employment. Only the Chairman has the authority to make any such agreement and then only in writing and signed by the
Chairman and the respective employee. No implied contract concerning any employment-related decision or term, or condition of employment
can be established by any other statement, conduct, policy, or practice.
Position
and Duties
You
shall serve in the position of CEO of the Company and shall perform all the duties assigned by the Board of Directors. Your position,
job description, salary, duties and responsibilities may be modified from time to time in the sole discretion of the Company. You agree
to strictly adhere to all of the rules and regulations of the Company as may be set forth in any Employee Manual or published policies
of the Company now or in the future, including all amendments to the Manual which may be made in the future in the Company’s sole
discretion (as published or amended from time to time, the “Manual”).
Phoenix Cars LLC, 401 S.
Doubleday Ave, Ontario, Ca 91761 USA
Company
Confidential
Page
2
No
Other Employment
You agree to devote your full
business time, attention, and best efforts to the business of the Company during the employment relationship. The Company’s normal
business hours are from 8:00 a.m. to 5:00 p.m. PST. Monday through Friday.
Compensation
of Employee
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(a)
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Salary
- The Company shall pay you, and you agree to accept from the Company in payment for
your services to the Company, a salary of $250,000 per year (the “Yearly Salary”),
payable in equal bi-monthly installments on regular dates established by the Company, subject
to applicable tax withholding requirements. Any proposed increase of your salary, compensation
or benefits must be approved by the Chairman:
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(b)
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Annual
Performance Bonus - You will be eligible to receive an annual bonus of 75% of base salary
based or the Company’s performance and your individual performance. To incentivize
you to remain employed with the Company, you must be employed on the date any bonus is paid
in order to earn the bonus.
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(c)
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Stock
Option - Subject to the approval of the Board and in accordance with the existing policies
and plans of the Company governing the vesting practices, you will be granted 700,000
shares of stock options of Phoenix Motor Inc’s Common Stock.
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(d)
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Vacation;
Sick Leave; Holidays - 5 weeks (25 days) Paid Time off (PTO) , accrued on a monthly basis
for each full month of employment. PTO may be applied to vacations, sick days, doctor visits,
or other personal leaves and time off as you may choose, not to exceed your total accrual.
Prior supervisor approval should be obtained whenever possible; emergency situations notwithstanding.
Standard company holidays are established by Company management during the first few weeks
of each year. For the current year (2021) the Company currently recognizes nine (9) fixed
holidays and one floating holiday. A list of approved holidays is included as an addendum
to the employee handbook which will be provided by the Human Resources Department.
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(e)
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Insurance
- Effective the first day of the month following 30 days of employment, you will be eligible
to participate in the Company healthcare benefit plan which includes medical, dental and
vision coverage for you and your family. The Company pays 75% of the Gold 0/30 BlueShield
of California plan cost of employee and eligible Family member. 75% of the cost of coverage
for you, as an employee and eligible family. The company will also contribute 75% of life
insurance coverage for you equivalent to your base annual wage rate, subject to coverage
limitations of the insurance carrier. Although you may be eligible for such benefits if they
become available in the future, the Company does not promise or represent that such benefits
will in fact become available or that once made available they will be continued.
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(f)
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401(k)
Plan - The Company offers a 401K plan. You will be eligible to enter the plan at the
beginning of the month, following completion of 90 days employment. There is no Company match
for the plan at this time, but the Company may elect to make future contributions to the
plan at its sole discretion.
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Phoenix
Cars LLC, 401 S. Doubleday Ave, Ontario, Ca 91761 USA
Company
Confidential
Page
3
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(g)
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Employee
Expenses - The Company will reimburse you for pre-approved business expenses (approved
by the Chairman, as provided within the guidelines of the Company’s expense policy. All expenses
shall be subject to review and approval by your direct report and shall require reasonable
documentation.
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Severance
Benefits
In
the event that the Company terminates your employment without “Cause,” or you terminate your employment with the Company for
“Good Reason,” then, provided you enter into and do not revoke a binding release of claims in favor of the Company within
30 days of the date of your termination, which is reasonably acceptable to the Company, the Company shall pay to you, in accordance with
the Company’s regular payroll practices, three (3) months of severance pay at your then applicable base salary.
For
purposes of this Agreement, “Cause” shall mean your failure to substantially perform your services hereunder or a material
breach of any provisions of this Agreement; your commission of any act of fraud, misappropriation, conversion, disloyalty or embezzlement;
your commission of a felony or any crime involving an act of dishonesty; or your incompetence, insubordination or gross negligence or
willful misconduct.
For
purposes of this Agreement, “Good Reason” means the occurrence of one of the following:
(i)
a material diminution or other material adverse change in your office, duties, salary, benefits or responsibilities made without your
prior written consent;
(ii)
a material breach by the Company of this Agreement;
All severance
payments are subject to withholding of such amounts, if any, relating to tax and other payroll deductions as the Company reasonably determines
are required pursuant to any applicable law or regulations.
Confidential
Information and Invention Assignment Agreement
During your employment
with the Company, you may have access to certain confidential and proprietary information. Your acceptance of this offer and commencement
of employment is contingent upon the execution and delivery
of the Company’s Confidential Information and Invention Assignment Agreement (the “Confidentiality Agreement”) to the
Company prior to your start date, a copy of which has been enclosed for your review and execution.
Governing
Law
This
Agreement is made and shall he construed and enforced in accordance with the laws of the State of California. This Agreement and the
Exhibits supersede and replace all prior agreements or understandings, oral or written, between the Company and you, except for prior
confidentiality agreements, if any. This Agreement may not be modified except in writing signed both by the Company Chairman and
by you.
You
acknowledge that, prior to signing this Agreement; you have had an opportunity to seek the advice of independent counsel of your choice
relating to the terms of this Agreement.
Phoenix
Cars LLC, 401 S. Doubleday Ave, Ontario, Ca 91761 USA
Company
Confidential
Page
4
This
employment offer will expire if not accepted within five days of the document posted date. To accept the offer before this expiration
date, you must sign and date this letter in the space provided below and return it to me, along with a signed and dated copy of the Confidentiality
Agreement. This letter, together with the Confidentiality Agreement, constitutes and contains the entire agreement, and replaces any
and all prior discussions and agreements. This is an integrated agreement.
Please
sign and date this letter below confirming your agreement to all the foregoing. This offer letter will expire on February 8, 2021 at
5 pm PST.
Sincerely,
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/s/ Denton Peng
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Denton Peng
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Chairman
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I
accept the Company’s offer of employment as stated in this letter and I agree that the employment relationship is terminable at
will by either the Company or me.
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/s/ Joseph R. Mitchell
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Joseph R. Mitchell
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Phoenix
Cars LLC, 401 S. Doubleday Ave, Ontario, Ca 91761 USA
Company
Confidential
WITNESS
WHEREOF, the parties have caused this Agreement to be executed by their duly authorized agents.
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/s/ Xiaofeng Peng
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Xiaofeng Peng
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Chairman
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Date:
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FEB 08 / 2021
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EMPLOYEE
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/s/ Joseph R. Mitchell
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Joseph R. Mitchell
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Date:
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FEB 5 / 2021
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Exhibit 10.4
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FUTURE TECHNOLOGY TODAY
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PHOENIX CARS,
LLC
OFFER OF EMPLOYMENT
November 4, 2021
Dear Chris Wang:
We are very excited that you will be continuing
with Phoenix Cars LLC, a California Limited Liability Company (the “Company”), as Chief Financial Officer of the Company reporting
to Chief Executive Officer, effective on November 1, 2021. This letter will confirm the terms of your employment.
Position and Duties
You shall serve in the position of Chief Financial
Officer of the Company and shall perform all the duties of that position as described on Exhibit A. Your position, job description, salary,
duties and responsibilities may be modified from time to time in the sole discretion of the Company. You agree to strictly adhere to all
of the rules and regulations of the Company as may be set forth in any Employee Manual or published policies of the Company now or in
the future, including all amendments to the Manual which may be made in the future in the Company’s sole discretion (as published or amended
from time to time, the “Manual”).
No Other Employment
You agree to devote your full business time, attention,
and best efforts to the business of the Company during the employment relationship. The Company’s normal business hours are from
8:00 a.m. to 5:00 p.m. PST, Monday through Friday.
Compensation of Employee
|
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(a)
|
Salary - The Company shall pay you, and you agree to accept from the Company in payment for your
services to the Company, a salary of $200,000.00 per year (the “Yearly Salary”), payable in equal bi-monthly installments on
regular dates established by the Company, subject to applicable tax withholding requirements. Any proposed increase of your salary, compensation
or benefits must be approved by the CEO and/or CFO.
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(b)
|
Vacation; Sick Leave; Holidays - 4 weeks Paid Time off (PTO). PTO is accrued on a monthly basis
for each full month of employment after the completion of the 90-day introductory period. PTO may be applied to vacations, sick days,
doctor visits, or other personal leaves and time off as you may choose, not to exceed your total accrual. Prior supervisor approval should
be obtained whenever possible, emergency situations notwithstanding. Standard company holidays are established by Company management during
the first few weeks of each year. For the current year (2021) the Company currently recognizes nine (9) fixed holidays and one floating
holiday. A list of approved holidays is included as an addendum to the employee handbook which will be provided by the Human Resources
Department.
|
1500 LAKEVIEW LOOP. ANAHEIM, CALIFORNIA 92807 | 909.987.0815 | INFO@PHOENIXMOTORCARS.COM | WWW. PHOENIXMOTORCARS.COM
|
|
|
FUTURE TECHNOLOGY TODAY
|
|
|
|
|
|
(c)
|
Insurance - Effective the first day of the of employment, you will be eligible to participate in
the Company healthcare benefit plan which includes medical, dental and vision coverage for you and your family. The Company pays 75% of
the Gold 0/30 BlueShield of California plan cost of employee and eligible Family member. 75% of the cost of coverage for you, as an employee
and eligible family. The company will also contribute 75% of life insurance coverage for you equivalent to your base annual wage rate,
subject to coverage limitations of the insurance carrier. Although you may be eligible for such benefits if they become available in the
future, the Company does not promise or represent that such benefits will in fact become available or that once made available they will
be continued.
|
|
|
(d)
|
401(k) Plan - The Company offers a 401K plan. You will be eligible to enter the plan at the beginning
of the month following completion of 90 days employment. There is no Company match for the plan at this time, but the Company may elect
to make future contributions to the plan at its sole discretion.
|
|
|
(e)
|
Employee Expenses - The Company will reimburse you for pre-approved business expenses (approved
by the CEO, COO and/or CFO), as provided within the guidelines of the Company’s expense policy. All expenses shall be subject to
review and approval by your direct report and shall require reasonable documentation.
|
Confidential Information and Invention Assignment
Agreement
During your employment with the Company, you may
have access to certain confidential and proprietary information. Your acceptance of this offer and commencement of employment is contingent
upon the execution and delivery of the Company’s Confidential Information and Invention Assignment Agreement (the “Confidentiality
Agreement”) to the Company prior to your start date, a copy of which has been enclosed for your review and execution.
Governing Law
This Agreement is made and shall be construed
and enforced in accordance with the laws of the State of California. This Agreement and the Exhibits supersede and replace all prior agreements
or understandings, oral or written, between the Company and you, except for prior confidentiality agreements, if any. This Agreement may
not be modified except in writing signed both by the Company CEO and/or CFO and by you.
At-Will Employment
Employment with the Company is employment at-will.
Employment at-will may be terminated with or without cause and with or without notice at any time at the will of either you or the Company.
Terms and conditions of employment with the Company may be modified at the sole discretion of the Company with or without cause and with
or without notice. Other than the Company (“CEO, COO and/or CFO”), no one has the authority to make any agreement for employment
other than for employment at-will or to make any agreement limiting the Company’s discretion to modify the terms and conditions of employment.
Only the CEO, COO and/or CFO has the authority to make any such agreement and then only in writing and signed by the CEO, COO and/or CFO
and the respective employee. No implied contract concerning any employment-related decision or term, or condition of employment can be
established by any other statement, conduct, policy, or practice.
1500 LAKEVIEW LOOP. ANAHEIM, CALIFORNIA 92807 | 909.987.0815 | INFO@PHOENIXMOTORCARS.COM | WWW. PHOENIXMOTORCARS.COM
|
|
|
FUTURE TECHNOLOGY TODAY
|
|
|
|
You acknowledge that, prior to signing this
Agreement; you have had an opportunity to seek the advice of independent counsel of your choice relating to the terms of this Agreement.
This employment offer will expire if not accepted
within five days of the document posted date. To accept the offer before this expiration date, you must sign and date this letter in the
space provided below and return it to me, along with a signed and dated copy of the Confidentiality Agreement. This letter, together with
the Confidentiality Agreement, constitutes and contains the entire agreement, and replaces any and all prior discussions and agreements.
This is an integrated agreement.
Please sign and date this letter below confirming
your agreement to all the foregoing.
|
Sincerely,
|
|
|
|
/s/ Joe Mitchell
|
|
|
|
Joe Mitchell
|
|
|
I accept the Company’s offer of employment as stated in this
letter and I agree that the employment relationship is terminable at will by either the Company or me.
|
Wenbing Wang
|
|
11/10/21
|
|
[Print Name]
|
|
[Date]
|
|
|
|
|
|
/s/ Wenbing Wang
|
|
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[Signature]
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1500 LAKEVIEW LOOP. ANAHEIM, CALIFORNIA 92807 | 909.987.0815 | INFO@PHOENIXMOTORCARS.COM | WWW. PHOENIXMOTORCARS.COM
Exhibit 10.5
PHOENIX
CARS, LLC
OFFER
OF EMPLOYMENT
October 7, 2021
Ronald Iacobelli
5138 Cypress Street
Vancouver, BC, V6M 4J1
Cell (604)418-5603
rviacobelli@gmail.com
Dear Mr. Iacobelli,
We are very excited that you will be joining Phoenix
Cars LLC, a Delaware Limited Liability Company (the “Company”), as CTO reporting to the CEO Joseph R. Mitchell, effective on
October 11, 2021 (the “Effective Date”). This letter will confirm the terms of your employment.
Position and Duties
You shall serve in the position of CTO of the
Company and shall perform all the duties assigned by the CEO. Your position, job description, salary, duties and responsibilities may
be modified from time to time in the sole discretion of the Company. You agree to strictly adhere to all of the rules and regulations
of the Company as may be set forth in any Employee Manual or published policies of the Company now or in the future, including all amendments
to the Manual which may be made in the future in the Company's sole discretion (as published or amended from time to time, the “Manual”).
Limited Other Employment
You agree to devote your full business time,
attention, and best efforts to the business of the Company during the employment relationship. The Company’s normal business
hours are from 8:00 a.m. to 5:00 p.m. PST, Monday through Friday. Notwithstanding the foregoing provisions of this
paragraph, you may provide services only to INTGR8 in the same manner/scope of work as currently performing, so long as such
services do not interfere with the performance of your obligations to the Company or the provision of such services has been
approved in writing by the Company. The Company acknowledges that you are co-owner and executive of INTGR8 Technologies Inc. and
agrees that you will continue only in that role and as within the terms of this paragraph.
Compensation of Employee
|
|
(a)
|
Salary - The Company shall pay you, and you agree to accept from the Company in payment for your
services to the Company, a salary of $230,000 per year (the “Yearly Salary”), payable in equal bi-monthly installments
on regular dates established by the Company, subject to applicable tax withholding requirements. Any proposed increase of your salary,
compensation or benefits must be approved by the CEO.
|
|
|
(b)
|
Annual Performance Bonus - You
will be eligible to receive an annual bonus of 50% of base salary based or the Company’s performance and your individual
KPI performance. To incentivize you to remain employed with the Company, you must be employed
on the date any bonus is paid in order to earn the bonus.
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|
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(c)
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Stock Option - Subject to the approval of the Board and in accordance with the existing policies
and plans of the Company governing the vesting practices, you will be granted 500,000 shares of stock options of Phoenix Motor
Inc’s Common Stock.
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|
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(d)
|
Vacation; Sick Leave; Holidays - 4 weeks (20 days) Paid
Time off (PTO) , accrued on a monthly basis for each full month of employment. PTO may be applied to vacations, sick days, doctor
visits, or other personal leaves and time off as you may choose, not to exceed your total accrual. Prior supervisor approval should
be obtained whenever possible; emergency situations notwithstanding. Standard company holidays are established by Company management
during the first few weeks of each year. For the current year (2021) the Company currently recognizes nine (9) fixed holidays
and one floating holiday. A list of approved holidays is included as an addendum to the employee handbook which will be provided by
the Human Resources Department.
|
|
|
(e)
|
Insurance - Effective the first day of the month following 30 days of employment, you will be eligible
to participate in the Company healthcare benefit plan or such other plan for foreign non- resident executive employee. The plan includes
medical, dental and vision coverage for you and your family. The Company pays 75% of the Gold 0/30 BlueShield of California plan cost
of employee and eligible Family member. 75% of the cost of coverage for you, as an employee and eligible family. The company will also
contribute 75% of life insurance coverage for you equivalent to your base annual wage rate, subject to coverage limitations of the insurance
carrier. Although you may be eligible for such benefits if they become available in the future, the Company does not promise or represent
that such benefits will in fact become available or that once made available they will be continued.
|
|
|
(f)
|
401(k) Plan - The Company offers a 401K plan. You will be eligible to enter the plan at the
beginning of the month following completion of 90 days employment. There is no Company match for the plan at this time, but the Company
may elect to make future contributions to the plan at its sole discretion.
|
|
|
(g)
|
Employee Expenses - The Company will reimburse you for pre-approved business expenses (approved
by the CEO), as provided within the guidelines of the Company’s expense policy. All expenses shall be subject to review and approval
by your direct report and shall require reasonable documentation.
|
At-Will Employment
Employment with the Company is employment at-will.
Employment at-will may be terminated with or without cause and with or without notice at any time at the will of either you or the Company.
Terms and conditions of employment with the Company may be modified at the sole discretion of the Company with or without cause and with
or without notice. Other than the Company CEO, no one has the authority to make any agreement for employment other than for employment
at-will or to make any agreement limiting the Company’s discretion to modify the terms and conditions of employment. Only the CEO has
the authority to make any such agreement and then only in writing and signed by the CEO and the respective employee. No implied contract concerning
any employment-related decision or term, or condition of employment can be established by any other statement, conduct, policy, or practice.
Confidential Information and Invention Assignment
Agreement
During your employment with the Company, you may
have access to certain confidential and proprietary information. Your acceptance of this offer and commencement of employment is contingent
upon the execution and delivery of the Company’s Confidential Information and Invention Assignment Agreement (the “Confidentiality
Agreement”) to the Company prior to your start date, a copy of which has been enclosed for your review and execution.
Governing Law
This Agreement is made and shall be construed
and enforced in accordance with the laws of the State of California. This Agreement and the Exhibits supersede and replace all prior agreements
or understandings, oral or written, between the Company and you, except for prior confidentiality agreements, if any. This Agreement may
not be modified except in writing signed both by the Company CEO and by you.
You acknowledge that, prior to signing this
Agreement; you have had an opportunity to seek the advice of independent counsel of your choice relating to the terms of this Agreement.
This employment offer will expire if not accepted
within five days of the document posted date. To accept the offer before this expiration date, you must sign and date this letter in the
space provided below and return it to me, along with a signed and dated copy of the Confidentiality Agreement. This letter, together with
the Confidentiality Agreement, constitutes and contains the entire agreement, and replaces any and all prior discussions and agreements.
This is an integrated agreement.
Please sign and date this letter below confirming
your agreement to all the foregoing. This offer letter will expire on October 8, 2021 at 5pm PST.
|
Sincerely,
|
|
|
|
|
|
|
|
/s/ Joseph R. Mitchell
|
10/7/2021
|
|
|
|
Joseph R. Mitchell
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|
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CEO
|
|
|
I accept the Company’s offer of employment as stated in this
letter and I agree that the employment relationship is terminable at will by either the Company or me.
|
/s/ Ronald Iacobelli
|
|
|
|
Ronald Iacobelli
|
|
|
|
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|
|
Date:
|
10/7/2021
|
|
|
Exhibit 10.6
Phoenix Motorcars Factory Direct Representative
Agreement
This Phoenix Motorcars Factory Direct Representative Agreement (the
“Agreement”) is made and entered into as of February 22nd, 2019, (the “Effective Date”) by and between Phoenix
Cars, LLC, having its offices at 401 S. Doubleday Avenue, Ontario, CA 91761 (“PMC”), and Creative Bus Sales, Inc. (“FACTORY
REP”), having a headquarters at 14740 Ramona Avenue, Chino, CA 91710, for themselves and on behalf of all of their successors and
assigns. Each of PMC and FACTORY REP shall be referred to herein as a “Party”, and together as the “Parties”.
Recitals
WHEREAS, PMC is a manufacturer of all-electric
powertrain and has experience in manufacturing and supplying all-electric powertrain buses for sale in the US market. PMC wishes to supply
its models (“Vehicles”) in all the territories, as defined in this agreement, through FACTORY REP as its Authorized Factory
Direct Representative;
WHEREAS, FACTORY REP has the experience in the
transportation sector specifically in the sales, parts distribution and as a service provider of all types of vans and buses and wishes
to act as the exclusive Authorized Factory Direct Representative for PMC’s Vehicles; and
WHEREAS, PMC desires to appoint
FACTORY REP as its Authorized PMC Factory Direct Representative to represent, sell, distribute, and service its vehicles pursuant to the
terms and conditions of this Agreement, and FACTORY REP accepts such appointment.
NOW, THEREFORE, in consideration of the mutual
covenants, terms and conditions set out herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:
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1.
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APPOINTMENT AND ACCEPTANCE OF AUTHORIZED PMC FACTORY DIRECT REPRESENTATIVE
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1.1 PMC
hereby appoints FACTORY REP, and FACTORY REP hereby accepts the appointment, as its Authorized Factory Direct Representative of Vehicles
(as defined in Section 1.3 below) in the Territory (as defined in Section 1.2 below). In furtherance thereto, PMC hereby grants
to FACTORY REP the right to represent, market, distribute, sell, rent, lease, service and otherwise dispose (collectively, "Represent"
or “Representation”) the Vehicles, in the Territory.
1.2 “Territory”
shall mean the exclusive appointment of the FACTORY REP for all states in the United States, including Hawaii and Alaska.
1.3 “Vehicles”
shall include all current models and variations built with body types manufactured by Forest River Inc. subsidiaries. FACTORY REP may
purchase or order all models of Vehicles produced by PMC, its subsidiaries, and their respective successors, including all next generation
and newly developed models, together with all parts, components, accessories, and equipment thereof or subsidiaries, and their respective
successors, directly or indirectly, produce, convert, assemble, or manufacture presently or may in the future produce, convert, assemble,
or manufacture. FACTORY REP shall be given the First Right of Refusal to exclusively represent and distribute any new products that PMC
develops.
1.4 PMC
hereby grants to the FACTORY REP during the term of this Agreement the fully- paid up and royalty free, non-transferable right and license
to use the trademarks, trade names, service and other manuals, copyrighted materials, and other marketing and technical information (to
the extent that utilization of such technical information does not impinge on the intellectual property rights of PMC) associated with
Vehicles in connection with and in furtherance of FACTORY REP’s Representation of Vehicles. PMC requires that the FACTORY REP abide
by PMC guidelines for brand usage and PMC approval of all related images, marketing and advertising collateral.
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1.5
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The Parties mutually agree to the following Sales Target for the initial term:
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80 vehicles commencing on April 1st, 2019, up to December 31st,
2019.
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180 vehicles on January 1st, 2020 up to December 31st,
2020.
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240 vehicles on January 1st, 2021 up to December 31st,
2021.
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1.6 After
the conclusion of the initial term, this agreement will be renewed based on conditions set out in section 8.1. New annual sales targets
will be agreed on 60 days prior to the renewal. The Parties agree that increases in annual sales targets shall be reasonable, and the
determination of reasonableness shall be based on historic practice.
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2.
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GENERAL RESPONSIBILITIES OF FACTORY REP
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2.1 In
consideration of the rights granted to it under this Agreement and subject to the terms and conditions of this Agreement, FACTORY REP
shall provide the following:
a. FACTORY
REP shall promote, market and sell PMC’s Vehicles in the Territory during the term of this agreement.
b. FACTORY
REP shall secure and maintain necessary permits and licenses for the operation of its business as contemplated by this Agreement. PMC
shall assist FACTORY REP in obtaining and renewing any such permits and licenses.
c. FACTORY
REP shall assist customers with evaluating charging infrastructure needs in conjunction with PMC.
d. FACTORY
REP shall offer the customer the specific Electric Vehicle Supply Equipment (EVSE) as approved by PMC.
e. FACTORY
REP shall handle all California HVIP applications and other state voucher incentive programs as needed.
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f.
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FACTORY REP shall assist customers with all title and registration requirements.
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3.
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TERMS OF SALE AND PURCHASE OF VEHICLES
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3.1 In
the event of discontinuation of a Vehicle model, PMC shall fully support FACTORY REP with the discontinuation campaign, including,
but not limited to, ongoing support for those discontinued Vehicle models as well as introduction of a new vehicle model in its
place, if PMC so determines to introduce a new model. PMC fully understands the importance of developing and bringing new vehicle
models to the market either as replacements for discontinued models or as newly introduced vehicle models as this effort relates to
the financial well-being and growth of both PMC and FACTORY REP.
3.2 PMC
agrees to assist FACTORY REP, as FACTORY REP may reasonably request based on prevailing industry practices in the marketing and launch
of Vehicles and on-going Representation of Vehicles as communicated by FACTORY REP to PMC or as may be agreed by the Parties from time
to time.
4.1 FACTORY
REP shall submit all Purchase Orders and customer requirements in written form via e-mail, U.S. mail, or via an agreed upon processing
system. The Purchase Order represents the ordering dealer’s or buyer’s offer to purchase Vehicles under the terms and conditions
of the Purchase Order. PMC may, in its sole discretion, accept or reject any Purchase Order within ten (10) business days of receipt
of the Purchase Order. PMC may accept any Purchase Order by confirming the order (whether by written confirmation, invoice or otherwise)
or by delivering the Vehicle, whichever occurs first. No Purchase Order is binding on PMC unless accepted by PMC as provided in this Agreement.
FACTORY REP has the right to cancel or amend any Purchase Order on behalf of any purchaser if within ten (10) business days of PMC’s
receipt of the Purchase Order FACTORY REP notifies PMC in writing of such amendment or cancellation
4.2 Each
Purchase Order for the Vehicles shall constitute a separate contract, and any default, breach, or failure, including failure of timely
delivery or payment, by PMC, FACTORY REP, or its dealers or ultimate buyers of Vehicles in relation to any individual Purchase Order shall
not entitle a Party to treat this Agreement as terminated or breached.
4.3 PMC
will provide the FACTORY REP with a standard form of Order Form, Customer Requirement Form and Change Request Form.
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5.
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SHIPMENT AND DELIVERY OF VEHICLE(S)
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5.1 PMC
agrees to provide a delivery schedule for the Vehicle(s) pursuant to the Purchase Order accepted by PMC. All Vehicles shall be affixed
with all required labels and place in the compartments required documentation, publications, and other required materials, all of the
forgoing in compliance of the applicable Federal and State Laws and regulations related to delivery and sale of new Vehicles in applicable
markets. PMC and Factory Rep are equally responsible for determining compliance with applicable federal and state laws in order to sell
vehicles manufactured by PMC. The Parties will mutually agree on what is needed in order to sell and deliver vehicles in order to guarantee
compliance with such federal and state laws and regulations. For the avoidance of doubt, FACTORY REP is not responsible for PMC’s
compliance with any applicable manufacturing standards and specifications required by applicable law for the manufacture of any vehicles
manufactured by PMC. PMC shall timely deliver applicable Manufacturer's Statement of Origin (MSO) / Manufacturer's Certificate of Origin
(MCO) for each Vehicle to facilitate sale of Vehicles upon Vehicle delivery.
5.2 FACTORY
REP shall, in respect to each Purchase Order for the Vehicles to be supplied under this Agreement, be responsible for ensuring the
accuracy of each Purchase Order and FACTORY REP will be responsible for any costs arising from any inaccuracies and providing PMC
with information which is necessary for PMC to fulfill the order and to comply with all applicable legal requirements.
5.3 FACTORY
REP may, in its discretion, either direct PMC to deliver completed Vehicles to FACTORY REP or pick up the completed Vehicles at PMC’s
location. For delivered Vehicles, PMC agrees to deliver completed Vehicles to Factory Rep at 14740 Ramona Avenue, Chino, California 91710.
6.1 Any
purchase of the Vehicles from PMC will be at the prices set out in PMC’s price list in effect when PMC accepts the related Purchase
Order, provided, however, that PMC hereby agrees to provide a minimum of thirty (30) days prior written notice for any changes related
to the price list. Applicable pricing for future vehicle types and models shall be determined by PMC and agreed upon by FACTORY REP.
6.2 Transportation
and other related charges, insurance, taxes, duties and other charges of any kind imposed by Governmental Authority shall be listed as
a separate line-item on PMC’s invoice, in accordance with reasonable commercial terms and in accordance with the customary practices
of the commercial truck industry. The ultimate purchaser of the Vehicle is responsible for all charges, costs and taxes.
6.3 Parties
understand that payment for the Vehicles by FACTORY REP to PMC shall take place as outlined in PMC’s price list. Subject to the
foregoing, FACTORY REP will pay PMC for Vehicles by fed-wire to PMC prior to vehicles being released from PMC’s facility, and provided
that allowance for this payment schedule shall be made for weekends and U.S. bank holidays. The title to the Vehicles shall pass in accordance
with the terms set forth in the Purchase Order accepted by PMC.
6.4 The
Parties shall notify the other in writing of any dispute with any invoice (along with a reasonably detailed dispute description) as soon
as possible but no later than thirty days from the date of receipt of the invoice. The Parties shall seek to resolve all disputes expeditiously
and in good faith. Notwithstanding anything to the contrary in this Agreement, the Parties shall continue performing their obligations
under this Agreement during any dispute, unless the disputed invoice is in an amount that would constitute a material breach of this Agreement.
Such amount shall be determined in the future by the Parties.
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7.
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VEHICLE WARRANTIES, RECALLS, PRODUCT LIABILITY, LEMON LAWS, OTHER REQUIREMENTS
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7.1 Each
Party shall as soon as reasonably possible inform the other Party of any condition that is or may be a safety related defect or regulatory
non-compliance with respect to the Vehicles and other Vehicles of which it becomes aware. If either Party or a third party, including
a government authority, such as NHTSA, determines that it is necessary to conduct a recall or other service campaign of Vehicles or other
Vehicles at issue, PMC shall determine the nature of the corrective action to be taken and, if required, will undertake and coordinate
the recall / service campaigns. For a fee to be agreed upon by the parties, FACTORY REP will assist PMC in such recall / service campaign
actions.
7.2 As
the designer, manufacturer and supplier of Vehicles, PMC shall provide a warranty of 3 years or 36,000 miles (whichever comes
first). Additionally, the PMC electric drivetrain shall be warranted for 5 year or 60,000 miles and the lithium-ion battery system
shall be warranted for 5 years or 150,000 miles. PMC shall indemnify, defend and hold completely harmless FACTORY REP and all other
Persons in its chain of distribution of Vehicles from and against any and all losses, liabilities, damages, costs, fees and
expenses, including legal costs and attorneys’ fees, resulting from any and all claims related to work performed by PMC on the
Vehicles. In order to further facilitate the foregoing, PMC shall obtain and continue to maintain at all times from the initial
launch of Vehicles in the U.S. Vehicles liability insurance coverage in an amount that is not less than Five Million Dollars
($5,000,000) until the units in operation within the Territory reaches 50 Vehicles and up to Ten Million Dollars ($10,000,000)
thereafter, both in aggregate and per occurrence basis, with a deductible of not more than Two Hundred Fifty Thousand Dollars
($250,000) per occurrence, and name FACTORY REP as its additional insured and loss payee and provide FACTORY REP a Certificate of
Insurance upon each renewal and upon FACTORY REP’s request. Parties hereby agree that the insurance coverage set forth herein
shall provide a means for PMC’s indemnity and shall in no way limit or constitute as a waiver of any kind with respect to
PMC’s indemnity obligations under this Agreement. An extended warranty is available based on the vendor and supplier terms and
conditions.
7.3 As
the designer, manufacturer and supplier of Vehicles, PMC shall be solely responsible for the Lemon Law claims, breach of express or implied
warranty or similar laws. FACTORY REP agrees to deliver to PMC a copy of such notice and such other related information as is reasonably
available to it, and PMC shall provide defense of such case on behalf of FACTORY REP and PMC shall indemnify and completely hold harmless
FACTORY REP for any and all damages, including any money judgments or obligation to repurchase vehicles and out-of-pocket expenses incurred
by FACTORY REP in defending or responding to such claims.
7.4 PMC
shall furnish FACTORY REP with master electronic versions and hard copies of owner’s manuals, service manuals, parts catalogs, labor
time guides, and other vehicle related publications for each and every make and model of Vehicles to be represented by FACTORY REP. PMC
shall also notify FACTORY REP of all technical changes to any of the Vehicles promptly upon the occurrences of such changes. PMC shall
furnish FACTORY REP with certified technical documents regarding the specification, operation and maintenance and special service tools
(mechanical and electronic) required for the diagnosis and service/repair of the Vehicles. PMC shall send its engineers and other personnel
for the purposes of technical support, training, and other support or coordination as needed in PMC’s discretion.
7.5 PMC
shall provide FACTORY REP launch dates for any and all new buses for its Representation as soon as they become available.
7.6 PMC
shall comply and maintain at all times continued compliance in regard to Vehicle manufacturing, safety, emission, and other quality standards
for the Vehicles and other Vehicles being or to be supplied to FACTORY REP for Representation of Vehicles.
7.7 In
the event of governmental inquiries or requests related to vehicle design, manufacturing, operational, or other characteristics
pertaining to Vehicles or other Vehicles, PMC shall respond to all required design/development data, test data, engineering data and
other documentation as needed to sufficiently respond to such inquiries or requests, using commercially reasonable efforts.
7.8 If
PMC and Factory Rep agree that Factory Rep will perform any work related to routine maintenance, service, recalls, warranty repairs, lemon
law repairs or any other work as deemed necessary by the Parties, Factory Rep shall indemnify, defend and hold completely harmless PMC
from and against any and all losses, liabilities, damages, costs, fees and expenses, including legal costs and attorneys' fees, resulting
from any and all claims related to work performed by Factory Rep on Vehicles covered by this Agreement. In order to further facilitate
the foregoing, Factory Rep shall obtain and continue to maintain at all times from the initial execution of this Agreement liability insurance
coverage in an amount that is not less than Five Million Dollars ($5,000,000) until the units in operation within the Territory reaches
50 Vehicles and up to Ten Million Dollars ($10,000,000) thereafter, both in aggregate and per occurrence basis, with a deductible of not
more than Two Hundred Fifty Thousand Dollars ($250,000) per occurrence, and name PMC as its additional insured and loss payee and provide
PMC a Certificate of Insurance upon each renewal and upon PMC’s request. Parties hereby agree that the insurance coverage set forth
herein shall provide a means for Factory Rep’s indemnity and shall in no way limit or constitute as a waiver of any kind with respect
to Factory Rep’s indemnity obligations under this Agreement.
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8.
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TERM AND DUTIES AFTER TERMINATION
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The initial term of this
Agreement shall commence on the Effective Date and shall continue for a period of three (3) years (the “Term”).
Thereafter, the Term shall automatically renew for additional one (1) year periods, as long as the FACTORY REP has met the
Annual Sales Targets set forth in Section 1.5 and new sales targets agreed on as per section 1.6, unless terminated by mutual
agreement of the parties or pursuant to the provisions of Section 8.2 below.
Except for a material breach, as defined in Section 8.2(a) and
8.2(b), this Agreement is noncancelable for the initial three-year period. Those provisions that by their nature are intended to survive
termination or expiration of this Agreement shall so survive.
Either Party may terminate this Agreement by providing written
notice to the other Party:
(a) if
the other Party materially breaches any provision of this Agreement, and the breach is not cured by the breaching Party within thirty
(30) days after its receipt of written notice of the breach; or
(b) if
the other Party becomes insolvent or files, or has filed against it, a petition for voluntary or involuntary bankruptcy or under any other
insolvency law, makes or seeks to make a general assignment for the benefit of its creditors or applies for, or consents to, the appointment
of a trustee, receiver or custodian for a substantial part of its property, or is generally unable to pay its debts as they become due.
Any termination under this Section 8.2 is effective upon the breaching
Party's receipt of the notice of termination, or as may be applicable, upon the breaching Party’s failure to cure during the 30-day
cure period, or any later date set out in the notice.
8.3 Upon
the expiration, non-renewal, or termination of this Agreement for any reason, FACTORY REP shall immediately cease to make any representations
regarding its status as the distributor of Vehicles and coordinate with PMC, so that an orderly liquidation of the Vehicles and other
Vehicles, and continued services for such Vehicles, can be made in the most commercially acceptable manner and with minimum inconvenience
and damages incurred to the Vehicle owners.
8.4 Any
expiration, non-renewal, or termination of this Agreement for any reason shall be without prejudice to the rights and remedies of either
Party with respect to any provisions of this Agreement or arising out of a breach prior to such termination. In the event a Party materially
breaches the terms and conditions of this Agreement or fails to perform its obligations under this Agreement, the non-breaching Party
may pursue any and all rights and remedies available at law and/or in equity. Without limiting the generality of the foregoing, Section 3.2
and Section 7 and other provisions that by their nature are intended to survive termination shall survive termination of this Agreement.
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9.
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WARRANTIES & REPRESENTATIONS
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9.1 Each
Party represents to the other Party that it is an entity duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization; it has all requisite power and authority to own and operate its properties, and to carry on its business
as it is now being conducted; it has all requisite power and authority to enter into the transaction contemplated hereby; the execution,
delivery and performance of this Agreement have been duly authorized by all requisite actions; this Agreement has been duly and validly
executed and delivered to the other Party; and (if assuming this Agreement constitutes a valid and binding obligation of the other Party)
this Agreement constitutes a valid and binding obligation of the Party enforceable against it in accordance with its terms.
9.2 PMC
hereby continuously warrants and guarantees that at all times during the term of this Agreement, including any extensions and renewals
periods thereof, (a) all Vehicles supplied to FACTORY REP, meet laws and regulations of the United States, (b) all such Vehicles
will be merchantable, meet PMC’s design requirements, manufacture, and workmanship, (c) all such Vehicles are properly labeled
and (d) all such Vehicles ordered shall be delivered timely and in good and undamaged condition and shall, when delivered, be merchantable
and fit and safe for the purposes for which the same are intended to be used. Nothing contained in this Agreement shall be deemed a waiver
of warranties implied by law as may be applied to FACTORY REP.
9.3 PMC
warrants to FACTORY REP that the appropriate licenses, agreements and rights have been obtained from the respective parts, components,
and accessory providers for use in its Vehicles. PMC represents and warrants, and hereby agrees to indemnify and hold FACTORY REP harmless
from and against alleged infringement in relation to the Vehicles of the trademarks, patents, copyrights and other intellectual property
rights of any third party.
9.4 FACTORY
REP represents and warrants that it has extensive vehicle Representation and related business experience and functional and comprehensive
know-how.
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10.
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ADDITIONAL TERMS & CONDITIONS
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10.1 The
Parties to this Agreement are independent contractors. No agency, partnership, franchise, employment, joint venture or other joint relation
is created between the Parties by virtue of this Agreement. Neither Party has the authority to bind the other Party or to incur any obligation
on the other Party’s behalf. Any joint venture or other joint business relations may be created only by subsequent agreement between
the Parties in writing.
10.2 Any
and all information exchanged between the Parties under this Agreement is confidential and may not be disclosed to any Person during the
term of this Agreement and for a period of five (5) years thereafter, except: (A) to employees, legal advisors, auditors and
other consultants of each Party or its related companies, and to third party service providers who require the information for the purposes
of carrying out the terms and conditions of this Agreement; (B) with the consent of the disclosing Party; (C) if the information,
as of the Effective Date of this Agreement, is lawfully in the possession of the other Party; (D) if required by law; (E) if
required in connection with a financing or a proposed sale or transfer of business operations, but only if the party receiving such information
agrees to keep such information confidential on the same terms provided herein; (F) if strictly and necessarily required in connection
with legal proceedings relating to this Agreement; or (G) if the information becomes published or otherwise generally available to
the public other than as a result of breach of confidence by a Party to the other. In the event FACTORY REP or PMC, or anyone to whom
they may transmit any confidential information becomes legally compelled to disclose any of the confidential information, FACTORY REP
or PMC, as the case may be, will provide the other Party with prompt written notice of not less than seven (7) business days from
the receipt of such request, so that the pertinent Party can seek a protective order or other appropriate remedy. In the absence of a
protective order, or the failure to quash the legal process requiring disclosure or other measure effectively removing such legal compulsion,
neither PMC nor FACTORY REP shall have any duty to resist the production of confidential information, and the production thereof shall
not constitute a breach of this Agreement.
10.3 Each
Party shall indemnify, defend, and hold the other Party (including, without limitation, all of each Party’s respective directors,
officers, shareholders, employees, managers, and agents) harmless from and against any and all losses, liabilities, damages, costs, fines,
penalties, judgments, fees and expenses, including legal costs, expert costs and/or attorneys' fees, in relation to any of the following
(the “Mutually Released Claims”):
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(A)
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Any act or omission of the Party for actual or alleged breach of any of the terms of this Agreement;
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(B)
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Any actual or alleged negligence or tortuous conduct in connection with this Agreement; and
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(C) Any
claim or demand of any type or variety, whether made by a government, government agency, dealer, consumer, or any other person or entity,
for which the Parties do not otherwise have an obligation to indemnify, defend, and/or hold harmless under the terms of this Agreement.
10.4 The
Parties agree to provide written notice to each other within a reasonable time after receiving notice that any action related to Mutually
Released Claims has been taken or threatened against any Party, and agree to reasonably cooperate with each other so that a Party can
adequately defend itself against any Mutually Released Claim.
10.5 With
respect to any provision of this Agreement providing that one party indemnify, defend, and hold harmless ("Indemnifying Party")
the other party ("Indemnified Party"), the Indemnified Party agrees to extend these obligations to claims made against the Indemnified
Party's officers, directors, shareholders, employees, managers, and agents. The Indemnifying Party shall provide defense of such case
on behalf of Indemnified Party with Indemnifying Party’s choice of counsel, and indemnify, defend and hold harmless Indemnified
Party for any and all claims, including any judgments and out-of-pocket expenses incurred by Indemnified Party in defending or responding
to such claims. At the election of Indemnified Party, Indemnifying Party further agrees that Indemnified Party may employ attorneys
of its own selection, at Indemnified Party's sole cost and expense, to appear and defend the claim or action on behalf of Indemnified
Party. Indemnifying Party agrees to fully cooperate and provide any and all assistance necessary to adequately defend such claims and
lawsuits.
10.6 Subject
to the foregoing Section 10.5, neither Party shall be held responsible for any delay or failure in performance of this Agreement
to the extent that such delay or failure is caused by war, civil unrest, strike, flood, or acts of God. Either Party shall promptly notify
the other Party after becoming aware of the occurrence of any such cause and shall use its reasonable best efforts to minimize any resulting
delay in, or interference with, the performance of this Agreement.
10.7 Both
Parties acknowledge that the sales and distribution of the Vehicles is to an evolving market that could be subject to rapid changes in
the technology, personnel requirements, support, maintenance, regulations or requirements from various government authorities, which could
impact on the ability of either Party to fulfill its obligations under this Agreement. Should such changes occur then both Parties agree
to negotiate in good faith any changes that might be required to this Agreement.
10.8 Any
public announcement, media comment, and official referencing with regard to the contents, interpretation or subject matter of this Agreement
by either Party (the “Public Disclosure”) shall be sent to the other Party for their review prior to the release of the Public
Disclosure. The foregoing shall not restrict in any respect a Party’s ability to file appropriate information and issue press releases
in compliance with its applicable regulatory or statutory requirements or to communicate information concerning this Agreement and the
business affairs contemplated hereby. The foregoing shall also not restrict in any respect Party’s ability to communicate the information
concerning this Agreement and the transactions contemplated hereby to its potential investors, funding sources, specific accounts or vehicle
dealers.
10.9 Any
notice permitted, required or desired to be given pursuant to this Agreement shall be deemed to have been given one (1) Business
Day after sending by Federal Express or other comparable overnight express courier service (with proof of receipt available), or on the
same Business Day if personally delivered (with confirmation), if addressed to the attention of the President or CEO at the principal
place of business, which is stated on the first page of this Agreement or to such other address as any Party hereto shall from time
to time designate by providing written notice to the other Party.
10.10 This
Agreement shall be binding upon and inure to the benefit of both Parties and their respective successors and assigns. Neither Party shall
assign or transfer any of its rights or obligations under this Agreement without prior written consent of the other Party, which consent
may be withheld in the other Party’s absolute discretion. Notwithstanding anything to the contrary herein, PMC may use its subsidiaries
and affiliates to manufacture the Vehicles hereunder in whole or in part.
10.11 In
the event any provision of this Agreement, in whole or in part, is held to be invalid, unenforceable or in conflict with the applicable
laws or regulations of any jurisdiction, such provision will be replaced, to the extent possible, with a provision consistent with original
business purposes of the provision in a valid and enforceable manner, and the remainder of this Agreement will remain unaffected and in
full force. This Agreement and all related business transactions shall be governed by and construed in accordance with the laws of the
State of Delaware and the Federal Laws of the United States applicable therein and each Party hereby submits to the exclusive jurisdiction
of the United States District Court for Delaware for the purpose of enforcing or adjudicating such matters as are permitted to be submitted
to civil court pursuant to this paragraph.
10.12 Unless
otherwise agreed to by the Parties in writing for a specific transaction, this Agreement shall apply to any and all FACTORY REP's purchase
of Vehicles from PMC (each such individual purchase transaction initiated by FACTORY REP referred to herein as “Individual Purchase(s)”)
during the term of this Agreement. The terms and conditions of this Agreement shall apply to any and all such Individual Purchases whether
or not this Agreement or its terms and conditions are expressly referenced in the Individual Purchase. Unless otherwise agreed to by the
Parties in writing for a specific transaction, no inconsistent terms or condition in any Individual Purchase shall be applicable to Individual
Purchases.
10.13 All
section headings, titles or captions contained in this Agreement are for convenience only and shall not be deemed a part of this Agreement
and shall not in any way limit or amplify the terms and provisions of this Agreement. The masculine, feminine or neuter gender and the
singular or plural number shall be deemed to include the others whenever the context so requires or indicates. The word “including”
means “including, but not limited to,” and the word “include” when used herein means “include, without limitation.”
Each provision of this Agreement shall be construed according to its fair meaning and not strictly for or against any Party, regardless
of whether such provision was drafted by or at the request of a particular Party or such Party’s counsel.
10.14 This
Agreement shall constitute the entire and complete understanding and agreements between the Parties with respect to the subject matter
hereof and supersedes all other prior or contemporaneous oral and written agreements and understandings. The terms and conditions of this
Agreement may be amended, modified or waived only by an agreement in writing between the Parties. This Agreement may be executed in multiple
original copies, each original having the same content and validity.
10.15 All
vehicles sold under this agreement and liabilities thereof are subject to the terms of use as stipulated in the PMC ELECTRIC VEHICLES
OWNER’S and WARRANTY MANUAL.
IN WITNESS WHEREOF, the Parties hereto execute this Agreement by their
duly authorized officer on the date first above written.
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Phoenix Cars, LLC
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By
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Name:
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Title:
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Creative Bus Sales, Inc.
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Name: T.J. Matijevich
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Title: Vice President
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Exhibit 10.7
ATTACHMENT 1
STATEMENT OF WORK FOR
Phoenix Motorcars
Southern California Airports – Zero Emission
Shuttle Transportation
The 2016 AQMP identifies the need for NOx emission reductions
as the most significant air quality challenge in meeting the upcoming ozone standard deadlines. Significant increases in NOx, PM and greenhouse
gases emissions from airport shuttle buses are expected because airline passenger transportation and expansion of operations at various
commercial airports are projected to increase in the near future. Staff has been working with Contractor, an electric vehicle manufacturer,
to accelerate the development and deployment of battery electric shuttle buses. Contractor has made significant progress deploying over
36 battery electric shuttle buses operating at the Los Angeles World Airport and Ontario Airport for over two years and is committed to
seeking funds from CARB’s Hybrid and Zero Emission Truck and Bus Voucher Incentive Project (HVIP) for battery electric shuttle bus
replacement projects.
This project is to replace 29 diesel and gasoline airport
shuttle buses with new battery electric buses manufactured by Contractor. The new electric buses are equipped with state-of-the-art electric
drivetrain technology that delivers up to 100 miles range on a single charge. Combined with dual charging capability, the buses are well
suited to meet the requirements of most fleets operating on a fixed route within close proximity of the airport. As part of the eligibility
requirement, staff will inspect existing shuttle buses for operability and drivability before the buses can be replaced with battery electric
buses. Upon successful inspection and replacement of the existing buses, Contractor will be required to destroy or render the existing
buses useless without cannibalizing any parts from the old engines. In addition, staff will confirm that each replaced bus and its engine
have been destroyed by an authorized scrap yard. Contractor will submit quarterly and annual reports during the project.
CONTRACTOR shall perform the following tasks:
Task 1 - Program Management
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1.1.
|
CONTRACTOR shall plan, coordinate, and report as required to successfully achieve the overall objectives of the project. CONTRACTOR
shall submit monthly status updates and quarterly reports as described in the Deliverables section of this contract.
|
|
|
1.2.
|
CONTRACTOR shall attend a “kick-off” meeting with the SCAQMD. The administrative and technical aspects of this Agreement
will be discussed at the meeting. At a minimum, the meeting shall cover team introductions, project requirements and expectations as well
as preliminary vehicle design, specifications, and performance targets.
|
|
|
1.3.
|
CONTRACTOR shall develop, document, and distribute a project management plan for this project. The project management plan shall include
the objectives, work plan, success criteria, assumptions, dependencies, organizational structure, managerial process and communication
plan, risk management, and any other plans associated with project management of this project.
|
|
|
1.4.
|
CONTRACTOR shall release request for proposal to solicit proposals from fleet operators and select awardees for replacement of shuttle.
|
Deliverables:
|
|
·
|
Project management plan
|
|
|
·
|
Project Management Update reports (Monthly and Quarterly)
|
|
|
·
|
Preliminary Vehicle Design, Specifications and Performance Targets
|
Task 2 – Preliminary Design Task
|
|
2.1.
|
CONTRACTOR shall review both the airport shuttle market requirements as well as data from currently operating electric vehicles in
the market to determine optimum specifications of the vehicles to be deployed. CONTRACTOR shall develop a complete specification (proprietary
information) allowing the vehicle to meet market requirements. Conduct a review of 2D and 3D mechanical drawings, electrical schematics,
physical wiring diagrams, and installation instructions in order to fabricate and assemble the target vehicle.
|
Deliverables:
|
|
·
|
Airport shuttle bus market analysis and data analysis report on currently operating electric shuttles
|
|
|
·
|
Review of vehicle specifications and vehicle 3D integration model during dedicated meeting.
|
|
|
·
|
Vehicle system / design information (Confidential documents)
|
|
|
o
|
First level of Bill of Materials
|
|
|
o
|
Vehicle & main components specifications
|
|
|
o
|
Overview installation drawing
|
|
|
·
|
Targeted performance metrics
|
Task 3 - Vehicle Assembly, Testing and Deployment
|
|
3.1.
|
CONTRACTOR shall demonstrate ability to design & mass-produce, deploy and support high quality electric shuttles in the field.
CONTRACTOR shall conduct verification testing on the first vehicle to be produced to confirm the following criteria:
|
|
|
·
|
Vehicle range: City and highway w/ & w/o A/C.
|
|
|
·
|
Vehicle acceleration: 0-20 mph, 0-30 mph, 0-50 mph.
|
|
|
·
|
Battery cell level information (TBC based on confirmation from supplier).
|
|
|
·
|
Motor design validation – list of tests done by supplier.
|
|
|
·
|
Simulated customer use test – Airport environment.
|
|
|
·
|
Vehicle drive by & interior noise.
|
|
|
·
|
Contractor shall present the Phoenix Motorcars vehicle limited warranty coverage information
|
CONTRACTOR shall provide a verification testing report to
SCAQMD for review prior to commencing manufacture of the 29 vehicles.
|
|
3.2.
|
CONTRACTOR shall produce and submit the following reports with regard to vehicle manufacturing and deployment.
|
|
|
■
|
Sourcing: CONTRACTOR to produce Sourcing Plan for all 29 Vehicles and submit actual spending update on a monthly basis
till the conclusion of Task
|
|
|
■
|
Manufacturing: CONTRACTOR to produce and submit Manufacturing Plan for all 29 Vehicles.
|
|
|
■
|
Quality and Testing: CONTRACTOR to produce and submit Quality and Testing Plan for all 29 Vehicles.
|
|
|
■
|
Vehicle Deployment: CONTRACTOR to produce and submit Deployment Plan for all 29 Vehicles. Deployment costs will be calculated
and submitted at the end of February 2019 for reimbursement to SCAQMD.
|
|
|
■
|
Customer Training and Maintenance: CONTRACTOR to produce and submit Customer Training and Maintenance Plan for all 29
Vehicles.
|
|
|
3.3.
|
CONTRACTOR shall complete the manufacturing and deployment of 29 new battery electric buses, including EVSEs with the goal of delivering
the vehicles within about 12 months of project start.
|
|
|
3.4.
|
CONTRACTOR shall deliver battery electric shuttle buses to end user fleets and prepare photos of delivered buses. CONTRACTOR shall
provide SCAQMD with a list of participating end user fleets.
|
Deliverables:
|
|
·
|
Vehicle verification testing report based on prototype vehicle with identical specification - chassis and EV powertrain - to target
vehicles
|
|
|
·
|
Sourcing plan and monthly Sourcing Report
|
|
|
·
|
Source base shuttle bus for first 13 units
|
|
|
·
|
Source base shuttle bus for next 5 units
|
|
|
·
|
Source base shuttle bus for next 6 units
|
|
|
·
|
Source base shuttle bus for next 5 units
|
|
|
·
|
Source battery packs for all 29 units
|
|
|
·
|
Complete shipping, tariff and duties for 29 battery packs
|
|
|
·
|
Complete testing of first 13 battery packs
|
|
|
·
|
Complete testing of next 11 battery packs
|
|
|
·
|
Complete testing of next 5 battery packs
|
|
|
·
|
Source Motor Components for all 29 units
|
|
|
·
|
Complete shipping, tariff and duties for 29 Motor Component Units
|
|
|
·
|
Source On-board Chargers for first 13 units
|
|
|
·
|
Source On-board Chargers for remaining 16 units
|
|
|
·
|
Source remaining Bill Of Materials and Labor Costs for 6 units
|
|
|
·
|
Source remaining Bill Of Materials and Labor Costs for next 7 units
|
|
|
·
|
Source remaining Bill Of Materials and Labor Costs for next 5 units
|
|
|
·
|
Source remaining Bill Of Materials and Labor Costs for next 6 units
|
|
|
·
|
Source remaining Bill Of Materials and Labor Costs for next 5 unit
|
|
|
·
|
Manufacturing plan and Monthly Manufacturing report
|
|
|
·
|
Quality & Testing plan and results
|
|
|
·
|
Deployment Plan and Monthly Deployment Report
|
|
|
·
|
Customer training &Maintenance plan
|
|
|
·
|
Complete Manufacturing, Deployment & Customer Training for first 6 units
|
|
|
·
|
Complete Manufacturing, Deployment & Customer Training for next 7 units
|
|
|
·
|
Complete Manufacturing, Deployment & Customer Training for next 5 units
|
|
|
·
|
Complete Manufacturing, Deployment & Customer Training for next 6 units
|
|
|
·
|
Complete Manufacturing, Deployment & Customer Training for next 5 units
|
|
|
·
|
Pictures of buses & corresponding VIN number at factory after completion of manufacture
|
|
|
·
|
Pre-delivery Inspection report of buses prior to delivery
|
|
|
·
|
Picture of the bus at the customer’s location
|
Task 4 – Vehicle Attrition Schedule and Engine/Bus
Scrappage
|
|
4.1.
|
CONTRACTOR shall inspect and record the serial numbers, VINs, odometer readings, make, model, and year of the airport shuttles to
be replaced. CONTRACTOR shall verify operability and drivability before the vehicle is replaced.
|
|
|
4.2.
|
CONTRACTOR shall destroy or render the existing buses along with the engines useless upon successful completion of replacing gasoline
or diesel buses with battery electric buses. The destruction of each replaced bus will be confirmed by SCAQMD staff through photographs
of destroyed engines and buses and a certificate signed and dated by an authorized scrap yard representative that a 6-inch hole was cut
into the engine block and the chassis was cut through the frame/frame rails. The vehicles will be scrapped within a period of 4 months
from the date of delivery of the vehicle to the customer.
|
Deliverables:
|
|
·
|
Vehicle inspection report - the serial numbers, VINs, odometer readings, make, model, year, operability and drivability
|
|
|
·
|
Vehicle scrappage report – photographs of destroyed engines and buses and a certificate signed and dated by an authorized
scrap yard representative
|
Task 5 – Vehicle Operation Monitoring and Reporting
|
|
5.1.
|
CONTRACTOR shall assure that the electric shuttle bus will be fully deployed on the assigned route during the field demonstration.
|
|
|
5.2.
|
CONTRACTOR shall provide performance parameters and specifications on all deployed buses to monitor during the operation in Airport
Shuttle service for at least 12 months with the goal of performance comparison with a representative conventional shuttle bus.
|
|
|
5.3.
|
CONTRACTOR shall develop and distribute surveys to gather driver and service feedback and perform interviews with operators, mechanics
and fleet managers for user acceptance evaluation. CONTRACTOR shall prepare User deployment acceptance report.
|
Deliverables:
|
|
·
|
Operating route information
|
|
|
·
|
Operations report (distance driven, efficiency, energy charged)
|
|
|
·
|
Environmental reports (CO2 savings, NOx savings, Particle Matter savings)
|
|
|
·
|
Down-time frequency reports for scheduled maintenance
|
|
|
·
|
Estimated Mean Time Between Failure (MTBF) for major components (motor, inverter, battery system)
|
|
|
·
|
User deployment acceptance report
|
Task 6 – Installation of EVSEs
|
|
6.1.
|
CONTRACTOR shall assess infrastructure requirements and develop Infrastructure Implementation plan
|
Deliverables:
|
|
·
|
Monthly Infrastructure Installation Report
|
|
|
·
|
Complete EVSE & Infrastructure installation for first 12 buses
|
|
|
·
|
Complete EVSE & Infrastructure installation for next 12 buses
|
|
|
·
|
Complete EVSE & Infrastructure installation for remaining 5 buses
|
Task 7 – Final Report
|
|
7.1.
|
CONTRACTOR shall produce a final report that summarizes the complete analysis conducted on vehicle performance and user acceptance.
|
Deliverables:
Final report with user acceptance survey and 2-page project synopsis on the completion of the project
DELIVERABLES
CONTRACTOR shall supply the following reports to the SCAQMD
under this Contract. Each submitted report shall be submitted electronically in MS WORD format (.doc). CONTRACTOR is encouraged not to
submit patentable material or protected data in these reports, but if there is such material or data in the report, you must: (1) clearly
identify patentable or protected data on each page of the report; (2) identify such material on the cover of the report. Reports
must not contain any limited rights data (proprietary data), classified information, information subject to export control classification,
or other information not subject to release. Protected data is specific technical data, first produced in the performance of the award
that is protected from public release for a period of time by the terms of the award agreement.
|
|
1.
|
Project Management Plan. CONTRACTOR shall provide a detailed Project Management Plan as described by Task 1.
|
During phase I of the project (Vehicle Assembly and deployment),
CONTRACTOR shall submit an electronic copy in MS Word format (.doc) of each monthly progress report due by the 30th day of
each month following the reporting period. The monthly reports must provide a concise narrative assessment of the status of work, milestones
achieved, and problems encountered and how they were resolved. The monthly reports shall be formatted and completed as follows:
|
|
a.
|
What was planned to be accomplished in the period by Task
|
|
|
b.
|
What was actually accomplished during the period by Task
|
|
|
c.
|
How the project is progressing to plan
|
|
|
d.
|
Significant problems or changes
|
|
|
e.
|
What is expected to be accomplished in the next period by Task
|
|
|
f.
|
Current and cumulative budget expenditures
|
|
|
g.
|
Photos to illustrate project performance
|
During phase II of the Project (Vehicle Operation Monitoring
and reporting) CONTRACTOR shall submit an electronic copy in MS Word format (.doc) of each monthly progress report due by the 30th
day of each month following the reporting period. The monthly reports must provide a concise narrative assessment of the following:
|
|
a.
|
Operational report per client, per period and cumulative (distance driven - mile, efficiency - kWh/mile, energy charged – kWh)
|
|
|
b.
|
Environmental report per location, per period and cumulative (CO2 savings, NOx savings, Particle Matter savings).
|
|
|
c.
|
Down-time frequency reports for scheduled maintenance
|
|
|
d.
|
Failures report per client, per period and cumulative for major components (motor, inverter, battery system)
|
|
|
e.
|
Estimated Mean Time Between Failure (MTBF) for major components (motor, inverter, battery system).
|
|
|
3.
|
Quarterly Progress Reports. CONTRACTOR shall submit an electronic copy in MS Word format of each quarterly progress report
due by the 30th day of each month following the reporting period. CONTRACTOR shall submit one copy of each progress report
to AQMD’s Project Manager, and one copy to AQMD’s Contract Administrator- Technology Advancement.
|
During phase I of the project (Vehicle Assembly and deployment),
the Quarterly Progress Report must provide a concise narrative assessment of the status of work and include the following information:
|
|
a.
|
The AQMD contract number and name of the recipient.
|
|
|
b.
|
The project title and name of the project director/principal investigator.
|
|
|
c.
|
Date of report and period covered by the report.
|
|
|
d.
|
A comparison of the actual accomplishments with the goals and objectives established for the period and reasons why any established
goals were not met.
|
|
|
e.
|
A discussion of what was accomplished under these goals during this reporting period, including major activities, significant results,
major findings or conclusions, key outcomes or other achievements. This section should not contain any proprietary data or other information
not subject to public release. If such information is important to reporting progress, do not include the information, but include a note
in the report advising the reader to contact the Principal Investigator or the Project Director for further information
|
|
|
f.
|
Cost Status. Show approved budget by budget period and actual costs incurred. Costs shall be broken out by AQMD share, recipient share,
and total costs.
|
|
|
g.
|
Schedule Status. List milestones, anticipated completion dates and actual completion dates. If you submitted a project management
plan with your application, you must use this plan to report schedule and budget variance. You may use your own project management system
to provide this information.
|
|
|
h.
|
Any changes in approach or aims and reasons for change. Remember significant changes to the objectives and scope require prior approval
by the contracting officer.
|
|
|
i.
|
Actual or anticipated problems or delays and actions taken or planned to resolve them.
|
|
|
j.
|
Any absence or changes of key personnel or changes in consortium/teaming arrangement.
|
During phase II of the Project (Vehicle Operation Monitoring
and reporting), the Quarterly Progress Report must provide a concise narrative assessment of vehicle operation as the various customer
sites and include the following information:
|
|
a.
|
The AQMD contract number and name of the recipient.
|
|
|
b.
|
The project title and name of the project director/principal investigator.
|
|
|
c.
|
Date of report and period covered by the report.
|
|
|
d.
|
A comparison of the actual environmental impact (CO2 savings, NOx savings, Particle Maters savings) with the objectives.
|
|
|
e.
|
A cumulative Operation report (miles driven, energy charge).
|
|
|
4.
|
Special Event/Status Report. CONTRACTOR must report the following events associated with this project by e-mail to SCAQMD Project
Officer as soon as possible after they occur:
|
|
|
a.
|
Developments that have a significant favorable impact on the project.
|
|
|
b.
|
Problems, delays, or adverse conditions which materially impair CONTRACTOR’s ability to meet the objectives of the Contract
or which may require SCAQMD to respond to questions relating to such events from the public.
|
|
|
c.
|
CONTRACTOR must report any of the following incidents and include the anticipated impact and remedial action to be taken to correct
or resolve the problem/condition:
|
|
|
i.
|
Any single fatality or injuries requiring hospitalization of five or more individuals.
|
|
|
ii.
|
Any significant environmental permit violation.
|
|
|
iii.
|
Any verbal or written Notice of Violation of any Environmental, Safety, and Health statutes.
|
|
|
iv.
|
Any incident which causes a significant process or hazard control system failure.
|
|
|
v.
|
Any event which is anticipated to cause a significant schedule slippage or cost increase.
|
|
|
vi.
|
Any damage to Government-owned equipment in excess of $50,000.
|
|
|
vii.
|
Any other incident that has potential for high visibility in the media.
|
|
|
5.
|
Draft Final Report. CONTRACTOR shall submit an electronic copy of the draft final report in Microsoft Word format (.doc) for
review and comment. The draft final report shall be submitted within 45 days of the conclusion of the project. This document shall be
considered in the public domain, in conformance with the California Public Records Act (Government Code Section 6250 et seq.). Any
trade secret information may be submitted to AQMD in a separate report in which the trade secret information is specifically identified.
AQMD agrees to treat such trade secret information in accordance with its Public Records Act guidelines relating to trade secret information.
AQMD shall complete its review of the draft final report within four weeks of its receipt from CONTRACTOR. The draft final report shall
include, but not be limited to, the following:
|
|
|
a.
|
Identify the AQMD contract number; name of recipient; project title; name of project director/principal investigator; and consortium/teaming
members.
|
|
|
b.
|
Display prominently on the cover of the report any authorized distribution limitation notices, such as patentable material or protected
data. Reports delivered without such notices may be deemed to have been furnished with unlimited rights, and the AQMD assumes no liability
for the disclosure, use or reproduction of such reports.
|
|
|
c.
|
Provide an executive summary, which includes 1) a customer feedback overview of the use of the electric shuttle bus technology, 2)
an overview of major lessons learned from the project, 3) an assessment of the technical effectiveness and economic feasibility of the
proposed solution and 4) how the project is otherwise of benefit to the public. The discussion should be a minimum of one paragraph and
written in terms understandable by an educated layman.
|
|
|
d.
|
Provide a comparison of the actual accomplishments with the goals and objectives of the project.
|
|
|
e.
|
Summarize project activities for the entire period of funding, including solutions implemented, pictures, main challenges encountered
during project, and recommendations for future deployments. Include, if applicable, facts, figures, analyses, and assumptions used during
the life of the project to support the conclusions.
|
|
|
6.
|
Final Report. CONTRACTOR shall submit three stapled originals and an electronic copy in Microsoft Word format (.doc) of the
final report, incorporating AQMD’s comments, within 90 days of the conclusion of the project. This document shall be considered
in the public domain, in conformance with the California Public Records Act (Government Code Section 6250 et seq.). Any trade secret
information may be submitted to AQMD in a separate report in which the trade secret information is specifically identified. AQMD agrees
to treat trade secret information in accordance with its Public Records Act guidelines relating to trade secret information.
|
|
|
7.
|
Project Synopsis. CONTRACTOR shall submit a 2-page project synopsis, along with the final report. Attachment 3 to this
contract provides the format and content to be used for this synopsis. In addition to a hard copy, CONTRACTOR shall provide the synopsis
in an electronic version, using Microsoft WORD. All color photographs and images, if relevant to the project, shall be embedded within
the synopsis AND provided separately in digital format, such as .ppt, .tif. or .jpg, on a CD or sent electronically.
|
ATTACHMENT 2
PAYMENT SCHEDULE FOR
Phoenix Motorcars
The total project cost is estimated to be $7,373,905,
of which EPA’s cost share shall not exceed $3,184,875. Leveraged funding sources for the remaining $4,189,030 will include contribution
from Phoenix Cars LLC OEM in conjunction with the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) available through
the California Air Resource Board. CONTRACTOR shall submit an updated progress report with each invoice to provide documentation that
work has been completed to justify the invoice payment. Each invoice shall also be accompanied with documentation to identify the CONTRACTOR’s
cost share expenditures.
|
Tasks
|
|
EPA
Share
|
|
|
Contractor
share
|
|
|
Total
Budget
|
|
|
Estimated
Completion Date
(Not to exceed)
|
|
SCAQMD Admin Fee
|
|
$
|
62,449
|
|
|
$
|
0
|
|
|
|
62,449
|
|
|
|
1.1, 1.2, 1.3, 1.4
(Program Management)
|
|
$
|
0
|
|
|
$
|
60,000
|
|
|
|
60,000
|
|
|
|
2.1
(Preliminary Design Task)
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
|
150,000
|
|
|
|
3.1, 3.2
(Sourcing, Manufacturing & Quality Testing)
|
|
$
|
2,298,515
|
|
|
$
|
2,842,424
|
|
|
|
5,140,939
|
|
|
10 months after contract execution
|
|
Please see Table 1 for detailed subtasks under Task 3.1, 3.2
|
3.3, 3.4
(Vehicle Deployment, Customer Training / Maintenance)
|
|
$
|
463,911
|
|
|
$
|
449,650
|
|
|
|
913,561
|
|
|
18 months after contract execution
|
|
Please see Table 2 for detailed subtasks for Task 3.3 & 3.4
|
4.1, 4.2
(Vehicle scrappage)
|
|
$
|
0
|
|
|
$
|
11,600
|
|
|
|
11,600
|
|
|
|
5.1
(Monitoring & Reporting)
|
|
$
|
20,000
|
|
|
$
|
6,880
|
|
|
|
26,880
|
|
|
30 months after contract execution
|
6.1
(EVSE Installation)
|
|
$
|
290,000
|
|
|
$
|
654,476
|
|
|
|
944,476
|
|
|
18 months after contract execution
|
|
Please see Table 3 for detailed subtasks for Task 6.1
|
7.1
Final Report & Post-Project Completion
|
|
$
|
50,000
|
|
|
$
|
14,000
|
|
|
|
64,000
|
|
|
36 Months after contract execution
|
|
Total not to exceed amount
|
|
|
3,184,875
|
|
|
|
4,189,030
|
|
|
|
7,373,905
|
|
|
|
Table 1: Detailed subtasks under Task 3.2
|
Task
|
|
Description
|
|
EPA Share
|
|
|
Contractor
Share
|
|
|
Total Budget
|
|
|
Task 3.1
|
|
Vehicle verification testing
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Task 3.2.1
|
|
Source base shuttle buses - 13 units
|
|
$
|
373,509
|
|
|
$
|
458,644
|
|
|
$
|
832,153
|
|
|
Task 3.2.2
|
|
Source Battery Packs - 29 units
|
|
$
|
698,212
|
|
|
$
|
857,357
|
|
|
$
|
1,555,569
|
|
|
Task 3.2.3
|
|
Source Motor Components - 29 units
|
|
$
|
112,191
|
|
|
$
|
137,763
|
|
|
$
|
249,953
|
|
|
Task 3.2.4
|
|
Shipping, Tariff & Duties for 29 Motor Components
|
|
$
|
30,130
|
|
|
$
|
36,998
|
|
|
$
|
67,128
|
|
|
Task 3.2.5
|
|
Source base shuttle buses - 5 units
|
|
$
|
147,670
|
|
|
$
|
181,330
|
|
|
$
|
329,000
|
|
|
Task 3.2.6
|
|
Source base shuttle buses - 6 units
|
|
$
|
177,205
|
|
|
$
|
217,595
|
|
|
$
|
394,800
|
|
|
Task 3.2.7
|
|
Source base shuttle buses - 5 units
|
|
$
|
147,670
|
|
|
$
|
181,330
|
|
|
$
|
329,000
|
|
|
Task 3.2.8
|
|
Test Battery Packs - 13 units
|
|
$
|
55,234
|
|
|
$
|
67,823
|
|
|
$
|
123,057
|
|
|
Task 3.2.9
|
|
Test Battery Packs - 11 units
|
|
$
|
46,736
|
|
|
$
|
57,389
|
|
|
$
|
104,125
|
|
|
Task 3.2.10
|
|
Test Battery Packs - 5 units
|
|
$
|
21,244
|
|
|
$
|
26,086
|
|
|
$
|
47,330
|
|
|
Task 3.2.11
|
|
Duties & Shipping for 29 Battery Packs
|
|
$
|
55,888
|
|
|
$
|
68,627
|
|
|
$
|
124,515
|
|
|
Task 3.2.12
|
|
Source of On Board Charger - 13 units
|
|
$
|
38,278
|
|
|
$
|
47,002
|
|
|
$
|
85,280
|
|
|
Task 3.2.13
|
|
Source of On Board Charger - 16 units
|
|
$
|
47,111
|
|
|
$
|
57,849
|
|
|
$
|
104,960
|
|
|
Task 3.2.14
|
|
Source remaining BOM & Labor Cost for 6 buses
|
|
$
|
72,284
|
|
|
$
|
88,760
|
|
|
$
|
161,044
|
|
|
Task 3.2.15
|
|
Source remaining BOM & Labor Cost for 7 buses
|
|
$
|
89,221
|
|
|
$
|
109,557
|
|
|
$
|
198,778
|
|
|
Task 3.2.16
|
|
Source remaining BOM & Labor Cost for 5 buses
|
|
$
|
58,104
|
|
|
$
|
71,348
|
|
|
$
|
129,452
|
|
|
Task 3.2.17
|
|
Source remaining BOM & Labor Cost for 6 buses
|
|
$
|
69,725
|
|
|
$
|
85,618
|
|
|
$
|
155,342
|
|
|
Task 3.2.18
|
|
Source remaining BOM & Labor Cost for 5 buses
|
|
$
|
58,104
|
|
|
$
|
71,348
|
|
|
$
|
129,452
|
|
|
TOTAL
|
|
$
|
2,298,515
|
|
|
|
2,822,424
|
|
|
$
|
5,120,939
|
|
Table 2: Detailed subtasks under Task 3.3 and Task 3.4
|
Task
|
|
Description
|
|
EPA Share
|
|
|
Contractor
Share
|
|
|
Total
Budget
|
|
|
Task 3.3.1 /3.4.1
|
|
Complete Manufacturing, Deployment & Customer Training – 6 units
|
|
$
|
95,982
|
|
|
$
|
93,031
|
|
|
$
|
189,013
|
|
|
Task 3.3.2/ 3.4.2
|
|
Complete Manufacturing,
Deployment & Customer Training – 7 units
|
|
$
|
111,979
|
|
|
$
|
108,536
|
|
|
$
|
220,515
|
|
|
Task 3.3.3 /3.4.3
|
|
Complete Manufacturing, Deployment & Customer Training – 5 units
|
|
$
|
79,985
|
|
|
$
|
77,526
|
|
|
$
|
157,511
|
|
|
Task 3.3.4 /3.4.4
|
|
Complete Manufacturing, Deployment & Customer Training – 6 units
|
|
$
|
95,982
|
|
|
$
|
93,031
|
|
|
$
|
189,013
|
|
|
Task 3.3.5 /3.4.5
|
|
Complete Manufacturing, Deployment & Customer Training – 5 units
|
|
$
|
79,985
|
|
|
$
|
77,526
|
|
|
$
|
157,511
|
|
|
TOTAL
|
|
$
|
463,911
|
|
|
$
|
449,650
|
|
|
$
|
913,561
|
|
Table 3: Detailed subtasks under Task 6.1
|
Task
|
|
Description
|
|
EPA Share
|
|
|
Contractor
Share
|
|
|
Total Budget
|
|
|
Task 6.1.1
|
|
EVSE & Infrastructure - 12 buses
|
|
$
|
120,000
|
|
|
$
|
270,818
|
|
|
$
|
390,818
|
|
|
Task 6.1.2
|
|
EVSE & Infrastructure - 12 buses
|
|
$
|
120,000
|
|
|
$
|
270,818
|
|
|
$
|
390,818
|
|
|
Task 6.1.3
|
|
EVSE & Infrastructure - 5 buses
|
|
$
|
50,000
|
|
|
$
|
112,840
|
|
|
$
|
162,840
|
|
|
TOTAL
|
|
$
|
290,000
|
|
|
$
|
654,476
|
|
|
$
|
944,476
|
|
Exhibit 10.8
ROMEO SYSTEMS, INC.
PRODUCT
SUPPLY MASTER AGREEMENT
This ROMEO PRODUCT
SUPPLY MASTER AGREEMENT
(this “Agreement”) is entered into as of 8
September , 2020 by and between Romeo Systems, Inc., a Delaware corporation (“Romeo”) and
Phoenix Cars LLC dba Phoenix Motorcars, a Delaware limited liability company (“Purchaser”), with reference to
the following facts:
|
|
A.
|
Romeo has developed and manufactures the Orion line of battery products described in Exhibit B.
|
|
|
B.
|
Purchaser desires to purchase such products from Romeo, and Romeo desires to supply such products to Purchaser, subject to the terms
and conditions of this Agreement.
|
NOW, THEREFORE, the Parties hereby agree as follows:
|
|
1.
|
Definitions. The following terms shall have the meanings indicated.
|
|
|
(a)
|
“Affiliate” of any individual or entity means a Person that controls, is controlled by or is under common
control with such individual or entity.
|
|
|
(b)
|
“Failure Rate” means the percentage of Severity Level 1 and Severity Level 2 occurrences, as defined in
the Service Level Agreement, as determined at the end of each calendar year, to be calculated by dividing the number of Products Units
and Safety Tested Battery Units (if applicable) where a Severity Level 1 and/or Severity Level 2 event occurred, shipped by Romeo to Purchaser
overall Product Units and Safety Tested Battery Units (if applicable) shipped to date that are still under warranty.
|
|
|
(c)
|
“Initial Term” has the meaning provided in Section 7.
|
|
|
(d)
|
“Lead Time” means sixteen (16) weeks from PO submission date.
|
|
|
(e)
|
“Minimum Volume Commitment” means, for each calendar year during the Initial Term, the number of Product
Units ordered, shipped and accepted as specified as such in Exhibit B for such year, and for any Renewal Term, the number of Product
Units ordered, shipped and accepted as determined pursuant to Section 7.
|
|
|
(f)
|
“Party” means a party to this Agreement.
|
|
|
(g)
|
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association,
corporation, limited liability company, entity or governmental authority.
|
|
|
(h)
|
“PO” means a purchase order submitted by Purchaser to Romeo hereunder.
|
|
|
(i)
|
“Product” means, with respect to any PO accepted by Romeo pursuant to Section 2, any Product Unit,
Prototype Unit or Safety Tested Battery Unit ordered pursuant to such PO.
|
|
|
(j)
|
“Product Unit” means one Orion v1 battery pack unit as defined in Exhibit B that had its design and
performance validated through the successful conclusion of the Test Campaign.
|
|
|
(k)
|
“Prototype Unit” means one Orion v1 battery pack unit as defined in Exhibit B that has not had its
design and performance validate through the Test Campaign. Prototype Units do not have any Warranty.
|
|
|
(l)
|
“Purchaser Authorized Product” means the vehicle, machine, device or other product that will be powered
by the Product and into which the Product will be incorporated as specified in the applicable PO. All of Purchaser’s products that
may be Purchaser Authorized Products are described in Exhibit C.
|
|
|
(m)
|
“Quality Standard” means a Failure Rate equal to or less than five percent (5%) in the applicable calendar
year in the Initial Term.
|
|
|
(n)
|
“Renewal Term” has the meaning provided in Section 7.
|
|
|
(o)
|
“Safety Tested Battery Unit” means one Orion v1 battery pack unit as defined in Exhibit B that had
its design and performance validated through the successful conclusion of the Functional and Safety Testing segment of the Test Campaign
per Exhibit A (which shall be completed no later than November 20, 2020). A Safety Tested Battery Unit becomes a Product Unit
upon completion of the Performance & Reliability segment of the Test Campaign.
|
|
|
(p)
|
“Service Level Agreement” means the signed Service Level Agreement between Romeo and Purchaser for the Product Units.
|
|
|
(q)
|
“Test Campaign” means the testing and validation plan to validate Product performance described in Exhibit A
which is expected to last sixteen (16) weeks per the Project Plan in Exhibit F.
|
|
|
(r)
|
“Term” means the Initial Term and any Renewal Term.
|
|
|
(s)
|
“Warranty” means the meaning provided in Exhibit D (Product Warranty) and Section 8(a).
|
|
|
(a)
|
POs. From time to time Purchaser shall order Products by
issuing POs to Romeo in written form via email to Account Receivables (ar@romeopower.com)
and Program Management (pm@romeopower.com) or other means of which Romeo notifies
Purchaser in writing, all in accordance with the terms and conditions of this Agreement.
The terms and conditions of every PO may be reviewed by Romeo for conformance to this Agreement
(e.g. Product specifications, pricing, due dates within lead time, etc.). Within three
(3) business days after Purchaser submits any PO, Romeo shall accept or reject such
PO by written notice to Purchaser via email (to the contact email address stated on the PO)
or other means of communication of which Romeo notifies Purchaser in writing. For the avoidance
of doubt, any PO that is rejected by Romeo due to non-conforming PO terms shall be corrected
by Purchaser and resubmitted with accurate terms. Any PO that is not expressly accepted or
rejected by written notice during such three (3) business day period shall be deemed
to have been rejected. Neither Party shall have any obligation under or with respect to any
PO that is not accepted by Romeo, and Romeo may accept or reject POs in the exercise of its
sole discretion. The quantities specified on POs rejected by Romeo without an opportunity
for Purchaser to rectify the PO will count towards the Minimum Volume Commitment. Accepted
POs shall be binding on the Parties (and may not be cancelled or changed by either Party
without the written consent of the other Party). Romeo shall not be deemed to violate any
obligation hereunder (including, without limitation, under any PO) if it delivers any Products
after the delivery date specified in the applicable PO, provided that Romeo provides Purchaser
with prompt written notice of such delayed delivery date and uses commercially reasonable
efforts to ship such Products as close to such scheduled delivery date as is reasonably practicable.
A PO Project Plan for the Prototype Units is attached as Exhibit F.
|
|
|
(b)
|
POs for Safety Tested Battery Units. Purchaser has agreed to the Test Campaign. Purchaser may order Safety Tested Battery
Units for delivery while the Performance & Reliability segment of the Test Campaign is in progress.
|
|
|
(c)
|
Form of PO. Each PO submitted by Purchaser shall (i) identify the Product (by product number or other means
specified by Romeo), (ii) the quantity ordered, (iii) the requested shipment date (which shall be at sixteen (16) weeks from
PO submission date), (iv) the ship to address, (v) the price of each unit of Product and total amount due for the applicable
order, and (vi) for each Product, the applicable Purchaser Authorized Product. No PO shall include any terms other than those referenced in this
Section 2 and, if any PO does include any other terms, such terms shall be of no force or effect whatsoever.
|
|
|
(d)
|
Manufacture and Supply. During the Term, Romeo shall manufacture and supply to Purchaser the Products that are ordered
by Purchaser pursuant to POs accepted by Romeo, and Purchaser shall purchase such Products, in each case subject to the terms and conditions
of this Agreement.
|
|
|
(e)
|
Incoterms and Delivery. All deliveries shall be Ex Works Romeo’s facility, except to the extent otherwise specified
in the applicable PO. The ship-to address for any Product purchased hereunder shall be in North America.
|
|
|
3.
|
Review and Acceptance. Purchaser shall promptly review any shipment received from Romeo and shall notify Romeo promptly (and
in any event within ten (10) business days of receipt of the shipment) of any failure of such shipment materially to conform to the
applicable PO or to Product Units, Prototype Units or Safety Tested Battery Units in accordance with Exhibit B (the “Specifications”).
Unless Purchaser timely provides notice of such a failure with respect to any delivery, such delivery shall be conclusively presumed to
be accepted. If any shipment does fail to conform to the applicable PO or Specifications and Purchaser timely so notifies Romeo, Romeo
shall make commercially reasonable efforts to cure such failure within ten (10) business days (which cure may include a correction
of any error in the Specifications). For avoidance of doubt, Purchaser shall accept any order delivered hereunder that materially conforms
to the applicable PO and Specifications.
|
|
|
(a)
|
Price. The price at which Purchaser may purchase each Product hereunder shall be the amount specified in Exhibit B
attached hereto.
|
|
|
(b)
|
Periodic Cost Review. In April and September of each year during the Term, Romeo and Purchaser shall jointly
review the Romeo bill of materials for the Product Units (the “BOM”) to determine if the BOM has decreased since the
prior review. The BOM costs to be reviewed will include, without limitation, battery cells, pack enclosure, electrical components, plastic
components, cold plate, and printed circuit board assemblies. The BOM costs to be reviewed will be supported by invoices and other relevant
documentation from Romeo’s BOM vendors, though vendor names and other confidential information may be redacted. If, as determined
in any such review, the BOM has decreased over the one (1) year period ending on the date of such review by at least 1%, Romeo will
reduce the Product Unit price to Purchaser by .3% for every 1% reduction in BOM costs.
|
|
|
(c)
|
Shortfall Payment. If Purchaser orders fewer Product Units than ninety percent (90%) of the applicable Minimum Volume
Commitment during any calendar year of this Agreement, Romeo may invoice Purchaser in an amount equal to the product obtained by multiplying
(i) the amount by which ninety percent (90%) of such Minimum Volume Commitment exceeds number of Product Units that Purchaser ordered
during such calendar year by (ii) five thousand dollars ($5,000). Purchaser will pay any invoice submitted pursuant to this Section 4(c) within
thirty (30) days of the date thereof. For avoidance of doubt, a Product Unit will be deemed to be ordered by Purchaser for purposes of
this Section 4(c) if (i) it is accepted by Romeo pursuant to Sections 2 (Purchase Orders) and 3 (Review and Acceptance)
above; (ii) it was ordered by Purchaser but rejected by Romeo without an opportunity for Purchaser to rectify the PO; or (iii) it
conforms in all respects to the lead time, pricing, specification, warranty and other terms of this Agreement. Any Shortfall Payment is
contingent upon Satisfactory Completion of the Test Campaign and Romeo supplying Product Units materially in compliance with the Lead
Time, Specifications and meeting the Quality Standard in the prior calendar year. For avoidance of doubt, Purchaser will not be liable
for any Shortfall Payment until (1) Satisfactory Completion of the Test Campaign and (2) Romeo’s compliance with this
Subsection 4(c).
|
|
|
(d)
|
Invoices. Purchaser will pay invoices submitted by Romeo for Products within thirty (30) days after the invoice date
unless certain items require prepayment, which terms shall be agreed upon in advance in writing and on a case-by-case basis.
|
|
|
(e)
|
Late Fees and Discounts. Purchaser shall pay Romeo late fees accruing at the rate of one percent (1.0%) per month or
the highest rate permitted under applicable law, whichever is lower, on any amounts that are not paid when due hereunder. Romeo will provide
a discount to Purchaser for early payment of invoices at a rate of two percent (2%) per invoice paid within ten (10) days of invoice
receipt.
|
|
|
(f)
|
Taxes. Purchaser shall pay any sales, use, excise or other tax, duty or assessment incurred in connection with the manufacture
and delivery of Purchaser Authorized Products or the performance under this Agreement which are customary for product supply transactions,
other than taxes based solely on Romeo’s net income.
|
|
|
(a)
|
Purchaser Authorized Products. Subject to Satisfactory Completion, Romeo hereby grants Purchaser the nonexclusive right
and license under the patents and other intellectual property rights held or controlled by Romeo to incorporate the Product into, and
use the Product to power, only Purchaser Authorized Products. No right or license is granted to incorporate the Product into any
other vehicle, machine, device or other product. Purchaser shall not incorporate any Product into, or use any Product to power, any vehicle,
machine, device or other product other than the applicable Purchaser Authorized Product. Purchaser shall use reasonable efforts to ensure
that no reseller or other Person that purchases or otherwise obtains any Product from Purchaser incorporates any Product into, or uses
any Product to power, any vehicle, machine, device or other product other than the applicable Purchaser Authorized Product. For purposes
of this Agreement reasonable efforts means delivering the installed Product to Purchaser’s customers and/or end users.
|
|
|
(b)
|
Compliance with Law. Purchaser shall ensure that its use, sale or other commercialization of Product shall comply in
all respects with applicable law and regulation, including, without limitation, laws or regulations relating to the export of Products.
|
|
|
6.
|
Intellectual Property. As between Romeo and Purchaser, Romeo does and shall own all patents and other intellectual property
rights in or relating to the Products. Purchaser does and shall own all patents and other intellectual property rights in any of its own
vehicles, machines, devices or other products in which the Products are used.
|
|
|
7.
|
Term & Termination. The initial term of this Agreement shall commence upon the date hereof and shall continue through
December 31, 2022 (the “Initial Term”). This Agreement shall automatically renew for successive terms of
one (1) year each (each, a “Renewal Term”) unless either party notifies the other in writing that this
Agreement shall not renew at least one hundred eighty (180) days before the end of the Initial Term or the then current Renewal Term,
as the case may be. The Minimum Volume Commitment and Price for any Renewal Term shall be reviewed in good faith by both Parties starting
two hundred and seventy (270) days before the end of the Initial Term or the then current Renewal Term, as the case may be and agreed
in writing prior to one hundred eighty (180) days before the end of the Initial Term or the then current Renewal Term, as the case may
be. The rights, obligations and duties of the Parties shall survive any termination of this Agreement with respect to any PO submitted
by Purchaser and accepted by Romeo during the Term. Further, Sections 4(c), 4(d), 4(e), 4(f), 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16
shall survive any termination of this Agreement and remain fully effective and enforceable thereafter. The Purchaser may terminate this
Agreement for cause, in writing with a ninety (90) days written notice, if: (a) Romeo has failed to meet the Quality Standard to
the provision of such termination notice; or (b) Romeo consistently fails to satisfy deliveries within the Lead Time; provided, however,
(i) the written termination notice must describe in sufficient detail the reasons and events leading to the termination and steps
proposed by Purchaser for avoiding termination; (ii) upon receiving such notice, Romeo will be given thirty (30) days to execute
on commercially reasonable proposed steps to remedy any default leading to Purchaser’s termination notice; and (iii) Purchaser
shall not terminate this Agreement if Romeo achieves the proposed steps within the thirty (30) days (or longer timeframe, if agreed by
the Parties in writing) Purchaser may terminate this Agreement in the event of a Purchaser change of control with no less than one hundred
twenty (120) days written notice to Romeo..
|
|
|
(a)
|
By Romeo. Romeo shall provide Purchaser the warranty with respect to the Products set forth on Exhibit D, subject
to all of the terms, conditions and restrictions set forth therein.
|
|
|
(b)
|
By Purchaser. Purchaser warrants that its use of all Products shall comply with all applicable laws and regulations
and shall satisfy all of the conditions to the warranty provided in Exhibit D.
|
|
|
(c)
|
Disclaimer. Except as expressly provided in this Section 8 and Exhibit D, Romeo neither makes nor provides
any additional warranty hereunder, and Purchaser’s use or other commercialization of any Product shall be at Purchaser’s sole
risk. Without limiting the foregoing, Romeo expressly disclaims any implied warranties, including, without limitation, the implied
warranties of merchantability, fitness for a particular purpose and non-infringement
|
|
|
9.
|
Powered By Credit. Purchaser may, at Purchaser’s full discretion, credit Romeo as the manufacturer of the battery
products used in Purchaser Authorized Products in accordance with Exhibit E. If Exhibit E is blank as of the date hereof, Romeo
may at any time during the Term add a new Exhibit E with Purchaser’s consent.
|
|
|
(a)
|
General. Each Party (the “Indemnifying Party”) shall (i) defend the other Party, its
Affiliates and their respective employees, officers, directors, representatives and agents (the “Indemnified Parties”)
against any claim asserted or threatened by any third party that is based on any allegation of a fact, thing, circumstance or condition
that would, if confirmed, constitute a breach by the Indemnifying Party of this Agreement or the gross negligence, willfulness or intentional
misconduct of the Indemnifying Party or any Affiliate thereof (a “Claim”) and (ii) pay any settlement of
or final judgment awarded for any Claim; provided in each case that the applicable Indemnified Parties promptly notify the Indemnifying
Party in writing of the Claim, tender sole control of the defense and settlement thereof to the Indemnifying Party, and reasonably cooperate
in such defense. Notwithstanding the foregoing, the Indemnifying Party shall not settle any Claim without the Indemnified Party’s
prior written consent, not to be unreasonably withheld, delayed or conditioned.
|
|
|
(b)
|
Intellectual Property Infringement. Romeo shall (i) defend Purchaser, its Affiliates and their respective employees,
officers, directors, representatives and agents (the “IP Indemnified Parties”) against any claim asserted or
threatened by any third party that any Product infringes any United States patent or other Intellectual Property Right arising under the
laws of the United States (an “IP Claim”) and (ii) pay any settlement of or final judgment awarded for
any IP Claim; provided in each case that the applicable IP Indemnified Parties promptly notify Romeo in writing of the IP Claim, tender
sole control of the defense and settlement thereof to Romeo, and reasonably cooperate in such defense. Notwithstanding any other provision
hereof, Romeo may cancel any PO for any Products that are subject to any IP Claim. Further, Purchaser shall reasonably cooperate with
Romeo’s efforts to address, settle or mitigate the damages, potential damages or other actual or potential liability associated
with any IP Claim, including, without limitation, by making or allowing Romeo to make, at Romeo’s expense, any changes to any Products
subject to such Claim or to the use thereof, or by accepting any restrictions regarding the use or other commercialization of any such
Products, as reasonably requested by Romeo. Notwithstanding the provisions of Section 10(b), Romeo assumes no liability for any IP
Claim arising out of or resulting from: (1) Purchasers combination or use of the Products with hardware, software, systems, technology,
products, services, intellectual property, data, or materials not provided or approved by Romeo, if such IP Claim could have been avoided
by the non-combined or independent use of the Product; (2) modification of the Product by anyone other than Romeo, if such IP Claim
would have been avoided by use of the unmodified Product; (3) Romeo’s modification of the Product at Purchaser’s sole
direction, if such IP Claim would have been avoided by use of the unmodified Product; or (4) Purchaser’s use of the Product
in a manner unauthorized by Romeo or inconsistent with this Agreement.
|
|
|
(c)
|
Personal Injury or Property Damage: At any time during the term of this Agreement and thereafter, Romeo shall indemnify
and hold Purchaser, its parent, subsidiaries and affiliates, and their respective officers and directors harmless from and against any
and all Claims arising out of personal injury (including death) or property damage alleged to have been solely caused by a defect in design,
materials or workmanship of a Product. However, Romeo shall have no liability to Purchaser with respect to damages caused solely by Purchaser’s
integration of the Product into Purchaser Authorized Products.
|
|
|
11.
|
Safety Risks; Recalls. In the event that an unacceptable risk to property or human safety from the use of any Product is identified
or brought to the attention of either Party (each a “Risk Event”), such Party shall promptly inform the other
Party in writing. Romeo may take necessary or appropriate measures, as determined by Romeo in its sole discretion, to address any Risk
Event, including, without limitation, recall of Product that is identified as presenting an unacceptable risk to property or human safety.
Furthermore, Romeo may, in its sole discretion, notify competent authorities, agencies, and other notified bodies (“Agencies”)
of Risk Events. Purchaser shall cooperate with Romeo and any Agency in any response to any Risk Event. Purchaser shall promptly provide
Romeo notice and copies of any communications received by Purchaser or any Affiliate thereof from any Agency. Except for Risk Events or
other issues caused by or attributable to any Purchaser Authorized Product or the use thereof or Purchaser’s breach of this Agreement,
negligence or misconduct, Romeo shall be responsible for all costs, expenses, fees, damages, and liability incurred in connection with
addressing or resolving any Risk Event. Purchaser shall be responsible for all costs, expenses, fees, damages, and liability incurred
by Romeo in connection with addressing or resolving any Risk Event caused by or attributable to any Purchaser Authorized Product or the
use thereof or Purchaser’s breach of this Agreement, negligence or misconduct.
|
|
|
(i)
|
“Confidential Information” means the trade secret or other confidential information of a Party that is or has been disclosed
to the other Party, orally or in writing, including, without limitation, any such information of which the Party receiving the disclosure
may obtain knowledge through or as a result of the relationship with the disclosing Party, access to the disclosing Party’s premises,
or communication with the disclosing Party’s employees or independent contractors, including any such information that is designated
as confidential at the time of disclosure or that should, under the circumstances, be understood to be confidential by the Parties.
|
|
|
(ii)
|
For all purposes of this Agreement, (i) Romeo will be referred to as “Discloser” with respect to its Confidential
Information and “Recipient” with respect to Confidential Information of Purchaser, and (ii) Purchaser will be referred
to as “Discloser” with respect to its Confidential Information and “Recipient” with respect to Confidential Information
of Romeo.
|
|
|
(iii)
|
Notwithstanding any other provision hereof, Confidential Information shall not include information that Recipient shows (i) is
now or later becomes generally known to the trade (other than as a result of a breach of this Agreement), (ii) is independently developed
by Recipient without reference to any information supplied by Discloser; or (iii) Recipient lawfully obtains from any third party
without restriction on use or disclosure.
|
|
|
(b)
|
No Unauthorized Use or Disclosure. Recipient agrees not to use any of the Confidential Information of Discloser for
any purpose at any time, other than for the purpose of exercising its rights and performing its obligations under this Agreement (the
“Purpose”). Recipient shall at all times hold in confidence and not disclose or reveal to any Person any such
Confidential Information without the clear and express prior written consent of a duly authorized representative of Discloser. Recipient
shall at all times protect the confidentiality of such Confidential Information using at least such care as Recipient uses to protect
its own confidential and proprietary information of like importance,
but in no event less care than a prudent business person would employ under similar circumstances. Notwithstanding the foregoing, Recipient
may disclose Confidential Information to the extent reasonably required in connection with the Purpose, provided that any such disclosure
is made (i) solely with and subject to Discloser’s prior written consent, not to be unreasonably withheld, delayed or conditioned,
and (ii) subject to written obligations of confidentiality that are at least as protective of the Confidential Agreement as this
Agreement.
|
|
|
(c)
|
Subpoena. If Recipient is served with a subpoena or similar order, interrogatories, requests for information or documents,
civil investigative demand or other order or process which seeks to compel the production of Confidential Information, Recipient shall,
to the extent permitted under applicable law, promptly notify Discloser in writing thereof. The Parties shall then cooperate with one
another for the purpose of obtaining such relief as will protect the Confidential Information. Should either Party file any timely motion
for a protective order or similar motion with respect to the Confidential Information, Recipient shall not comply with such subpoena or
similar order, interrogatories, requests for information or documents, civil investigative demand or other order or process until after
such time as the court rules on such motion. Recipient shall protect the Confidential Information to the maximum extent possible
consistent with such ruling.
|
|
|
(d)
|
For avoidance of doubt, this Section 12 supersedes any confidentiality agreement between the Parties entered into before the
date hereof solely with respect to the Parties’ respective obligations regarding Confidential Information that is used to exercise
rights or perform obligations under this Agreement. This Agreement shall not be deemed to supersede any pre-existing obligations with
respect to any other information.
|
|
|
13.
|
Limitation of Liability.
|
|
|
(a)
|
Except as otherwise provided herein, neither Party nor its Affiliates, licensors, suppliers or service providers nor any of their
respective officers, directors, owners, employees, agents, suppliers or representatives will be liable for any special, incidental, consequential
or exemplary damages, including, but not limited to, damages for loss of use or lost profits, arising out of or in connection with (i) the
Products or their use, (ii) any maintenance, support or other services that relate in any way to the Products or their use, or (iii) this
Agreement, even if such Party has been advised of the possibility of such damages.
|
|
|
(b)
|
Except as otherwise provided herein, in no event will the aggregate liability of either Party for any claims relating to the Product
or its use, to any maintenance, support or other services that relate in any way to the Products or their use, or to this Agreement, whether
sounding in contract, tort or any other theory of liability, exceed, in the aggregate for all claims, the aggregate payments that Romeo
receives from Purchaser under this Agreement.
|
|
|
(a)
|
Each Party shall, by the end of the Functional and Safety Testing segment of the Test Campaign per Exhibit A (which shall be
no later than November 20, 2020), obtain and maintain, throughout the Term, Commercial General Liability insurance satisfactory to
each Party using the Insurance Service Office (ISO) policy form CG 00 01 04 13 or such form as provides equivalent coverage. Such policy
shall have minimum limits of $1,000,000 per occurrence, $2,000,000 products/completed operations aggregate and $2,000,000 aggregate including
Broad Form Property Damage, Premises and Operations coverage, Products and Completed Operations coverage, advertising injury, Personal
Injury coverage, and Blanket Contractual Liability coverage.
|
|
|
(b)
|
The Commercial General Liability Policy shall be further endorsed to provide, to the fullest extent permitted by law:
|
|
|
o
|
additional insured coverage to the other Party;
|
|
|
o
|
that coverage available to the additional insureds shall apply on a primary and non-contributing basis as respects any other insurance,
deductibles, or self-insurance available to the additional insureds;
|
|
|
o
|
a waiver of subrogation in favor of the other Party; and
|
|
|
o
|
that defense costs shall be in addition to and not erode the limits of liability.
|
|
|
(c)
|
Each Party shall obtain and maintain, throughout the Term, Commercial Automobile Liability covering all owned, non-owned, and hired
vehicles - $1,000,000 combined single limit of liability for bodily injury or death and property damage, including loss of use thereof.
Such policy or policies of automobile liability insurance shall be written on an "occurrence" (as opposed to a "claims
made") basis. The Commercial Auto Liability Policy shall be further endorsed to:
|
|
|
o
|
include the other Party as additional insured on a primary and non-contributing basis; and
|
|
|
o
|
include a waiver of subrogation in favor of the other Party.
|
|
|
(d)
|
Each Party shall obtain and maintain, throughout the Term, Workers' Compensation and Employers Liability complying with the applicable
statutory requirements and Employers Liability insurance with limits of $1,000,000 bodily injury by accident (each accident); $1,000,000
bodily injury by disease (policy limit); and $1,000,000 bodily injury by disease (each employee). Policy
shall include a waiver of subrogation in favor of the other Party.
|
|
|
(e)
|
Each Party shall obtain and maintain, throughout the Term, Umbrella/Excess Liability in excess of and follow form to the General Liability,
Auto Liability and Employers Liability policies required here within in an amount not less than $5,000,000 each occurrence and in the
aggregate.
|
|
|
(f)
|
All insurance required by this Section 14 shall be in such form and with such companies as shall be reasonably satisfactory to
the other Party, provided that such company shall have a minimum A.M. Best rating of A- Class IX. All insurance required under Section 14
shall name the other Party as an additional insured. Policies of insurance (to the extent applicable) shall (i) provide that the
insurance company will have no right of subrogation against the other Party or any of their respective affiliated or subsidiary companies
or the agents or employees thereof and (ii) provide that the proceeds thereof in the event of loss or damage shall, to the extent
payable to the other Party, be payable notwithstanding any act of negligence or breach of warranty by the other Party which might otherwise
result in the forfeiture or nonpayment of such insurance proceeds. All coverage limits and deductible amounts set forth in this Agreement
shall be reviewed by the parties from time to time for the purpose of determining the coverage limits and deductible amounts then appropriate
for industries similar in type and for the nature of the business being conducted. The parties shall cooperate reasonably to arrive at
an agreement on such matters.
|
|
|
(g)
|
For the purpose of ensuring compliance with the provisions of this Section 14, Each Party shall furnish to the other Party certificates
of all insurance and renewals as required to be maintained pursuant to this Section 14 including all endorsements. All such certificates
shall specify that the policies to which they relate cannot be canceled, modified or non-renewed on less than thirty (30) days prior written
notice to the other Party or ten (10) days for non-payment and at
least ten (10) days prior to their respective expiration dates.
|
|
|
(h)
|
Neither Party in any way represents, warrants or advises that the insurance or the limits of insurance specified herein are sufficient
or adequate to protect the other Party’s interests or cover all of the other Party’s liabilities.
|
|
|
(a)
|
No Party shall be liable hereunder for any failure or delay in the performance of its obligations hereunder to the extent resulting
from any acts of God, fire, pandemic, epidemic, explosion, accident, strike, lock-out, civil disorder, terrorist attacks, civil or military
authority or any other event or cause beyond such Party’s reasonable control (each an "Event").
To the extent reasonably practicable, each Party shall promptly give notice to the other Party of the occurrence of any Event and shall
describe such Event in reasonable detail, including, to the extent possible, the expected duration of the Event and its anticipated impact
on such Party’s performance of its obligations under this Agreement.
|
|
|
(b)
|
Each Party acknowledges that, in entering into this Agreement, it has taken into consideration the current and anticipated future
effect of the COVID-19 pandemic (the “Pandemic”) on its business. In particular, Romeo has taken the Pandemic
into account in connection with production planning for purposes of meeting Purchaser’s demand for Products hereunder, and Purchaser
has taken the Pandemic into account in its sales forecasts to manage its risk associated with the provisions of this Agreement relating
to the Minimum Volume Commitment (the “Minimum Commitment Provisions”). If the direct negative effects of the
Pandemic on the business of either Party eventually become greater than such Party reasonably anticipated on the date hereof, such Party
may so notify the other Party in writing. Upon such notice, the Parties shall confer and endeavor in good faith to mutually agree on any
amendments to the Minimum Commitment Provisions that are reasonably necessary and equitable in light of such unanticipated negative effects.
|
|
|
(a)
|
Agreement. This Agreement constitutes the entire agreement between Romeo and Purchaser with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous oral or written communications relating to such subject matter. There being
no expectations to the contrary between the Parties, no usage of trade or other regular practice or method of dealing between the Parties
shall be used to modify, interpret, supplement or alter in any manner any express terms of this Agreement. Except as otherwise provided
herein, this Agreement shall not be amended except by a writing executed by both Parties. No waiver of any provision of this Agreement
or any rights or obligations of either Party hereunder shall be effective, except pursuant to a written instrument signed by the Party
or Parties waiving compliance, and any such waiver shall be effective only in the specific instance and for the specific purpose stated
in such writing. A Party shall not assign or otherwise transfer this Agreement or any rights hereunder, and any purported assignment or
other transfer without the other Party’s prior written consent (which shall not be unreasonably withheld) shall be null and void
ab initio and of no force or effect.
|
|
|
(b)
|
Governing Law. This Agreement shall be construed and enforced in accordance with the internal laws of the state of California
applicable to contracts entered into and fully performed in California by residents thereof. Application to this Agreement of the United
Nations Convention on Contracts for the International Sale of Goods is expressly disclaimed. Any action or proceeding brought by either
Party against the other arising out of or in connection with this Agreement or the breach or alleged breach hereof, the Product, or the
use or commercialization of any Product shall be brought only in a state or federal court located in the state of California, county of
Los Angeles, and Purchaser hereby irrevocably submits and consents to the personal jurisdiction of and to venue in such courts for purposes
of any such action or proceeding. Notwithstanding the foregoing, Romeo or any Affiliate thereof may bring any claim or action of any type
to enforce, or otherwise address any infringement, misappropriation, misuse or other violation of, any patent, trade secret or other intellectual
property right owned or controlled by Romeo or any Affiliate thereof in any court, agency or tribunal, anywhere in the world.
|
|
|
(c)
|
Severability. If all or part of any provision of this Agreement shall be deemed invalid or unenforceable under applicable
law, such provision, or the invalid or unenforceable part thereof, shall be deemed stricken from this Agreement, and the remainder of
this Agreement shall continue in full force and effect.
|
|
|
(d)
|
No Joint Venture; No Third-Party Beneficiary. Nothing contained herein shall be deemed to create a joint venture or
partnership or agency relationship between Romeo and Purchaser. Neither Party shall assume or create or have the right or authority to
assume or create any obligation or responsibility, express or implied, on behalf of or in the name of the other Party. Nothing in this
Agreement shall be deemed to confer upon any Person other than the Parties and their respective assigns
or other successors in interest a right of action either under this Agreement or in any manner whatsoever.
|
|
|
(e)
|
Press Releases; Confidentiality of Terms. If either Party wishes to issue a press release or otherwise publicly announce
this Agreement, it shall first obtain the other Party’s written consent, which shall not be unreasonably withheld or delayed. Notwithstanding
the foregoing, each Party shall hold in confidence and shall not disclose the terms of this Agreement, except that disclosure by a Party
shall be permitted to its employees, lawyers, accountants and other advisors who reasonably require access to such terms and to actual
or potential regulators, licensees, licensors, acquirors or other Persons with a reasonable interest in the disclosing Party's business
arrangements, provided that any Person acquiring knowledge of such terms shall first agree in writing to maintain the confidentiality
of such terms and to use his or her knowledge of such terms only for the purposes for which such terms are disclosed hereunder. In any
event, Purchaser shall be entitled to publicly disclose that Romeo is its supplier of the Products.
|
|
|
(f)
|
Failure of Essential Purpose. The Parties acknowledge and agree that the provisions hereof that limit liability,
disclaim warranties, or exclude consequential damages or other damages or remedies are essential terms of this Agreement that are fundamental
to the parties’ understanding regarding allocation of risk. Accordingly, such provisions shall be severable and independent of any
other provisions and shall be enforced as such, regardless of any breach or other occurrence hereunder. Without limiting the generality
of the foregoing, Purchaser agrees that all limitations of liability, disclaimers of warranties, and exclusions of consequential damages
or other damages or remedies shall remain fully valid, effective and enforceable in accordance with their respective terms, even under
circumstances that cause any exclusive remedy under this Agreement to fail of its essential purpose.
|
|
|
(g)
|
Notices. Any notice or communication required or permitted to be given pursuant to any provision of this Agreement shall
be in writing and shall be (i) delivered personally, (ii) sent by certified mail, return receipt requested, or (iii) delivered
by nationally recognized overnight courier, addressed as follows:
|
401 S. Doubleday Ave, Ontario, CA 91761
Attn: Gillray M. Cadet, CFO & Interim CEO (gillrayc@phoenixmotorcars.com) &
Tarek Helou, COO (tarekh@phoenixmotorcars.com)
4380 Ayers Ave, Vernon, CA 90058
Attn: Lauren Webb, Chief Finance Officer (lauren@romeopower.com)
and Lionel Selwood Jr., President (lionel@romeopower.com)
Any such communication shall be deemed
to be delivered, given and received for all purposes hereof (i) on the date of receipt if delivered personally by courier, (ii) five
(5) days after posting if transmitted by certified mail, return receipt requested, or (iii) the day following deposit with a
nationally recognized express overnight delivery service such as FedEx.
[Signatures Follow]
IN WITNESS WHEREOF, the Parties hereby enter into this Agreement
as of the date hereof:
|
PURCHASER
|
|
ROMEO
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Gillray Cadet
|
|
By:
|
/s/ Lauren Webb
|
|
|
|
|
|
Title:
|
CFO & Interim CEO
|
|
Title:
|
CFO
|
|
Print Name:
|
Gillray Cadet
|
|
Print Name:
|
Lauren Webb
|
Exhibit A
Test Campaign
Romeo will conduct a Test Campaign, for the tests as described below,
to validate road-readiness of Product Units.
The tests, which will be conducted in parallel (see Exhibit F),
will include but may not be limited to:
|
Functional & Safety Testing* (which shall
be no later than November 20, 2020)
|
~ 28 business days
|
|
Altitude Simulation Test
|
|
Thermal Test
|
|
Vibration Test
|
|
Shock Test
|
|
External Short Circuit Test
|
|
Impact Test
|
|
Overcharge Test
|
|
*Following UN38.3 Standards
|
|
Performance & Reliability (Engineering Verification Testing (EVT))**
|
~ 80 business days
|
|
Overcharge Test
|
|
Short Circuit Test
|
|
Overcharge Protection Test
|
|
Temperature Test
|
|
Imbalanced Charging Test
|
|
Dielectric Withstand Test
|
|
Isolation Resistance Test
|
|
Continuity Test
|
|
Failure Test
|
|
Rotation Test
|
|
Vibration Endurance Test
|
|
Shock Test
|
|
Drop Test
|
|
Crush Test
|
|
Thermal Cycling Test
|
|
Salt Spray Test
|
|
Immersion Test
|
|
External Fire Test
|
|
Internal Fire Test
|
|
**Following UL2580 Standards
|
Exhibit B
Prices, Minimum Commitments, Lead Time
Product Unit
Romeo Power 31.36 kWh Orion v1 Liquid Cooled Pack
containing three (3) 32S18P Hermes Modules in a 3S1P configuration. The pack includes a Battery Management System (BMS) with Vehicle
CAN Interface using J1939-71 protocols.
Lead Time
Lead Time, as specified in Section 1(d) of
this agreement, is 16 weeks from PO submission. However, a Lead Time exception has been made for the two (2) Prototype Units which
will be delivered on September 28, 2020 and the first PO for the Minimum Volume Commitment for 2020 (see below table) which will
have a Lead Time according to Exhibit F. For the avoidance of doubt, Romeo has accepted the PO for the two (2) Prototype Units
and the first PO for the Minimum Volume Commitment for 2020.
Prototype Unit Price
Romeo Power Prototype Pack (up to 5 Prototype
Units): $950/kWh ($29,640/pack)
Product Unit Price and Minimum Volume Commitment
|
Year
|
|
Price
|
|
Minimum Volume Commitment
|
|
2020
|
|
$479/kWh ($14,950/Product Unit)
|
|
35 Safety Tested Battery Units
|
|
2021
|
|
$368/kWh ($11,482/Product Unit)
|
|
800 Safety Tested Battery and/or Product
Units
|
|
2022
|
|
$351/kWh ($10,951/Product Unit)
|
|
1,600 Product Units
|
Price Ceiling Clause
Prices communicated are ceilings or maximums.
If Romeo is unable to deliver the Safety Tested Battery Units for the 2020 Minimum Volume Commitment within the timeframe identified in
the Project Plan in Exhibit F, then the Price shall be reduced to the 2021 price of $368/kWh. If Romeo is unable to deliver the Safety
Tested Battery Units and/or Product Units for the 2021 Minimum Volume Commitment, then the Minimum Volume Commitment for 2021 shall be
reduced by 1/50 for each week of delay. The maximum prices for 2021 and 2022 are $368/kWh and $351/kWh respectively once the Minimum Committed
Volume, specified above in this Exhibit B, is met. Romeo will partner with Purchaser in good faith to achieve lower prices for Product
Units utilizing activities including Joint Open Book Cost Exercises, which will take place during an agreed on Periodic Cost Review time
interval as defined on Section 4(b) of this agreement.
Tiered Pricing Table
If, during any calendar year of the Initial
Term, the number of Product Units purchased hereunder exceeds the applicable Minimum Volume Commitment, then the price of Product
Units purchased during such calendar year after Purchaser purchases the Minimum Volume Commitment for such year shall be determined
based on the tiered pricing table set forth below. For example, if Purchaser purchases 1,300 Product Units in 2021, then Purchaser
shall pay $368/kWh for each of the first 800 Product Units, $364/kWh for each of the next 200 Product Units, $361/kWh for the each
of the next 200 Product Units after that, and $357/kWh for each of the final 100 Product Units purchased in that year. Accordingly,
the total purchase price paid for Products purchased in 2021 in this example would be (800 x $11,482) + (200 * $11,367) +
(200*11,252) + (100*$11,139) = $14,823,300.
|
Pack Volume
|
|
|
Price per Pack
(USD)
|
|
|
Price per kWh
(USD)
|
|
|
|
800
|
|
|
$
|
11,482
|
|
|
$
|
368
|
|
|
|
1,000
|
|
|
$
|
11,367
|
|
|
$
|
364
|
|
|
|
1,200
|
|
|
$
|
11,252
|
|
|
$
|
361
|
|
|
|
1,400
|
|
|
$
|
11,139
|
|
|
$
|
357
|
|
|
|
1,600
|
|
|
$
|
11,014
|
|
|
$
|
353
|
|
|
|
2,000
|
|
|
$
|
10,822
|
|
|
$
|
347
|
|
|
|
2,500
|
|
|
$
|
10,660
|
|
|
$
|
342
|
|
|
|
4,000
|
|
|
$
|
9,763
|
|
|
$
|
313
|
|
Exhibit C
Purchaser Authorized Products
|
|
1.
|
Purchaser electric drivetrain
|
Exhibit D
Product Warranty
Subject to Section 2 of this Limited
Product Warranty (this “Warranty”), Romeo warrants to Purchaser that each Product Unit and each Safety Tested Battery
Unit that has completed the Functional and Safety Testing segment of the Test Campaign per Exhibit A (which shall be no later than
November 20, 2020) shall be free of defects in design, materials and workmanship during the period (the “Warranty Period”)
commencing upon Purchaser’s receipt of the Product Unit and/or Safety Tested Battery Unit and ending upon the earliest to occur
of the following: (i) fifty (50) months from the date that Purchaser receives the Product Unit and/or Safety Tested Battery Unit,
and (ii) the occurrence of two thousand (2,000) cycles; provided, however, that if the Product Unit and/or Safety Tested Battery
Unit fails to record the number of Cycles or if the Cycle count record shall become corrupted or unreadable, the Warranty Period shall
end on the fiftieth (50th) month from the date that Purchaser receives the Product Unit and/or Safety Tested Battery Unit.
For the avoidance of doubt, Romeo defines a cycle as a full charge event followed by a drive event that consumes at least 50% of the Product
Unit’s and/or Safety Tested Battery Unit’s usable energy capacity. Additionally, notwithstanding the foregoing, no warranties
are provided for Safety Tested Battery Units that have not completed the Functional and Safety Testing segment of the Test Campaign per
Exhibit A (which shall be no later than November 20, 2020).
Notwithstanding any other provision hereof, this Warranty
shall be void and of no force or effect if:
|
|
·
|
the Product is altered or repaired by any person other than Romeo or Romeo’s
authorized service representative;
|
|
|
·
|
neither Purchaser nor any person that subsequently obtains the Product shall
fail in any respect to (i) install, operate, maintain, store and transport the Product in accordance with any guidelines or instructions
provided by Romeo or (ii) comply with Section 4 of this Warranty;
|
·
|
|
·
|
the Product is at any time exposed to operating temperatures above 60°C
or below -20°C.
|
|
|
·
|
the Product is at any time exposed to charging temperatures above 50°C
or below 0°C.
|
Further, Romeo shall have no liability
or obligation under this Warranty, and no Product shall be deemed to violate this Warranty, as a result of any failure, condition or problem
attributable to:
|
|
·
|
natural disasters, war, riot, terrorism, or other events or occurrences that
are beyond Romeo’s reasonable control; or
|
|
|
·
|
electrical overloading or external electrical shorts, power failure surges,
inrush current or lightning.
|
Notwithstanding any other provision
hereof, Romeo provides no warranty whatsoever with respect to (i) any prototypes provided hereunder or (ii) any Products that
are not satisfactory as determined by the Test Campaign (i.e., any Products that may not be sold by Purchaser as provided in Section 2(b)).
|
|
3.
|
SERVICE LEVEL AGREEMENT
|
A Service Level Agreement has been released under Document
Reference Number 20004.199.00. The Service Level Agreement shall be reviewed jointly by both Parties, at minimum once per calendar Year.
|
|
4.
|
POTENTIAL WARRANTY EXTENSION
|
The Parties shall discuss and in good
faith consider whether this Agreement should be amended to extend the Warranty Period as of the first (1st) anniversary of
the first production use of any Product purchased hereunder by Purchaser, based on the parties analysis of relevant data supplied to Romeo
by Purchaser, including, without limitation, the following recorded BMS variables, such as:
|
|
·
|
Fault Monitoring Signals
|
|
|
·
|
Module Block Voltage Deltas
|
|
|
5.
|
CLAIM PROCESS AND EXCLUSIVE REMEDY
|
Purchaser shall promptly notify Romeo
of any violation of this Warranty by telephone or email or physical letter as follows:
|
|
Email:
|
warrantyclaims@romeopower.com
|
|
|
Phone:
|
323-675-2180
|
|
|
Address:
|
Romeo Power Technology
4380 Ayers Ave
Vernon, CA 90058
|
Such notice shall (i) describe
the warranty violation in detail and (ii) specify the date that the Product was first shipped by Romeo, the date that the Product
was first used and the serial number of the Product. If Romeo requests, Purchaser shall confer (or shall cause the then-current owner
of the Product to confer) with a Romeo engineer or technician for the purpose of providing any requested information and endeavoring to
resolve the warranty claim expeditiously. If requested by Romeo, Purchaser shall allow (or shall cause the then-current owner of the Product
to allow) an authorized Romeo engineer or technician to inspect the Product at Purchaser’s (or such then-current owner’s)
facility or will ship (or cause the then-current owner to ship) the Product to Romeo, FOB destination, to the address provided above or
other address specified by Romeo.
If Romeo accepts the warranty
claim, it will promptly make commercially reasonable efforts to repair or replace the Product and, if the Product is at
Romeo’s facility, will ship the repaired or replaced Product to Purchaser FOB Purchaser’s address (or, if Purchaser
requests, to the then-current owner of the Product FOB such current owner’s address). The repaired Product or replacement
Product (as the case may be) will continue to be covered by this Warranty for the remainder of the original Warranty Period.
(Accordingly, for purposes of determining the Warranty Period for a repaired or replacement Product, the ship date and first use
date, respectively, of the repaired or replacement Product shall be deemed to be the same as the ship date and first use date of the
original Product, and the Ah-throughput of the repaired or replacement Product as of the time that it is shipped or otherwise
provided by Romeo shall be deemed to be the same as the Ah-throughput of the Product at the time of the applicable warranty claim.)
Any Product or any components thereof that are replaced shall become the property of Romeo. The decision whether to repair a
defective Product or replace it shall be made by Romeo in the exercise of its sole discretion. If the defective Product is replaced
and the original Product is at Purchaser’s (or the then-current owner’s) facility, Purchaser will either ship the
original Product back to Romeo or dispose of the original Product, in each case as Romeo instructs and at Romeo’s sole
expense.
If Romeo rejects the warranty claim,
it shall promptly so notify Purchaser in writing, which notice explains why Romeo rejected such claim. If the Product is at Romeo’s
facility, Romeo will either ship the Product back to Purchaser (or, if Purchaser requests, to the then-current owner) or dispose of the
Product, in each case as the Purchaser instructs and at Purchaser’s sole expense.
This Section 5 of this
Warranty sets forth Romeo’s only obligation and liability and Purchaser’s sole and exclusive remedy for any breach of
this Warranty.
Exhibit E
Powered By Credit
Exhibit F
Phoenix Motorcars – Project Plan
|
ID
|
Task Name
|
Duration
|
Start
|
Finish
|
|
1
|
i
|
128 days
|
Mon 3/2/20
|
Fri 8/28/20
|
|
2
|
Contracts
|
128 days
|
Mon 3/2/20
|
Fri 8/28/20
|
|
3
|
Proposal (LOI) Review
|
62 days
|
Mon 3/2/20
|
Wed 5/27/20
|
|
4
|
Proposal (LOI) Execution
|
0 days
|
Wed 5/27/20
|
Wed 5/27/20
|
|
5
|
Contract (MSA + SLA) Review
|
28 days
|
Thu 5/28/20
|
Tue 7/7/20
|
|
6
|
Contract (MSA + SLA) Execution
|
38 days
|
Wed 7/8/20
|
Fri 8/28/20
|
|
7
|
A-Sample Prototype & Testing
|
162 days
|
Thu 6/18/20
|
Mon 2/8/21
|
|
8
|
Prototype Purchase Orders
|
0
days
|
Thu 6/18/20
|
Thu 6/18/20
|
|
9
|
Issue Prototype PO
|
0 days
|
Thu 6/18/20
|
Thu 6/18/20
|
|
10
|
Design Release
|
4 days
|
Thu 6/18/20
|
Tue 6/23/20
|
|
11
|
Engineering Design Release
|
4 days
|
Thu 6/18/20
|
Tue 6/23/20
|
|
12
|
Prototype Packs Procurement
|
63
days
|
Wed 6/24/20
|
Tue 9/22/20
|
|
13
|
Pack Parts Procurement
|
58 days
|
Wed 6/24/20
|
Tue 9/15/20
|
|
14
|
Module Parts Procurement
|
63 days
|
Wed 6/24/20
|
Tue 9/22/20
|
|
15
|
Prototype Pack Builds
|
25
days
|
Wed 9/23/20
|
Tue 10/27/20
|
|
16
|
Build Week 1 (Packs 1, 2)
|
4 days
|
Wed 9/23/20
|
Mon 9/28/20
|
|
17
|
Build Week 2 (Packs 3, 4, 5)
|
5 days
|
Wed 10/7/20
|
Tue 10/13/20
|
|
18
|
Build Week 3 (Packs 6, 7, 8, 9)
|
5 days
|
Wed 10/14/20
|
Tue 10/20/20
|
|
19
|
Build Week 4 (Packs 10,
11)
|
5 days
|
Wed 10/21/20
|
Tue 10/27/20
|
|
20
|
Test Campaign
|
80 days
|
Wed 10/14/20
|
Mon 2/8/21
|
|
21
|
Performance & Reliability (EVT)
|
80 days
|
Wed 10/14/20
|
Mon 2/8/21
|
|
22
|
Functional & Safety (UN38.3)
|
28
days
|
Wed 10/14/20
|
Fri 11/20/20
|
|
23
|
A-Sample Production
|
81 days
|
Fri 8/28/20
|
Wed 12/23/20
|
|
24
|
Production Purchase Orders
|
1
day
|
Fri 8/28/20
|
Fri 8/28/20
|
|
25
|
Issue Production PO
|
1 day
|
Fri 8/28/20
|
Fri 8/28/20
|
|
26
|
Production Packs Procurement
|
60
days
|
Mon 8/31/20
|
Mon 11/23/20
|
|
27
|
Pack Parts Procurement
|
60 days
|
Mon 8/31/20
|
Mon 11/23/20
|
|
28
|
Module Parts Procurement
|
60 days
|
Mon 8/31/20
|
Mon 11/23/20
|
|
29
|
Production Pack Builds
|
20
days
|
Tue 11/24/20
|
Wed 12/23/20
|
|
30
|
Week 1 (10 packs)
|
5 days
|
Tue 11/24/20
|
Wed 12/2/20
|
|
31
|
Week 2 (10 packs)
|
5 days
|
Thu 12/3/20
|
Wed 12/9/20
|
|
32
|
Week 3 (10 packs)
|
5 days
|
Thu 12/10/20
|
Wed 12/16/20
|
|
33
|
Week 4 ( 5 packs)
|
5 days
|
Thu 12/17/20
|
Wed 12/23/20
|
Exhibit 10-9
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 1 of 11
|
|
Title: Service Level Agreement
|
Service Level Agreement
(SLA)
for Phoenix Motorcars
by Romeo Systems, Inc.
20004.199.00
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 2 of 11
|
|
Title: Service Level Agreement
|
Revision Control
|
REVISION
|
DATE
|
SUMMARY
|
PREPARED
|
REVIEWED
|
APPROVED
|
|
0
|
|
Initial Issue
|
|
|
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 3 of 11
|
|
Title: Service Level Agreement
|
Table of Contents
|
|
2.2.
|
Service Levels and Response Times
|
7
|
|
|
2.3.
|
Purchaser Requirements
|
8
|
|
|
2.4.
|
Romeo Requirements
|
8
|
|
|
2.5.
|
Additional Fee Based Services Provided
|
8
|
|
|
2.6.
|
Exceptions and Limitations
|
9
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 4 of 11
|
|
Title: Service Level Agreement
|
This is a Service Level Agreement ( “SLA”) between
Romeo Systems, Inc. (“Romeo”) and Phoenix Cars LLC dba Phoenix Motorcars (“Purchaser” or “PMC”)
for the services required to support and sustain Orion v1 Battery Packs.
This Agreement shall go into effect upon the execution of a Product
Supply Master Agreement (“Supply Agreement”) and remain valid for the Warranty Period defined within Exhibit D
of the executed Product Supply Master Agreement. This SLA is incorporated into the Supply Agreement by reference and is subject to its
terms and conditions. Capitalized terms not otherwise defined herein will have the same meaning as in the Supply Agreement. In the event
of a conflict between this SLA and the Supply Agreement, the Supply Agreement will govern.
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 5 of 11
|
|
Title: Service Level Agreement
|
The following services (“Services”) are covered
by this SLA:
Telephone/email support
|
|
·
|
Technical issues will be reported through the Romeo Customer Portal (https://customers.romeopower.com)
and troubleshooted via telephone and/or email support.
|
|
|
·
|
Acknowledgement and response times are set forth in the table in Section 2.2
(Service Levels and Response Times). A Path to Resolution will be provided by Romeo within the timeframes set forth in Section 2.2.
|
Rapid unit repair/replacement – Under Warranty
|
|
·
|
Reconditioned, refurbished, or new Product Unit
(“Replacement Unit”) to be provided in exchange for a faulty Product Unit or faulty Safety Tested Battery Unit (“Product
Unit” and “Safety Tested Battery Unit” are defined in the Supply Agreement)
|
|
|
·
|
Replacement Unit will have equal or greater energy
capacity and a less than or equal number of cycles as the Product Unit or Safety Tested Battery Unit being replaced
|
|
|
·
|
Committed Turn-around Time (“TAT”):
|
|
|
o
|
Upon determination of a path forward within the time frames set forth in Section 2.2, if a return of a faulty unit occurs, Romeo
shall provide a path to resolution as to whether it will repair or replace a faulty Product Unit or faulty Safety Tested Battery Unit
within 10 business days after receipt of product.
|
|
|
o
|
Repair TAT subject to repair complexity.
|
Safety stock
|
|
·
|
Safety stock carried in Product Unit inventory to ensure minimal downtime
|
|
|
·
|
Safety stock level: 4 completed Product Units and component-level stock to
build 2 additional Product Units. As volume of orders increase, the Safety stock level shall also increase and will be reviewed by the
Parties every six (6) months.
|
|
|
·
|
Committed Turn-around Time (TAT):
|
|
|
o
|
5 business days for Romeo to ship finished Product Unit
|
|
|
o
|
Support outside of safety stock quantity to be determined by Romeo Power based on component lead times, which in no event will exceed
12 weeks.
|
Field engineer support
|
|
·
|
Field support team for PMC dealership visits.
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 6 of 11
|
|
Title: Service Level Agreement
|
|
|
·
|
Limited to 2 days of on-site support for initial delivery (i.e., 1st shipment
of Safety Tested Battery Unit ) to PMC.
|
|
|
·
|
Future technical issue visits offered only for major issues that cannot be
resolved via phone/email/telecon and safety stock replacements.
|
|
|
·
|
Paid upgrade option is available for additional support for PMC’s end
customers – see Section 2.5 (Additional Fee Based Services Provided) below.
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 7 of 11
|
|
Title: Service Level Agreement
|
Firmware upgrades/updates
|
|
·
|
Firmware upgrades and updates may be made periodically on a when-and-if-available
basis. A release will consist of the following:
|
|
|
o
|
Released software – This will be delivered via electronic delivery, to be flashed by Purchaser via CAN. A list of required equipment
and instructions to perform upgrades and updates will be Provided by Romeo to PMC, or PMC’s third-party service
centers at the time of a new Firmware release.
|
|
|
o
|
Release notes -- This will detail any changes made since the previous release of the software.
|
|
|
2.2.
|
Service Levels and Response Times
|
In support of services outlined in this Agreement, Romeo will respond
to requests submitted by the Purchaser in accordance with the table below:
|
Severity Level
|
Description
|
Path to
Resolution
Timeframe
|
|
Level 1
High Priority
|
Issue that prevents operation of the Purchaser Authorized
Product resulting in severe impact to the Purchaser’s business
Severity Level 1 issues could include but are not limited
to the following characteristics:
· Multiple
Purchaser Authorized Products are inoperable due to Product Unit or Safety Tested Battery Unit issue
· Significant
safety issue caused by Product Unit or Safety Tested Battery Unit
|
Within 1 business day
|
|
Level 2
Medium Priority
|
Issue that prevents the intended use of the Purchaser Authorized
Product, but a workaround is available
Severity Level 2 issues could include but are not limited
to the following characteristics:
· Isolated
issue with Product Unit or Safety Tested Battery Unit and no major safety risk
|
Within 5 business days
|
|
Level 3
|
Issue that does not significantly prevent the Purchaser Authorized Product from working as intended
|
Within 10 business days
|
|
Low Priority
|
Severity Level 3 issues could include but are not limited
to the following characteristics:
· Reduced
functionality but no major reduction to operations
|
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 8 of 11
|
|
Title: Service Level Agreement
|
Normal operating business hours are Monday to Friday, 9 AM to 5 PM,
Pacific Coast Time (PT).
|
|
·
|
Product issue tickets shall be submitted to the Romeo Customer Portal site,
which includes a pre- defined form to report new issues, issue tracking and return merchandise authorization form (if applicable). The
Romeo Customer Portal site can be used by an unlimited number of users authorized by PMC, including its third-party service partners.
Each user shall be provided with unique login information by Romeo.
|
|
|
·
|
Priority level should initially be selected by the Purchaser during submittal
of the ticket
|
|
|
·
|
Romeo personnel to review and reach out to Purchaser within 24 business hours
of receipt to:
|
|
|
o
|
Align on appropriate Priority Level
|
|
|
o
|
Ensure full understanding of reported topic
|
|
|
o
|
Define next steps (e.g. additional data required, mitigation solution, final solution)
|
|
|
·
|
Path forward would include target final resolution date and interim solution
(if applicable)
|
|
|
2.3.
|
Purchaser Requirements
|
Purchaser responsibilities and/or requirements in support of this SLA
include:
|
|
·
|
Provide all necessary information related to the Product issue
|
|
|
·
|
Report issue or incident within 48 hours of occurrence via Romeo Customer
Portal
|
Romeo shall act as the primary support
provider of the Services herein identified except when third-party vendors are employed, in which case Romeo shall require such third
parties to assume appropriate service support responsibilities accordingly. Romeo shall also meet the targets as outlined in Section 2.2
(Service Levels and Response Times).
|
|
2.5.
|
Additional Fee Based Services Provided
|
Training: Romeo
shall provide a diagnostic flowchart and a troubleshooting guide to PMC. Additional product training beyond the standard operating documentation
for the Purchaser is available on request. Training fees will be mutually agreed to in advance.
Field Engineering
Support: A dedicated Field Engineering Support Team is available for end customer and/or dealer location visits beyond initial
Product onboarding support. Support level and duration to be quoted on request.
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 9 of 11
|
|
Title: Service Level Agreement
|
Out of Warranty repairs: Products
outside of Warranty may be submitted to Romeo for repair evaluation. A cost estimate or determination that product is Beyond Economical
Repair (BER) will be provided to Purchaser for evaluation.
Recycling support: Upon
notification from Purchaser of each Product Unit end-of-life, Romeo shall provide Purchaser with instructions for disposition of such
end-of-life inventory.
|
|
2.6.
|
Exceptions and Limitations
|
Romeo’s support services are limited only to Product Units and
Safety Tested Battery Units still within Warranty Period. Romeo will provide, at time of delivery, recommended Best Practices for maximizing
battery life. PMC shall share these Best Practices with its customers and train them on Romeo’s recommended Best Practices.
The SLA does not apply to any repair, replacement, or correction caused
by or related to, either directly or indirectly, accident, lack of or improper installation, transportation, storage, operation, maintenance;
attempted repair of any Product Unit by Purchaser; Safety Tested Battery Units or Prototype Units; or any other misuse or negligence,
including any of the following:
|
|
·
|
Electrical overloading or external electrical shorts, power failure surges,
inrush current, lightning, flood, fire, accidental breakage, etc.
|
|
|
·
|
An Event as described in Section 15 (Force Majeure) of the Supply Agreement
|
|
|
·
|
Theft of Product or any components thereof
|
|
|
·
|
Repairs, modifications, disassembly, replacements or alternations performed
by any party other than Romeo or a third party certified by Romeo, provided that Romeo has identified a Romeo-certified party or made
itself available to perform such types of services. Romeo-certified parties shall be identified in the Romeo Customer Portal. Romeo shall
provide PMC with its authorized certification program information when available and PMC may become a Romeo-certified party to perform
repairs, modifications, disassembly, replacements or alternations.
|
|
|
·
|
The defect has resulted from the Purchaser's misuse of the Product provided
by Romeo
|
|
|
·
|
The Product’s serial number is damaged
|
|
|
·
|
Exposing a Product to ambient temperatures above 60°C or below -30°C
for more than twenty-four (24) hours at a time
|
|
|
·
|
Exposing any component of the Product to direct flame
|
|
|
·
|
Immersing any components of the Product in water or other fluids
|
|
|
·
|
Damage that occurs after the expiration or termination of the Warranty Period
or that is reported more than ten (10) days after the expiration or termination of the Warranty Period
|
|
|
·
|
Failure of Purchaser’s equipment, including but not limited to the
Purchaser Authorized Vehicle, unrelated to the Product
|
|
|
•
|
In the event of non-payment or delinquent payment by Purchaser
|
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 10 of 11
|
|
Title: Service Level Agreement
|
This SLA should be mutually reviewed every six (6) months. However,
in the absence of a review during any period specified, the current SLA will remain in effect.
The Romeo Program Manager is responsible for facilitating regular reviews
of this document.
Program Manager:
PM responsible for Purchaser
Review Period: Minimum once per Calendar Year
Previous Review Date: 09/04/2020
Next Review Date:
03/04/2021
|
|
|
4380 Ayers Avenue, Vernon, CA, 90058
|
|
DRN: 20004.199.00
|
Revision: 0
|
Date: 9/4/2020
|
Page 11 of 11
|
|
Title: Service Level Agreement
|
|
Purchaser: Phoenix Cars LLC dba Phoenix Motorcars
|
|
|
|
|
|
Signature:
|
/s/ Gillray Cadet
|
|
|
|
|
|
Name:
|
Gillray Cadet
|
|
|
|
|
|
Company:
|
Phoenix Cars LLC
|
|
|
|
|
|
Date:
|
9/8/2020
|
|
|
|
|
|
Romeo Systems, Inc.
|
|
|
|
|
|
Signature:
|
/s/ Lauren Web
|
|
|
|
|
|
Name:
|
Lauren Webb
|
|
|
|
|
|
Company:
|
Romeo Power
|
|
|
|
|
|
Date:
|
9/8/2020
|
|
|
|
________ ________
________ ________
INITIALS INITIALS
© 2019AIRCRE. All Rights Reserved. Last Edited: 7/15/2021 3:58 PM
SBS-9.04, Revised 10-22-2020 Page 1 of 6
1. Basic Provisions ("Basic Provisions").
1.1 Par es: This Sublease ("Sublease"), dated for reference purposes only 6-24-2021 , is made by and between NMC Group, Inc., a
California Corporation ("Sublessor") and Phoenix Cars LLC ("Sublessee"), (collec vely the "Par es", or individually a "Party").
1.2 Premises: That certain real property, including all improvements therein, and commonly known as (street address, city, state, zip) 1500
Lakeview Loop, Anaheim, CA 92807 located in the County of Orange , State of California and generally described as
(describe briefly the nature of the property) 39,043 SF ("Premises").
1.3 Term: 5 years and 7.5 months commencing 8/15/2021 ("Commencement Date") and ending 3/31/2027
("Expira on Date").
1.4 Early Possession: If the Premises are available Sublessee may have non-exclusive possession of the Premises commencing N/A ("Early
Possession Date").
1.5 Base Rent: $31,234.40 per month ("Base Rent"), payable on the 1st day of each month commencing 10/1/2021 .
If this box is checked, there are provisions in this Sublease for the Base Rent to be adjusted.
1.6 Base Rent and Other Monies Paid Upon Execu on:
1.7 Agreed Use: The Premises shall be used and occupied only for general administrative office and light metal
fabrication use and for no other purposes.
1.8 Real Estate Brokers.
agency rela onships in this Sublease with the following real estate brokers ("Broker(s)") and/or their agents ("Agent(s)"):
Sublessor's Brokerage Firm CBRE License No. is the broker of (check one): the Sublessor; or both the Sublessee and Sublessor
(dual agent).
Sublessor's Agent Alex Hayden License No. 01202588 is (check one): the Sublessor's Agent (salesperson or broker associate); or
both the Sublessee's Agent and the Sublessor's Agent (dual agent).
Sublessee's Brokerage Firm CBRE License No. Is the broker of (check one): the Sublessee; or both the Sublessee and Sublessor
(dual agent).
Sublessee's Agent Brandon Luckham License No. 02058915 is (check one): the Sublessee's Agent (salesperson or broker associate);
or both the Sublessee's Agent and the Sublessor's Agent (dual agent).
separate wri en agreement (or if there is no such agreement, the sum of or % of the total Base Rent) for the brokerage services rendered
by the Brokers.
1.9 Guarantor. The obliga ons of the Sublessee under this Sublease shall be guaranteed by Xiaofeng Peng,Chief Executive
Officer of SPI ENERGY COMPANY LTD.("Guarantor").
1.10 A achments. A ached hereto are the following, all of which cons tute a part of this Sublease:
an Addendum consis ng of Paragraphs 14 through 15 ;
a plot plan depic ng the Premises;
a Work Le er;
a copy of the master lease and any and all amendments to such lease (collec vely the "Master Lease");
other (specify): Sublessor shall deliver the building vacant and in the conditions set
forth in the Paragraph 2.2 of this Sublease Agreement .
2. Premises.
SUBLEASE FOR A SINGLE SUBLESSEE
To be used if the en re space (Premises) willbe subleased by a single sublessee whether or
not the space (Premises) is a single tenant buildingor is located in a mul -tenant building.
If there will be one or more sublessees sharing the space with each other and/or the lessee,
whether or not the space (Premises)is a single tenant building or is located in a mul -tenant
building, use the Sublease for Mul ple Tenants.
(a) Base Rent: $31,234.40 for the period 8/15/2021-9/15/2021 .
(b) Security Deposit: $62,468.80 ("Security Deposit").
(c) Associa on Fees: for the period .
(d) Other: Net Expenses @ $0.22 PSF or $8,589.46 for 8/15/2021-9/15/2021 .
(e) Total Due Upon Execu on of this Lease: $102,292.66 .
(a) Representa on: Each Party acknowledges receiving a Disclosure Regarding Real Estate Agency Rela onship, confirms and consents to the following
(b) Payment to Brokers: Upon execu on and delivery of this Sublease by both Par es, Sublessor shall pay to the Brokers the brokerage fee agreed to in a
|
|
|
________ ________
________ ________
INITIALS INITIALS
© 2019AIRCRE. All Rights Reserved. Last Edited: 7/15/2021 3:58 PM
SBS-9.04, Revised 10-22-2020 Page 2 of 6
2.1 Le ng. Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and condi ons set forth in this Sublease. While the approximate square footage of the Premises may have been used in the marke ng of the
Premises for purposes of comparison, the Base Rent stated herein is NOT ed to square footage and is not subject to adjustment should the actual size be determined
to be different. Note: Sublessee is advised to verify the actual size prior to execu ng this Sublease.
2.2 Condi on. Sublessor shall deliver the Premises to Sublessee broom clean and free of debris on the Commencement Date or the Early Possession Date,
whichever first occurs ("Start Date"), and warrants that the exis ng electrical, plumbing, fire sprinkler, ligh ng, hea ng, ven la ng and air condi oning systems
("HVAC"), and any items which the Sublessor is obligated to construct pursuant to the Work Le er a ached hereto, if any, other than those constructed by Sublessee,
shall be in good opera ng condi on on said date. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should
malfunc on or fail within the appropriate warranty period, Sublessor shall, as Sublessor's sole obliga on with respect to such ma er, except as otherwise provided in
this Sublease, promptly a er receipt of wri en no ce from Sublessee se ng forth with specificity the nature and extent of such non-compliance, malfunc on or
failure, rec fy same at Sublessor's expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems
and other elements. If Sublessee does not give Sublessor the required no ce within the appropriate warranty period, correc on of any such non-compliance,
malfunc on or failure shall be the obliga on of Sublessee at Sublessee's sole cost and expense.
2.3 Compliance. Sublessor warrants that any improvements, altera ons or u lity installa ons made or installed by or on behalf of Sublessor to or on the
Premises comply with all applicable covenants or restric ons of record and applicable building codes, regula ons and ordinances ("Applicable Requirements") in
effect on the date that they were made or installed. Sublessor makes no warranty as to the use to which Sublessee will put the Premises or to modifica ons which
may be required by the Americans with Disabili es Act or any similar laws as a result of Sublessee's use. NOTE: Sublessee is responsible for determining whether or
not the zoning and other Applicable Requirements are appropriate for Sublessee's intended use, and acknowledges that past uses of the Premises may no longer
be allowed. If the Premises do not comply with said warranty, Sublessor shall, except as otherwise provided, promptly a er receipt of wri en no ce from Sublessee
se ng forth with specificity the nature and extent of such non-compliance, rec fy the same.
2.4 Acknowledgements. Sublessee acknowledges that: (a) it has been given an opportunity to inspect and measure the Premises, (b) it has been advised by
Sublessor and/or Brokers to sa sfy itself with respect to the size and condi on of the Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabili es Act), and their suitability for Sublessee's
intended use, (c) Sublessee has made such inves ga on as it deems necessary with reference to such ma ers and assumes all responsibility therefor as the same
relate to its occupancy of the Premises, (d) it is not relying on any representa on as to the size of the Premises made by Brokers or Sublessor, (e) the square footage of
the Premises was not material to Sublessee's decision to sublease the Premises and pay the Rent stated herein, and (f) neither Sublessor, Sublessor's agents, nor
Brokers have made any oral or wri en representa ons or warran es with respect to said ma ers other than as set forth in this Sublease. In addi on, Sublessor
acknowledges that: (i) Brokers have made no representa ons, promises or warran es concerning Sublessee's ability to honor the Sublease or suitability to occupy the
Premises, and (ii) it is Sublessor's sole responsibility to inves gate the financial capability and/or suitability of all proposed tenants.
2.5 Americans with Disabili es Act. In the event that as a result of Sublessee's use, or intended use, of the Premises the Americans with Disabili es Act or any
similar law requires modifica ons or the construc on or installa on of improvements in or to the Premises, Building, Project and/or Common Areas, the Par es agree
that such modifica ons, construc on or improvements shall be made at: Sublessor's expense Sublessee's expense.
3. Possession.
3.1 Early Possession. Any provision herein gran ng Sublessee Early Possession of the Premises is subject to and condi oned upon the Premises being available
for such possession prior to the Commencement Date. Any grant of Early Possession only conveys a non-exclusive right to occupy the Premises. If Sublessee totally or
par ally occupies the Premises prior to the Commencement Date, the obliga on to pay Base Rent shall be abated for the period of such Early Possession. All other
terms of this Sublease (including but not limited to the obliga ons to pay Sublessee's Share of Common Area Opera ng Expenses, Real Property Taxes and insurance
premiums and to maintain the Premises) shall, however, be in effect during such period. Any such Early Possession shall not affect the Expira on Date.
3.2 Delay in Commencement. Sublessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises by the Commencement
Date. If, despite said efforts, Sublessor is unable to deliver possession as agreed, the rights and obliga ons of Sublessor and Sublessee shall be as set forth in
Paragraph 3.3 of the Master Lease (as modified by Paragraph 6.3 of this Sublease).
3.3 Sublessee Compliance. Sublessor shall not be required to tender possession of the Premises to Sublessee un l Sublessee complies with its obliga on to
provide evidence of insurance. Pending delivery of such evidence, Sublessee shall be required to perform all of its obliga ons under this Sublease from and a er the
Start Date, including the payment of Rent, notwithstanding Sublessor's elec on to withhold possession pending receipt of such evidence of insurance. Further, if
Sublessee is required to perform any other condi ons prior to or concurrent with the Start Date, the Start Date shall occur but Sublessor may elect to withhold
possession un l such condi ons are sa sfied.
4. Rent and Other Charges.
4.1 Rent Defined. All monetary obliga ons of Sublessee to Sublessor under the terms of this Sublease (except for the Security Deposit) are deemed to be rent
("Rent"). Rent shall be payable in lawful money of the United States to Sublessor at the address stated herein or to such other persons or at such other places as
Sublessor may designate in wri ng.
4.2 U li es. Sublessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other u li es and services supplied to the Premises,
together with any taxes thereon.
5. Security Deposit. The rights and obliga ons of Sublessor and Sublessee as to said Security Deposit shall be as set forth in Paragraph 5 of the Master Lease (as
modified by Paragraph 6.3 of this Sublease).
6. Master Lease.
6.1 Sublessor is the lessee of the Premises by virtue of the "Master Lease", wherein Alemi Properties LLC is the lessor, hereina er the
"Master Lessor".
6.2 This Sublease is and shall be at all mes subject and subordinate to the Master Lease.
6.3 The terms, condi ons and respec ve obliga ons of Sublessor and Sublessee to each other under this Sublease shall be the terms and condi ons of the
Master Lease except for those provisions of the Master Lease which are directly contradicted by this Sublease in which event the terms of this Sublease document
shall control over the Master Lease. Therefore, for the purposes of this Sublease, wherever in the Master Lease the word "Lessor" is used it shall be deemed to mean
the Sublessor herein and wherever in the Master Lease the word "Lessee" is used it shall be deemed to mean the Sublessee herein.
6.4 During the term of this Sublease and for all periods subsequent for obliga ons which have arisen prior to the termina on of this Sublease, Sublessee does
hereby expressly assume and agree to perform and comply with, for the benefit of Sublessor and Master Lessor, each and every obliga on of Sublessor under the
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Master Lease except for the following paragraphs which are excluded therefrom: N/A .
6.5 The obliga ons that Sublessee has assumed under paragraph 6.4 hereof are hereina er referred to as the "Sublessee's Assumed Obliga ons". The
obliga ons that sublessee has not assumed under paragraph 6.4 hereof are hereina er referred to as the "Sublessor's Remaining Obliga ons".
6.6 Sublessee shall hold Sublessor free and harmless from all liability, judgments, costs, damages, claims or demands, including reasonable a orneys fees,
arising out of Sublessee's failure to comply with or perform Sublessee's Assumed Obliga ons.
6.7 Sublessor agrees to maintain the Master Lease during the en re term of this Sublease, subject, however, to any earlier termina on of the Master Lease
without the fault of the Sublessor, and to comply with or perform Sublessor's Remaining Obliga ons and to hold Sublessee free and harmless from all liability,
judgments, costs, damages, claims or demands arising out of Sublessor's failure to comply with or perform Sublessor's Remaining Obliga ons.
6.8 Sublessor represents to Sublessee that the Master Lease is in full force and effect and that no default exists on the part of any Party to the Master Lease.
7. Assignment of Sublease and Default.
7.1 Sublessor hereby assigns and transfers to Master Lessor the Sublessor's interest in this Sublease, subject however to the provisions of Paragraph 8.2 hereof.
7.2 Master Lessor, by execu ng this document, agrees that un l a Default shall occur in the performance of Sublessor's Obliga ons under the Master Lease,
that Sublessor may receive, collect and enjoy the Rent accruing under this Sublease. However, if Sublessor shall Default in the performance of its obliga ons to
Master Lessor then Master Lessor may, at its op on, receive and collect, directly from Sublessee, all Rent owing and to be owed under this Sublease. In the event,
however, that the amount collected by Master Lessor exceeds Sublessor's obliga ons any such excess shall be refunded to Sublessor. Master Lessor shall not, by
reason of this assignment of the Sublease nor by reason of the collec on of the Rent from the Sublessee, be deemed liable to Sublessee for any failure of the
Sublessor to perform and comply with Sublessor's Remaining Obliga ons.
7.3 Sublessor hereby irrevocably authorizes and directs Sublessee upon receipt of any wri en no ce from the Master Lessor sta ng that a Default exists in the
performance of Sublessor's obliga ons under the Master Lease, to pay to Master Lessor the Rent due and to become due under the Sublease. Sublessor agrees that
Sublessee shall have the right to rely upon any such statement and request from Master Lessor, and that Sublessee shall pay such Rent to Master Lessor without any
obliga on or right to inquire as to whether such Default exists and notwithstanding any no ce from or claim from Sublessor to the contrary and Sublessor shall have
no right or claim against Sublessee for any such Rent so paid by Sublessee.
7.4 No changes or modifica ons shall be made to this Sublease without the consent of Master Lessor.
8. Consent of Master Lessor.
8.1 In the event that the Master Lease requires that Sublessor obtain the consent of Master Lessor to any suble ng by Sublessor then, this Sublease shall not
be effec ve unless, within 10 days of the date hereof, Master Lessor signs this Sublease thereby giving its consent to this Suble ng.
8.2 In the event that the obliga ons of the Sublessor under the Master Lease have been guaranteed by third par es, then neither this Sublease, nor the Master
Lessor's consent, shall be effec ve unless, within 10 days of the date hereof, said guarantors sign this Sublease thereby giving their consent to this Sublease.
8.3 In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obliga ons or alter the primary liability of Sublessor to pay the Rent and perform and comply with all of
the obliga ons of Sublessor to be performed under the Master Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or any one else liable under the Master Lease shall not be deemed a waiver by Master
Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not cons tute a consent to any subsequent suble ng or assignment.
(d) In the event of any Default of Sublessor under the Master Lease, Master Lessor may proceed directly against Sublessor, any guarantors or any one
else liable under the Master Lease or this Sublease without first exhaus ng Master Lessor's remedies against any other person or en ty liable thereon to Master
Lessor.
(e) Master Lessor may consent to subsequent suble ngs and assignments of the Master Lease or this Sublease or any amendments or modifica ons
thereto without no fying Sublessor or any one else liable under the Master Lease and without obtaining their consent and such ac on shall not relieve such persons
from liability.
(f) In the event that Sublessor shall Default in its obliga ons under the Master Lease, then Master Lessor, at its op on and without being obligated to do
so, may require Sublessee to a orn to Master Lessor in which event Master Lessor shall undertake the obliga ons of Sublessor under this Sublease from the me of
the exercise of said op on to termina on of this Sublease but Master Lessor shall not be liable for any prepaid Rent nor any Security Deposit paid by Sublessee, nor
shall Master Lessor be liable for any other Defaults of the Sublessor under the Sublease.
(g) Unless directly contradicted by other provisions of this Sublease, the consent of Master Lessor to this Sublease shall not cons tute an agreement to
allow Sublessee to exercise any op ons which may have been granted to Sublessor in the Master Lease (see Paragraph 39.2 of the Master Lease).
8.4 The signatures of the Master Lessor and any Guarantors of Sublessor at the end of this document shall cons tute their consent to the terms of this
Sublease.
8.5 Master Lessor acknowledges that, to the best of Master Lessor's knowledge, no Default presently exists under the Master Lease of obliga ons to be
performed by Sublessor and that the Master Lease is in full force and effect.
8.6 In the event that Sublessor Defaults under its obliga ons to be performed under the Master Lease by Sublessor, Master Lessor agrees to deliver to
Sublessee a copy of any such no ce of default. Sublessee shall have the right to cure any Default of Sublessor described in any no ce of default if Sublessee does so
within the same number of days set forth in the no ce of default given to Sublessor. If such Default is cured by Sublessee then Sublessee shall have the right of
reimbursement and offset from and against Sublessor.
9. Addi onal Brokers Commissions.
9.1 Sublessor agrees that if Sublessee exercises any op on or right of first refusal as granted by Sublessor herein, or any op on or right substan ally similar
thereto, either to extend the term of this Sublease, to renew this Sublease, to purchase the Premises, or to lease or purchase adjacent property which Sublessor may
own or in which Sublessor has an interest, then Sublessor shall pay to Broker a fee in accordance with the schedule of Broker in effect at the me of the execu on of
this Sublease. Notwithstanding the foregoing, Sublessor's obliga on under this Paragraph is limited to a transac on in which Sublessor is ac ng as a Sublessor, lessor
or seller.
9.2 If a separate brokerage fee agreement is a ached then Master Lessor agrees that if Sublessee shall exercise any op on or right of first refusal granted to
Sublessee by Master Lessor in connec on with this Sublease, or any op on or right substan ally similar thereto, either to extend or renew the Master Lease, to
purchase the Premises or any part thereof, or to lease or purchase adjacent property which Master Lessor may own or in which Master Lessor has an interest, or if
Broker is the procuring cause of any other lease or sale entered into between Sublessee and Master Lessor pertaining to the Premises, any part thereof, or any
adjacent property which Master Lessor owns or in which it has an interest, then as to any of said transac ons, Master Lessor shall pay to Broker a fee, in cash, in
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accordance with the schedule a ached to such brokerage fee agreement.
9.3 Any fee due from Sublessor or Master Lessor hereunder shall be due and payable upon the exercise of any op on to extend or renew, upon the execu on
of any new lease, or, in the event of a purchase, at the close of escrow.
9.4 Any transferee of Sublessor's interest in this Sublease, or of Master Lessor's interest in the Master Lease, by accep ng an assignment thereof, shall be
deemed to have assumed the respec ve obliga ons of Sublessor or Master Lessor under this Paragraph 9. Broker shall be deemed to be a third-party beneficiary of
this paragraph 9.
10. Representa ons and Indemni es of Broker Rela onships. The Par es each represent and warrant to the other that it has had no dealings with any person,
firm, broker, agent or finder (other than the Brokers and Agents, if any) in connec on with this Sublease, and that no one other than said named Brokers and Agents is
en tled to any commission or finder's fee in connec on herewith. Sublessee and Sublessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensa on or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any
dealings or ac ons of the indemnifying Party, including any costs, expenses, a orneys' fees reasonably incurred with respect thereto.
11. A orney's fees. If any Party or Broker brings an ac on or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights
hereunder, the Prevailing Party (as herea er defined) in any such proceeding, ac on, or appeal thereon, shall be en tled to reasonable a orneys' fees. Such fees may
be awarded in the same suit or recovered in a separate suit, whether or not such ac on or proceeding is pursued to decision or judgment. The term, "Prevailing
Party" shall include, without limita on, a Party or Broker who substan ally obtains or defeats the relief sought, as the case may be, whether by compromise,
se lement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The a orneys' fees award shall not be computed in accordance with
any court fee schedule, but shall be such as to fully reimburse all a orneys' fees reasonably incurred. In addi on, Sublessor shall be en tled to a orneys' fees, costs
and expenses incurred in the prepara on and service of no ces of Default and consulta ons in connec on therewith, whether or not a legal ac on is subsequently
commenced in connec on with such Default or resul ng Breach ($200 is a reasonable minimum per occurrence for such services and consulta on).
12. No Prior or Other Agreements; Broker Disclaimer. This Sublease contains all agreements between the Par es with respect to any ma er men oned herein, and
no other prior or contemporaneous agreement or understanding shall be effec ve. Sublessor and Sublessee each represents and warrants to the Brokers that it has
made, and is relying solely upon, its own inves ga on as to the nature, quality, character and financial responsibility of the other Party to this Sublease and as to the
use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party.
The liability (including court costs and a orneys' fees), of any Broker with respect to nego a on, execu on, delivery or performance by either Sublessor or Sublessee
under this Sublease or any amendment or modifica on hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Sublease;
provided, however, that the foregoing limita on on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker.
Signatures to this Sublease accomplished by means of electronic signature or similar technology shall be legal and binding.
13. Accessibility; Americans with Disabili es Act.
(a) The Premises:
have not undergone an inspec on by a Cer fied Access Specialist (CASp). Note: A Cer fied Access Specialist (CASp) can inspect the subject premises and
determine whether the subject premises comply with all of the applicable construc on-related accessibility standards under state law. Although state law does not
require a CASp inspec on of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspec on of
the subject premises for the occupancy or poten al occupancy of the lessee or tenant, if requested by the lessee or tenant. The par es shall mutually agree on the
arrangements for the me and manner of the CASp inspec on, the payment of the fee for the CASp inspec on, and the cost of making any repairs necessary to
correct viola ons of construc on-related accessibility standards within the premises.
have undergone an inspec on by a Cer fied Access Specialist (CASp) and it was determined that the Premises met all applicable construc on-related accessibility
standards pursuant to California Civil Code §55.51 et seq. Lessee acknowledges that it received a copy of the inspec on report at least 48 hours prior to execu ng
this Lease and agrees to keep such report confiden al.
have undergone an inspec on by a Cer fied Access Specialist (CASp) and it was determined that the Premises did not meet all applicable construc on-related
accessibility standards pursuant to California Civil Code §55.51 et seq. Lessee acknowledges that it received a copy of the inspec on report at least 48 hours prior to
execu ng this Lease and agrees to keep such report confiden al except as necessary to complete repairs and correc ons of viola ons of construc on related
accessibility standards.
In the event that the Premises have been issued an inspec on report by a CASp the Lessor shall provide a copy of the disability access inspec on cer ficate to Lessee
within 7 days of the execu on of this Lease.
(b) Since compliance with the Americans with Disabili es Act (ADA) and other state and local accessibility statutes are dependent upon Lessee's specific
use of the Premises, Lessor makes no warranty or representa on as to whether or not the Premises comply with ADA or any similar legisla on. In the event that
Lessee's use of the Premises requires modifica ons or addi ons to the Premises in order to be in compliance with ADA or other accessibility statutes, Lessee agrees to
make any such necessary modifica ons and/or addi ons at Lessee's expense.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY AIR CRE OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR
TAX CONSEQUENCES OF THIS SUBLEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS SUBLEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE
LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF
AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO
COMPLY WITH LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED
Executed At:
On:
By Sublessor:
Executed At:
On:
By Sublessee:
7/16/2021 7/16/2021
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NMC Group, Inc., a California Corporation
By:
Name Printed: Kevin McHenry
Title: NMC/Kirkhill President
Phone:
Fax:
Email: kmchenry@kirkhill.com
By: TRANSDIGM AS GUARANTOR
By:_______________________________
Name Printed: Michael Lisman
Title: Chief Financial Officer
Phone:
Fax:
Email: mlisman@transdigm.com
Address:
Federal ID No.:
Phoenix Cars LLC
By:
Name Printed: Chris Wang
Title: Chief Financial Officer
Phone:
Fax:
Email: chrisw@phoenixmotorcars.com
By:
SPI ENERGY COMPANY, LTD.,
AS GUARANTOR
By:______________________________
Name Printed: Xiaofeng Peng
Title: Chief Executive Office
Phone:
Fax:
Email: denton.peng@spigroups.com
Address:
Federal ID No.:
BROKER
CBRE
A n: Alex Hayden
Title:
Address:
Phone:
Fax:
Email:
Federal ID No.:
Broker DRE License #:
Agent DRE License #: 01202588
BROKER
CBRE
A n: Brandon Luckham
Title:
Address:
Phone:
Fax:
Email:
Federal ID No.:
Broker DRE License #:
Agent DRE License #: 02058915
Consent to the above Sublease is hereby given.
Executed At:
Executed On:
By Master Lessor:
Alemi Properties LLC
By:
Name Printed:
Title:
Phone:
Fax:
Email:
By:
Name Printed:
Title:
Phone:
Fax:
Email:
Address:
Executed At:
Executed On:
By Guarantor:
By:
Name Printed:
Title:
Address:
By:
Name Printed:
Title:
Address:
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Federal ID No.:
AIR CRE * h ps://www.aircre.com * 213-687-8777 * contracts@aircre.com
NOTICE: No part of these works may be reproduced in any form without permission in wri ng.
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ASL-1.00, Revised 10-22-2020 Page 1 of 1
ADDENDUM TO SUBLEASE
Date: 6-24-2021
By and Between
Sublessor: NMC Group, Inc., a California Corporation
Sublessee: Phoenix Cars LLC
Property Address: 1500 Lakeview Loop, Anaheim, CA 92807
(street address, city, state, zip)
Paragraph: 14.
14. Triple Net Expenses: In addition to Base Rent, Sublessee shall be responsible for triple net
expenses which are currently approximately $0.22 Per Sq Ft or $8,589.46/month
15. Rent Schedule:
Months Rent Per Month
8/15/2021-9/15/2021 $31,234.40 NNN
9/16/2021-9/30/2021 $15,617.20 NNN
10/01/2021-7/31/2022 $31,234.40 NNN
8/01/2022-7/31/2023 $32,171.43 NNN
8/01/2023-7/31/2024 $33,136.57 NNN
8/01/2024-7/31/2025 $34,130.67 NNN
8/01/2025-7/31/2026 $35,154.59 NNN
8/01/2026-3/31/2027 $36,209.23 NNN
In the event of any conflict between the provisions of this Addendum and the printed provisions of the Sublease, this Addendum shall control.
AIR CRE * h ps://www.aircre.com * 213-687-8777 * contracts@aircre.com
NOTICE: No part of these works may be reproduced in any form without permission in wri ng.
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GR-3.22, Revised10-22-2020 Page 1 of 2
GUARANTY OF LEASE
WHEREAS, NMC Group, Inc., hereina er "SubLessor", and Phoenix Cars LLC , hereina er "SubLessee", are about to
execute a document en tled "SubLease" dated 6-24-2021 concerning the premises commonly known as (street address, city, state, zip) 1500
Lakeview Loop, Anaheim, CA 92807 wherein SubLessor will lease the premises to SubLessee, and
WHEREAS, SPI Energy Company Ltd. hereina er "Guarantors" have a financial interest in Lessee, and
WHEREAS, Lessor would not execute the Lease if Guarantors did not execute and deliver to Lessor this Guaranty of Lease.
NOW THEREFORE, in considera on of the execu on of said Lease by Lessor and as a material inducement to Lessor to execute said Lease, Guarantors hereby
jointly, severally, uncondi onally and irrevocably guarantee the prompt payment by Lessee of all rents and all other sums payable by Lessee under said Lease and the
faithful and prompt performance by Lessee of each and every one of the terms, condi ons and covenants of said Lease to be kept and performed by Lessee.
It is specifically agreed by Lessor and Guarantors that: (i) the terms of the foregoing Lease may be modified by agreement between Lessor and Lessee, or by a
course of conduct, and (ii) said Lease may be assigned by Lessor or any assignee of Lessor without the consent of or no ce to Guarantors and that this Guaranty shall
guarantee the performance of said Lease as so modified.
This Guaranty shall not be released, modified or affected by the failure or delay on the part of Lessor to enforce any of the rights or remedies of the Lessor under
said Lease.
No no ce of default by Lessee under the Lease need be given by Lessor to Guarantors, it being specifically agreed that the guarantee of the undersigned is a
con nuing guarantee under which Lessor may proceed immediately against Lessee and/or against Guarantors following any breach or default by Lessee or for the
enforcement of any rights which Lessor may have as against Lessee under the terms of the Lease or at law or in equity.
Lessor shall have the right to proceed against Guarantors following any breach or default by Lessee under the Lease without first proceeding against Lessee and
without previous no ce to or demand upon either Lessee or Guarantors.
Guarantors hereby waive (a) no ce of acceptance of this Guaranty. (b) demand of payment, presenta on and protest, (c) all right to assert or plead any statute
of limita ons rela ng to this Guaranty or the Lease, (d) any right to require the Lessor to proceed against the Lessee or any other Guarantor or any other person or
en ty liable to Lessor, (e) any right to require Lessor to apply to any default any security deposit or other security it may hold under the Lease, (f) any right to require
Lessor to proceed under any other remedy Lessor may have before proceeding against Guarantors, (g) any right of subroga on that Guarantors may have against
Lessee.
Guarantors do hereby subordinate all exis ng or future indebtedness of Lessee to Guarantors to the obliga ons owed to Lessor under the Lease and this
Guaranty.
If a Guarantor is married, such Guarantor expressly agrees that recourse may be had against his or her separate property for all of the obliga ons hereunder.
The obliga ons of Lessee under the Lease to execute and deliver estoppel statements and financial statements, as therein provided, shall be deemed to also
require the Guarantors to provide estoppel statements and financial statements to Lessor. The failure of the Guarantors to provide the same to Lessor shall cons tute
a default under the Lease.
The term "Lessor" refers to and means the SubLessor named in the SubLease and also SubLessor's successors and assigns. So long as Lessor's interest in
the Lease, the leased premises or the rents, issues and profits therefrom, are subject to any mortgage or deed of trust or assignment for security, no acquisi on by
Guarantors of the Lessor's interest shall affect the con nuing obliga on of Guarantors under this Guaranty which shall nevertheless con nue in full force and effect for
the benefit of the mortgagee, beneficiary, trustee or assignee under such mortgage, deed of trust or assignment and their successors and assigns.
The term "Lessee" refers to and means the SubLessee named in the SubLease and also SubLessee's successors and assigns.
The term "Lease" refers to and means the Sublease.
Any description of the transaction should only reflect these terms.
Any recovery by Lessor from any other guarantor or insurer shall first be credited to the por on of Lessee's indebtedness to Lessor which exceeds the maximum
liability of Guarantors under this Guaranty.
No provision of this Guaranty or right of the Lessor can be waived, nor can the Guarantors be released from their obliga ons except in wri ng signed by the
Lessor.
Any li ga on concerning this Guaranty shall be ini ated in a state court of competent jurisdic on in the county in which the leased premises are located and the
Guarantors consent to the jurisdic on of such court. This Guaranty shall be governed by the laws of the State in which the leased premises are located and for the
purposes of any rules regarding conflicts of law the par es shall be treated as if they were all residents or domiciles of such State.
In the event any ac on be brought by said Lessor against Guarantors hereunder to enforce the obliga on of Guarantors hereunder, the unsuccessful party in
such ac on shall pay to the prevailing party therein a reasonable a orney's fee. The a orney's fee award shall not be computed in accordance with any court fee
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GR-3.22, Revised10-22-2020 Page 2 of 2
schedule, but shall be such as to full reimburse all a orneys' fees reasonably incurred.
If any Guarantor is a corpora on, partnership, or limited liability company, each individual execu ng this Guaranty on said en ty's behalf represents and
warrants that he or she is duly authorized to execute this Guaranty on behalf of such en ty. Signatures to this Guaranty accomplished by means of electronic
signature or similar technology shall be legal and binding.
If this Form has been filled in, it has been prepared for submission to your a orney for his approval. No representa on or recommenda on is made by AIR CRE,
the real estate broker or its agents or employees as to the legal sufficiency, legal effect, or tax consequences of this Form or the transac on rela ng thereto.
GUARANTORS
SPI Energy Company Ltd.
Executed At:
On:
By:
Name Printed: Xiaofeng Peng
Title: Chief Executive Officer
Address:
email: denton.peng@spigroups.com
By:
Name Printed:
Title:
Address:
AIR CRE * h ps://www.aircre.com * 213-687-8777 * contracts@aircre.com
NOTICE: No part of these works may be reproduced in any form without permission in wri ng.
7/16/2021
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INITIALS INITIALS
© 2019 AIR CRE. All Rights Reserved. Last Edited: 7/15/2021 3:58 PM
AD-3.01, Revised 10-22-2020 Page1 of 4
DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP
(As required by the Civil Code)
When you enter into a discussion with a real estate agent regarding a real estate transac on, you should from the outset understand what type of agency rela onship
or representa on you wish to have with the agent in the transac on.
SELLER'S AGENT
A Seller's agent under a lis ng agreement with the Seller acts as the agent for the Seller only. A Seller's agent or a subagent of that agent has the following affirma ve
obliga ons:
To the Seller: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Seller.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent's du es.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affec ng the value or desirability of the property that are not known to, or within the diligent a en on
and observa on of, the par es.
An agent is not obligated to reveal to either party any confiden al informa on obtained from the other party that does not involve the affirma ve du es set
forth above.
BUYER'S AGENT
A Buyer's agent can, with a Buyer's consent, agree to act as agent for the Buyer only. In these situa ons, the agent is not the Seller's agent, even if by agreement the
agent may receive compensa on for services rendered, either in full or in part from the Seller. An agent ac ng only for a Buyer has the following affirma ve
obliga ons:
To the Buyer: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Buyer.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent's du es.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affec ng the value or desirability of the property that are not known to, or within the diligent
a en on and observa on of, the par es.
An agent is not obligated to reveal to either party any confiden al informa on obtained from the other party that does not involve the affirma ve du es set forth
above.
AGENT REPRESENTING BOTH SELLER AND BUYER
A real estate agent, either ac ng directly or through one or more salesperson and broker associates, can legally be the agent of both the Seller and the Buyer in a
transac on, but only with the knowledge and consent of both the Seller and the Buyer.
In a dual agency situa on, the agent has the following affirma ve obliga ons to both the Seller and the Buyer:
(a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the Seller or the Buyer.
(b) Other du es to the Seller and the Buyer as stated above in their respec ve sec ons.
In represen ng both Seller and Buyer, a dual agent may not, without the express permission of the respec ve party, disclose to the other party confiden al
informa on, including, but not limited to, facts rela ng to either the Buyer's or Seller's financial posi on, mo va ons, bargaining posi on, or other personal
informa on that may impact price, including the Seller's willingness to accept a price less than the lis ng price or the Buyer's willingness to pay a price greater than
the price offered.
SELLER AND BUYER RESPONSIBILITIES
Either the purchase agreement or a separate document will contain a confirma on of which agent is represen ng you and whether that agent is represen ng you
exclusively in the transac on or ac ng as a dual agent. Please pay a en on to that confirma on to make sure it accurately reflects your understanding of your agent’s
role. The above du es of the agent in a real estate transac on do not relieve a Seller or Buyer from the responsibility to protect his or her own interests. You should
carefully read all agreements to assure that they adequately express your understanding of the transac on. A real estate agent is a person qualified to advise about
real estate. If legal or tax advice is desired, consult a competent professional. If you are a Buyer, you have the duty to exercise reasonable care to protect yourself,
including as to those facts about the property which are known to you or within your diligent a en on and observa on. Both Sellers and Buyers should strongly
consider obtaining tax advice from a competent professional because the federal and state tax consequences of a transac on can be complex and subject to change.
Throughout your real property transac on you may receive more than one disclosure form, depending upon the number of agents assis ng in the transac on. The
law requires each agent with whom you have more than a casual rela onship to present you with this disclosure form. You should read its contents each me it is
presented to you, considering the rela onship between you and the real estate agent in your specific transac on. This disclosure form includes the provisions of
Sec ons 2079.13 to 2079.24, inclusive, of the Civil Code set forth on page 2. Read it carefully. I/WE ACKNOWLEDGE RECEIPT OF A COPY OF THIS DISCLOSURE AND
THE PORTIONS OF THE CIVIL CODE PRINTED ON THE BACK (OR A SEPARATE PAGE).
Buyer Seller
SubLessor
Lessee
Date:
Buyer Seller Lessor Sub
Lessee Date:
Agent: Alex Hayden DRE Lic. #: 01202588
Real Estate Broker (Firm)
By: DRE Lic. #: Date:
7/16/2021
7/16/2021
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AD-3.01, Revised 10-22-2020 Page2 of 4
(Salesperson or Broker-Associate)
THIS FORM HAS BEEN PREPARED BY AIR CRE. NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR ADEQUACY OF THIS FORM FOR ANY SPECIFIC
TRANSACTION. PLEASE SEEK LEGAL COUNSEL AS TO THE APPROPRIATENESS OF THIS FORM.
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INITIALS INITIALS
© 2019 AIR CRE. All Rights Reserved. Last Edited: 7/15/2021 3:58 PM
AD-3.01, Revised 10-22-2020 Page3 of 4
DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP
CIVIL CODE SECTIONS 2079.13 THROUGH 2079.24(2079.16 APPEARS ON THE FRONT)
2079.13. As used in Sec ons 2079.7 and 2079.14 to 2079.24, inclusive, the following terms have the following meanings:
(a) “Agent” means a person ac ng under provisions of Title 9 (commencing with Sec on 2295) in a real property transac on, and includes a person who is licensed as
a real estate broker under Chapter 3 (commencing with Sec on 10130) of Part 1 of Division 4 of the Business and Professions Code, and under whose license a lis ng
is executed or an offer to purchase is obtained. The agent in the real property transac on bears responsibility for that agent’s salespersons or broker associates who
perform as agents of the agent. When a salesperson or broker associate owes a duty to any principal, or to any buyer or seller who is not a principal, in a real property
transac on, that duty is equivalent to the duty owed to that party by the broker for whom the salesperson or broker associate func ons. (b) “Buyer” means a
transferee in a real property transac on, and includes a person who executes an offer to purchase real property from a seller through an agent, or who seeks the
services of an agent in more than a casual, transitory, or preliminary manner, with the object of entering into a real property transac on. “Buyer” includes vendee or
lessee of real property. (c) “Commercial real property” means all real property in the state, except (1) single-family residen al real property, (2) dwelling units made
subject to Chapter 2 (commencing with Sec on 1940) of Title 5, (3) a mobile home, as defined in Sec on 798.3, (4) vacant land, or (5) a recrea onal vehicle, as
defined in Sec on 799.29. (d) “Dual agent” means an agent ac ng, either directly or through a salesperson or broker associate, as agent for both the seller and the
buyer in a real property transac on. (e) “Lis ng agreement” means a wri en contract between a seller of real property and an agent, by which the agent has been
authorized to sell the real property or to find or obtain a buyer, including rendering other services for which a real estate license is required to the seller pursuant to
the terms of the agreement. (f) “Seller's agent” means a person who has obtained a lis ng of real property to act as an agent for compensa on. (g) “Lis ng price” is
the amount expressed in dollars specified in the lis ng for which the seller is willing to sell the real property through the seller’s agent. (h) “Offering price” is the
amount expressed in dollars specified in an offer to purchase for which the buyer is willing to buy the real property. (i) “Offer to purchase” means a wri en contract
executed by a buyer ac ng through a buyer’s agent that becomes the contract for the sale of the real property upon acceptance by the seller. (j) “Real property”
means any estate specified by subdivision (1) or (2) of Sec on 761 in property, and includes (1) single-family residen al property, (2) mul -unit residen al property
with more than four dwelling units, (3) commercial real property, (4) vacant land, (5) a ground lease coupled with improvements, or (6) a manufactured home as
defined in Sec on 18007 of the Health and Safety Code, or a mobile home as defined in Sec on 18008 of the Health and Safety Code, when offered for sale or sold
through an agent pursuant to the authority contained in Sec on 10131.6 of the Business and Professions Code. (k) “Real property transac on” means a transac on for
the sale of real property in which an agent is retained by a buyer, seller, or both a buyer and seller to act in that transac on, and includes a lis ng or an offer to
purchase. (l) “Sell,” “sale,” or “sold” refers to a transac on for the transfer of real property from the seller to the buyer and includes exchanges of real property
between the seller and buyer, transac ons for the crea on of a real property sales contract within the meaning of Sec on 2985, and transac ons for the crea on of a
leasehold exceeding one year’s dura on. (m) “Seller” means the transferor in a real property transac on and includes an owner who lists real property with an agent,
whether or not a transfer results, or who receives an offer to purchase real property of which he or she is the owner from an agent on behalf of another. “Seller”
includes both a vendor and a lessor of real property. (n) “Buyer's agent” means an agent who represents a buyer in a real property transac on.
2079.14.A seller’s agent and buyer’s agent shall provide the seller and buyer in a real property transac on with a copy of the disclosure form specified in Sec on
2079.16, and shall obtain a signed acknowledgment of receipt from that seller and buyer, except as provided in Sec on 2079.15, as follows: (a) The seller’s agent, if
any, shall provide the disclosure form to the seller prior to entering into the lis ng agreement. (b) The buyer’s agent shall provide the disclosure form to the buyer as
soon as prac cable prior to execu on of the buyer’s offer to purchase. If the offer to purchase is not prepared by the buyer’s agent, the buyer’s agent shall present the
disclosure form to the buyer not later than the next business day a er receiving the offer to purchase from the buyer.
2079.15. In any circumstance in which the seller or buyer refuses to sign an acknowledgment of receipt pursuant to Sec on 2079.14, the agent shall set forth, sign,
and date a wri en declara on of the facts of the refusal.
2079.16 Reproduced on Page 1 of this AD form.
2079.17(a) As soon as prac cable, the buyer’s agent shall disclose to the buyer and seller whether the agent is ac ng in the real property transac on as the buyer’s
agent, or as a dual agent represen ng both the buyer and the seller. This rela onship shall be confirmed in the contract to purchase and sell real property or in a
separate wri ng executed or acknowledged by the seller, the buyer, and the buyer’s agent prior to or coincident with execu on of that contract by the buyer and the
seller, respec vely. (b) As soon as prac cable, the seller’s agent shall disclose to the seller whether the seller’s agent is ac ng in the real property transac on as the
seller’s agent, or as a dual agent represen ng both the buyer and seller. This rela onship shall be confirmed in the contract to purchase and sell real property or in a
separate wri ng executed or acknowledged by the seller and the seller’s agent prior to or coincident with the execu on of that contract by the seller.
(C) CONFIRMATION: The following agency rela onships are confirmed for this transac on.
Seller's Brokerage Firm DO NOT COMPLETE, SAMPLE ONLY License Number
Is the broker of (check one): the seller; or both the buyer and seller. (dual agent)
Seller's Agent DO NOT COMPLETE, SAMPLE ONLY License Number
Is (check one): the Seller's Agent. (salesperson or broker associate); or both the Buyer's Agent and the Seller's Agent. (dual agent)
Buyer's Brokerage Firm DO NOT COMPLETE, SAMPLE ONLY License Number
Is the broker of (check one): the buyer; or both the buyer and seller. (dual agent)
Buyer's Agent DO NOT COMPLETE, SAMPLE ONLY License Number
Is (check one): the Buyer's Agent. (salesperson or broker associate); or both the Buyer's Agent and the Seller's Agent. (dual agent)
(d) The disclosures and confirma on required by this sec on shall be in addi on to the disclosure required by Sec on 2079.14. An agent’s duty to provide disclosure
and confirma on of representa on in this sec on may be performed by a real estate salesperson or broker associate affiliated with that broker.
2079.18 (Repealed pursuant to AB-1289, 2017-18 California Legisla ve session)
2079.19 The payment of compensa on or the obliga on to pay compensa on to an agent by the seller or buyer is not necessarily determina ve of a par cular agency
rela onship between an agent and the seller or buyer. A lis ng agent and a selling agent may agree to share any compensa on or commission paid, or any right to any
compensa on or commission for which an obliga on arises as the result of a real estate transac on, and the terms of any such agreement shall not necessarily be
determina ve of a par cular rela onship.
2079.20 Nothing in this ar cle prevents an agent from selec ng, as a condi on of the agent’s employment, a specific form of agency rela onship not specifically
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prohibited by this ar cle if the requirements of Sec on 2079.14 and Sec on 2079.17 are complied with.
2079.21 (a) A dual agent may not, without the express permission of the seller, disclose to the buyer any confiden al informa on obtained from the seller. (b) A dual
agent may not, without the express permission of the buyer, disclose to the seller any confiden al informa on obtained from the buyer. (c) “Confiden al informa on”
means facts rela ng to the client’s financial posi on, mo va ons, bargaining posi on, or other personal informa on that may impact price, such as the seller is willing
to accept a price less than the lis ng price or the buyer is willing to pay a price greater than the price offered. (d) This sec on does not alter in any way the duty or
responsibility of a dual agent to any principal with respect to confiden al informa on other than price.
2079.22 Nothing in this ar cle precludes a seller’s agent from also being a buyer’s agent. If a seller or buyer in a transac on chooses to not be represented by an
agent, that does not, of itself, make that agent a dual agent.
2079.23 (a) A contract between the principal and agent may be modified or altered to change the agency rela onship at any me before the performance of the act
which is the object of the agency with the wri en consent of the par es to the agency rela onship.(b) A lender or an auc on company retained by a lender to
control aspects of a transac on of real property subject to this part, including valida ng the sales price, shall not require, as a condi on of receiving the lender’s
approval of the transac on, the homeowner or lis ng agent to defend or indemnify the lender or auc on company from any liability alleged to result from the ac ons
of the lender or auc on company. Any clause, provision, covenant, or agreement purpor ng to impose an obliga on to defend or indemnify a lender or an auc on
company in viola on of this subdivision is against public policy, void, and unenforceable.
2079.24 Nothing in this ar cle shall be construed to either diminish the duty of disclosure owed buyers and sellers by agents and their associate licensees, subagents,
and employees or to relieve agents and their associate licensees, subagents, and employees from liability for their conduct in connec on with acts governed by this
ar cle or for any breach of a fiduciary duty or a duty of disclosure.
AIR CRE * h ps://www.aircre.com * 213-687-8777 * contracts@aircre.com
NOTICE: No part of these works may be reproduced in any form without permission in wri ng.
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Exhibit 10.11
LOAN AUTHORIZATION AND AGREEMENT (LA&A)
A PROPERLY SIGNED DOCUMENT IS
REQUIRED PRIOR
TO ANY
DISBURSEMENT
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CAREFULLY READ THE LA&A:
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This document describes the terms and conditions of your loan. It is your responsibility to comply with ALL the terms and conditions of your loan.
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SIGNING THE LA&A:
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All borrowers must sign the LA&A.
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Sign your name exactly as it appears on the LA&A. If typed incorrectly, you should sign with the correct spelling.
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If your middle initial appears on the signature line, sign with your middle initial.
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If a suffix appears on the signature line, such as Sr. or Jr., sign with your suffix.
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Corporate Signatories: Authorized representatives should sign the signature page.
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Your signature represents your agreement to comply
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with the terms and conditions of the loan.
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U.S. Small Business Administration
Economic Injury Disaster Loan
LOAN AUTHORIZATION
AND AGREEMENT
Date: 05.26.2020 (Effective Date)
On the above date, this Administration (SBA) authorized (under Section 7(b) of
the Small Business Act, as amended) a Loan (SBA Loan #3463267808) to Phoenix Cars LLC (Borrower) of 401 S Doubleday Avenue Ontario California
91761 in the amount of one hundred and fifty thousand and 00/100 Dollars ($150,000.00), upon the following conditions:
PAYMENT
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·
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Installment payments, including principal and interest, of $731.00 Monthly, will begin Twelve (12) months from the date
of the promissory Note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory
Note.
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INTEREST
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Interest will accrue at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of
each advance.
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PAYMENT TERMS
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Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied
to principal.
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Each payment will be made when due even if at that time the full amount of the Loan has not yet been advanced or the authorized amount
of the Loan has been reduced.
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COLLATERAL
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For loan amounts of greater than $25,000, Borrower hereby grants to SBA, the secured party hereunder, a continuing security interest
in and to any and all “Collateral” as described herein to secure payment and performance of all debts, liabilities and obligations
of Borrower to SBA hereunder without limitation, including but not limited to all interest, other fees and expenses (all hereinafter called
“Obligations”). The Collateral includes the following property that Borrower now owns or shall acquire or create immediately
upon the acquisition or creation thereof: all tangible and intangible personal property, including, but not limited to: (a) inventory,
(b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and electronic
chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including health-care insurance receivables and credit card receivables,
(h) deposit accounts, (i) commercial tort claims, (j) general intangibles, including payment intangibles and software and
(k) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest
Borrower grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products,
proceeds and collections thereof and all records and data relating thereto.
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For loan amounts of $25,000 or less, SBA is not taking a security interest in any collateral.
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REQUIREMENTS RELATIVE TO COLLATERAL
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Borrower will not sell or transfer any collateral (except normal inventory turnover in the ordinary course of business) described
in the "Collateral" paragraph hereof without the prior written consent of SBA.
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Borrower will neither seek nor accept future advances under any superior liens on the collateral securing this Loan without the prior
written consent of SBA.
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USE OF LOAN PROCEEDS
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Borrower will use all the proceeds of this Loan solely as working capital to alleviate economic injury caused by disaster occurring
in the month of January 31, 2020 and continuing thereafter and to pay Uniform Commercial Code (UCC) lien filing fees and a third-party
UCC handling charge of $100 which will be deducted from the Loan amount stated above.
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REQUIREMENTS FOR USE OF LOAN PROCEEDS AND RECEIPTS
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Borrower will obtain and itemize receipts (paid receipts, paid invoices or cancelled checks) and contracts for all Loan funds spent
and retain these receipts for 3 years from the date of the final disbursement. Prior to each subsequent disbursement (if any) and whenever
requested by SBA, Borrower will submit to SBA such itemization together with copies of the receipts.
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Borrower will not use, directly or indirectly, any portion of the proceeds of this Loan to relocate without the prior written permission
of SBA. The law prohibits the use of any portion of the proceeds of this Loan for voluntary relocation from the business area in which
the disaster occurred. To request SBA's prior written permission to relocate, Borrower will present to SBA the reasons therefore and a
description or address of the relocation site. Determinations of (1) whether a relocation is voluntary or otherwise, and (2) whether
any site other than the disaster-affected location is within the business area in which the disaster occurred, will be made solely by
SBA.
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Borrower will, to the extent feasible, purchase only American-made equipment and products with the proceeds of this Loan.
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Borrower will make any request for a loan increase for additional disaster-related damages as soon as possible after the need for
a loan increase is discovered. The SBA will not consider a request for a loan increase received more than two (2) years from
the date of loan approval unless, in the sole discretion of the SBA, there are extraordinary and unforeseeable circumstances beyond the
control of the borrower.
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DEADLINE FOR RETURN OF LOAN CLOSING DOCUMENTS
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Borrower will sign and return the loan closing documents to SBA within 2 months of the date of this Loan Authorization and Agreement.
By notifying the Borrower in writing, SBA may cancel this Loan if the Borrower fails to meet this requirement. The Borrower may submit
and the SBA may, in its sole discretion, accept documents after 2 months of the date of this Loan Authorization and Agreement.
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COMPENSATION FROM OTHER SOURCES
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Eligibility for this disaster Loan is limited to disaster losses that are not compensated by other sources. Other sources include
but are not limited to: (1) proceeds of policies of insurance or other indemnifications, (2) grants or other reimbursement (including loans)
from government agencies or private organizations, (3) claims for civil liability against other individuals, organizations or
governmental entities, and (4) salvage (including any sale or re-use) of items of damaged property.
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Borrower will promptly notify SBA of the existence and status of any claim or application for such other compensation, and of the
receipt of any such compensation, and Borrower will promptly submit the proceeds of same (not exceeding the outstanding balance of this
Loan) to SBA.
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Borrower hereby assigns to SBA the proceeds of any such compensation from other sources and authorizes the payor of same to deliver
said proceeds to SBA at such time and place as SBA shall designate.
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SBA will in its sole discretion determine whether any such compensation from other sources is a duplication of benefits. SBA will
use the proceeds of any such duplication to reduce the outstanding balance of this Loan, and Borrower agrees that such proceeds will not
be applied in lieu of scheduled payments.
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DUTY TO MAINTAIN HAZARD INSURANCE
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Within 12 months from the date of this Loan Authorization and Agreement the Borrower will provide proof of an active and in effect
hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the
insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan. BORROWER
MAY NOT BE ELIGIBLE FOR EITHER ANY FUTURE DISASTER ASSISTANCE OR SBA FINANCIAL ASSISTANCE IF THIS INSURANCE IS NOT MAINTAINED AS
STIPULATED HEREIN THROUGHOUT THE ENTIRE TERM OF THIS LOAN. Please submit proof of insurance to: U.S. Small Business Administration,
Office of Disaster Assistance, 14925 Kingsport Rd, Fort Worth, TX. 76155.
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BOOKS AND RECORDS
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Borrower will maintain current and proper books of account in a manner satisfactory to SBA for the most recent 5 years until 3 years
after the date of maturity, including extensions, or the date this Loan is paid in full, whichever occurs first. Such books will include
Borrower's financial and operating statements, insurance policies, tax returns and related filings, records of earnings distributed and
dividends paid and records of compensation to officers, directors, holders of 10% or more of Borrower's capital stock, members, partners
and proprietors.
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Borrower authorizes SBA to make or cause to be made, at Borrower's expense and in such a manner and at such times as SBA may require:
(1) inspections and audits of any books, records and paper in the custody or control of Borrower or others relating to Borrower's
financial or business conditions, including the making of copies thereof and extracts therefrom, and (2) inspections and appraisals
of any of Borrower's assets.
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Borrower will furnish to SBA, not later than 3 months following the expiration of Borrower's fiscal year and in such form as SBA may
require, Borrower's financial statements.
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Upon written request of SBA, Borrower will accompany such statements with an 'Accountant's Review Report' prepared by an independent
public accountant at Borrower's expense.
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Borrower authorizes all Federal, State and municipal authorities to furnish reports of examination, records and other information
relating to the conditions and affairs of Borrower and any desired information from such reports, returns, files, and records of such
authorities upon request of SBA.
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LIMITS ON DISTRIBUTION OF ASSETS
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·
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Borrower will not, without the prior written consent of SBA, make any distribution of Borrower’s assets, or give any preferential
treatment, make any advance, directly or indirectly, by way of loan, gift, bonus, or otherwise, to any owner or partner or any of its
employees, or to any company directly or indirectly controlling or affiliated with or controlled by Borrower, or any other company.
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EQUAL OPPORTUNITY REQUIREMENT
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·
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If Borrower has or intends to have employees, Borrower will post SBA Form 722, Equal Opportunity Poster (copy attached), in Borrower's
place of business where it will be clearly visible to employees, applicants for employment, and the general public.
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DISCLOSURE OF LOBBYING ACTIVITIES
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·
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Borrower
agrees to the attached Certification Regarding Lobbying Activities
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BORROWER’S CERTIFICATIONS
Borrower certifies that:
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·
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There has been no substantial adverse change in Borrower's financial condition (and organization, in case of a business borrower)
since the date of the application for this Loan. (Adverse changes include, but are not limited to: judgment liens, tax liens, mechanic's
liens, bankruptcy, financial reverses, arrest or conviction of felony, etc.)
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·
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No fees have been paid, directly or indirectly, to any representative (attorney, accountant, etc.) for services provided or to
be provided in connection with applying for or closing this Loan, other than those reported on SBA Form 5 Business Disaster Loan
Application'; SBA Form 3501 COVID-19 Economic Injury Disaster Loan Application; or SBA Form 159, 'Compensation Agreement'. All
fees not approved by SBA are prohibited.
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·
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All representations in the Borrower's Loan application (including all supplementary submissions) are true, correct and complete and
are offered to induce SBA to make this Loan.
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·
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No claim or application for any other compensation for disaster losses has been submitted to or requested of any source, and no such
other compensation has been received, other than that which Borrower has fully disclosed to SBA.
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·
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Neither the Borrower nor, if the Borrower is a business, any principal who owns at least 50% of the Borrower, is delinquent more than
60 days under the terms of any: (a) administrative order; (b) court order; or (c) repayment agreement that requires payment
of child support.
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·
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Borrower certifies that no fees have been paid, directly or indirectly, to any representative (attorney, accountant, etc.) for
services provided or to be provided in connection with applying for or closing this Loan, other than those reported on the Loan Application.
All fees not approved by SBA are prohibited. If an Applicant chooses to employ an Agent, the compensation
an Agent charges to and that is paid by the Applicant must bear a necessary and reasonable relationship
to the services actually performed and must be comparable to those charged by other Agents in the geographical area. Compensation cannot
be contingent on loan approval. In addition, compensation must not include any expenses which are deemed by SBA to be unreasonable for
services actually performed or expenses actually incurred. Compensation must not include charges prohibited in 13 CFR 103 or SOP 50-30, Appendix 1.
If the compensation exceeds $500 for a disaster home loan or $2,500 for a disaster business loan, Borrower must fill out the Compensation
Agreement Form 159D which will be provided for Borrower upon request or can be found on the SBA website.
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·
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Borrower certifies, to the best of its, his or her knowledge and belief, that the certifications and representations
in the attached Certification Regarding Lobbying are true, correct and complete and are offered to induce SBA to make this Loan.
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CIVIL AND CRIMINAL PENALTIES
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|
·
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Whoever wrongfully misapplies the proceeds of an SBA disaster loan shall be civilly liable to the Administrator in an amount equal
to one-and-one half times the original principal amount of the loan under 15 U.S.C. 636(b). In addition, any false statement or misrepresentation
to SBA may result in criminal, civil or administrative sanctions including, but not limited to: 1) fines, imprisonment or both, under
15 U.S.C. 645, 18 U.S.C. 1001, 18 U.S.C. 1014, 18 U.S.C. 1040, 18 U.S.C. 3571, and any other
applicable laws; 2) treble damages and civil penalties under the False Claims Act, 31 U.S.C. 3729; 3) double damages and civil penalties
under the Program Fraud Civil Remedies Act, 31 U.S.C. 3802; and 4) suspension and/or debarment from all Federal procurement and non-procurement
transactions. Statutory fines may increase if amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
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RESULT OF VIOLATION OF THIS LOAN AUTHORIZATION AND AGREEMENT
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·
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If Borrower violates any of the terms or conditions of this Loan Authorization and Agreement, the Loan
will be in default and SBA may declare all or any part of the indebtedness immediately due and payable. SBA's failure to exercise its
rights under this paragraph will not constitute a waiver.
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·
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A default (or any violation of any of the terms and conditions) of any SBA Loan(s) to Borrower and/or its affiliates will be
considered a default of all such Loan(s).
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DISBURSEMENT OF THE LOAN
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·
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Disbursements will be made by and at the discretion of SBA Counsel, in accordance with this Loan Authorization and Agreement and the
general requirements of SBA.
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·
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Disbursements may be made in increments as needed.
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·
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Other conditions may be imposed by SBA pursuant to general requirements of SBA.
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·
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Disbursement may be withheld if, in SBA's sole discretion, there has been an adverse change in Borrower's financial condition or in
any other material fact represented in the Loan application, or if Borrower fails to meet any of the terms or conditions of this Loan
Authorization and Agreement.
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·
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NO DISBURSEMENT WILL BE MADE LATER THAN 6 MONTHS FROM THE DATE OF THIS LOAN AUTHORIZATION AND AGREEMENT UNLESS SBA, IN ITS
SOLE DISCRETION, EXTENDS THIS DISBURSEMENT PERIOD.
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PARTIES AFFECTED
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·
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This Loan Authorization and Agreement will be binding upon Borrower and Borrower's successors and assigns and will inure to the benefit
of SBA and its successors and assigns.
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RESOLUTION OF BOARD OF DIRECTORS
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·
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Borrower shall, within 180 days of receiving any disbursement of this Loan, submit the appropriate SBA Certificate and/or Resolution
to the U.S. Small Business Administration, Office of Disaster Assistance, 14925 Kingsport Rd, Fort Worth, TX. 76155.
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ENFORCEABILITY
|
|
·
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This Loan Authorization and Agreement is legally binding, enforceable and approved upon Borrower’s signature, the SBA’s
approval and the Loan Proceeds being issued to Borrower by a government issued check or by electronic debit of the Loan Proceeds to Borrower’
banking account provided by Borrower in application for this Loan.
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/s/ James E. Rivera
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James
E. Rivera
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Associate Administrator
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U.S. Small Business
Administration
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The undersigned agree(s) to be bound by the terms and
conditions herein during the term of this Loan, and further agree(s) that no provision stated herein will be waived without prior
written consent of SBA. Under penalty of perjury of the United States of America, I hereby certify that I am authorized to apply
for and obtain a disaster loan on behalf of Borrower, in connection with the effects of the COVID-19 emergency.
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Phoenix
Cars LLC
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/s/ Gillary Cadet
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Date:
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05.26.2020
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Gillray
Cadet, Owner/Officer
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|
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Note:
Corporate Borrowers must execute Loan Authorization and Agreement in corporate name, by a duly authorized officer. Partnership Borrowers
must execute in firm name, together with signature of a general partner. Limited Liability entities must execute in the entity name by
the signature of the authorized managing person.
CERTIFICATION REGARDING
LOBBYING
For loans over $150,000,
Congress requires recipients to agree to the following:
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1.
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Appropriated
funds may NOT be used for lobbying.
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2.
|
Payment
of non-federal funds for lobbying must be reported on Form SF-LLL.
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3.
|
Language
of this certification must be incorporated into all contracts and subcontracts exceeding
$100,000.
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4.
|
All
contractors and subcontractors with contracts exceeding $100,000 are required to certify
and disclose accordingly.
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CERTIFICATION REGARDING
LOBBYING
Certification for Contracts, Grants,
Loans, and Cooperative
Agreements
Borrower and all Guarantors (if any) certify, to the best
of its, his or her knowledge and belief, that:
(1) No
Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, to any person for influencing or attempting
to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member
of Congress in connection with awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the
entering into of any cooperative agreement, and the extension, continuation, renewal, or modification of any Federal contract, grant,
loan, or cooperative agreement.
(2) If
any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence
an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress
in connection with this Federal loan, the undersigned shall complete and submit Standard Form LLL, "Disclosure Form to
Report Lobbying," in accordance with its instructions.
(3) The
undersigned shall require that the language of this certification be included in the award documents for all sub-awards at all tiers (including
subcontracts, sub-grants, and contracts under grants, loans, and co-operative agreements) and that all sub-recipients shall certify and
disclose accordingly.
This certification is a material representation of fact upon
which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making
or entering into this transaction imposed by Section 1352, Title 31, U.S. Code. Any person who fails to file the required certification
shall be subject to a civil penalty of not less than $10,000.00 and not more than $100,000.00 for each such failure.
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This Statement of Policy is Posted
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In Accordance with Regulations of the
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Small Business Administration
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This Organization Practices
Equal Employment Opportunity
We do not discriminate on the ground of race, color, religion,
sex, age, disability or national origin in the hiring, retention, or promotion of employees; nor in determining their rank, or the compensation
or fringe benefits paid them.
This Organization Practices
Equal Treatment of Clients
We do not discriminate on the basis of race, color, religion,
sex, marital status, disability, age or national origin in services or accommodations offered or provided to our employees, clients or
guests.
These policies
and this notice comply with regulations of the
United States Government.
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Please report violations of this policy to:
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Administrator
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Small Business Administration
Washington, D.C. 20416
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In order for the public and your employees
to know their rights under 13 C.F.R Parts 112, 113, and 117, Small Business Administration Regulations, and to conform with the directions
of the Administrator of SBA, this poster must be displayed where it is clearly visible to employees, applicants for employment, and the
public.
Failure
to display the poster as required in accordance with SBA Regulations may be considered evidence of noncompliance and subject you to the
penalties contained in those Regulations.
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SBA FORM 722 (10-02) REF: SOP 9030 PREVIOUS EDITIONS ARE OBSOLETE
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U.S. GOVERNMENT
PRINTING OFFICE: 1994 0- 153-346
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This form was electronically produced by Elite Federal Inc.
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Esta Declaración De Principios Se Publica
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De Acuerdo Con Los Reglamentos De La
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Agencia
Federal Para el Desarrollo de la Pequeña Empresa
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Esta Organización Practica
Igual Oportunidad De Empleo
No discriminamos por razón de raza, color,
religión, sexo, edad, discapacidad o nacionalidad en el empleo, retención o ascenso de personal ni en la
determinación de sus posiciones, salarios o beneficios marginales.
Esta Organización Practica
Igualdad En El Trato A Su Clientela
No discriminamos por razón de raza, color,
religión, sexo, estado civil, edad, discapacidad o nacionalidad en los servicios o facilidades provistos para nuestros
empleados, clientes o visitantes.
Estos principios y este
aviso cumplen con los reglamentos del Gobierno
de los Estados Unidos de América.
Favor de informar violaciones a lo aquí indicado
a:
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Administrador
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Agencia Federal Para el Desarrollo de la
Pequeña Empresa
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Washington, D.C. 20416
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A fin de que el público y sus empleados
conozcan sus derechos según lo expresado en las Secciones 112, 113 y 117 del Código de Regulaciaones Federales
No. 13, de los Reglamentos de la Agencja Federal Para el Desarrollo de la Pequeña Empresa y de acuerdo con las
instrucciones del Administrador de dicha agencia, esta notificación debe fijarse en un lugar claramente visible para los
empleados, solicitantes de empleo y público en general. No fijar esta notificación según lo requerido por los
reglamentos de la Agencia Federal Para el Desarrollo de la Pequeña Empresa, puede ser interpretado como evidencia de falta de
cumplimiento de los mismos y conllevará la ejecución de los castigos impuestos en estos reglamentos.
|
SBA FORM 722 (10-02) REF: SOP 9030 PREVIOUS EDITIONS ARE OBSOLETE
|
U.S. GOVERNMENT
PRINTING OFFICE: 1994 0- 153-346
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This form was electronically produced by Elite Federal Inc.
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NOTE
A PROPERLY SIGNED NOTE IS
REQUIRED PRIOR
TO ANY
DISBURSEMENT
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CAREFULLY READ THE NOTE: It is your promise to repay the loan.
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·
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The Note is pre-dated. DO NOT CHANGE THE DATE OF THE NOTE.
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·
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LOAN PAYMENTS will be due as stated in the Note.
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·
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ANY CORRECTIONS OR UNAUTHORIZED MARKS MAY VOID THIS DOCUMENT.
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SIGNING THE NOTE: All borrowers must sign the Note.
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·
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Sign your name exactly as it appears on the Note. If typed incorrectly, you should sign with the correct spelling.
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·
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If your middle initial appears on the signature line, sign with your middle initial.
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·
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If a suffix appears on the signature line, such as Sr. or Jr., sign with your suffix.
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·
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Corporate Signatories: Authorized representatives should sign the signature page.
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U.S. Small Business Administration
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Date: 05.26.2020
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NOTE
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Loan Amount: $150,000.00
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(SECURED
DISASTER LOANS)
|
Annual Interest Rate: 3.75%
|
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SBA Loan # 3463267808
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Application #3300872592
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1.
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PROMISE TO PAY: In return for a loan, Borrower promises to pay to the order of SBA the amount of one hundred and fifty thousand
and 00/100 Dollars ($150,000.00), interest on the unpaid principal balance, and all other amounts required by this Note.
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2.
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DEFINITIONS: A) “Collateral” means any property taken as security for payment of this Note or any guarantee of
this Note. B) “Guarantor” means each person or entity that signs a guarantee of payment of this Note. C) “Loan
Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral.
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3.
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PAYMENT TERMS: Borrower must make all payments at the place SBA designates. Borrower may prepay this Note in part or in full
at any time, without notice or penalty. Borrower must pay principal and interest payments of $731.00
every month beginning Twelve (12) months from the date of the Note. SBA will apply each installment payment
first to pay interest accrued to the day SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining
principal and accrued interest is due and payable Thirty (30) years from the date of the Note.
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4.
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DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower:
A) Fails to comply with any provision of this Note, the Loan Authorization and Agreement, or other Loan Documents; B) Defaults
on any other SBA loan; C) Sells or otherwise transfers, or does not preserve or account to SBA’s satisfaction for, any of
the Collateral or its proceeds; D) Does not disclose, or anyone acting on their behalf does not disclose, any material fact to
SBA; E) Makes, or anyone acting on their behalf makes, a materially false or misleading representation to SBA; F) Defaults
on any loan or agreement with another creditor, if SBA believes the default may materially affect Borrower’s ability to pay this
Note; G) Fails to pay any taxes when due; H) Becomes the subject of a proceeding under any bankruptcy or insolvency law;
I) Has a receiver or liquidator appointed for any part of their business or property; J) Makes an assignment for the benefit
of creditors; K) Has any adverse change in financial condition or business operation that SBA believes may materially affect Borrower’s
ability to pay this Note; L) Dies; M) Reorganizes, merges, consolidates, or otherwise changes ownership or business structure
without SBA’s prior written consent; or, N) Becomes the subject of a civil or criminal action that SBA believes may materially
affect Borrower’s ability to pay this Note.
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5.
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SBA’S RIGHTS IF THERE IS A DEFAULT: Without notice or demand and without giving up any of its rights, SBA may: A)
Require immediate payment of all amounts owing under this Note; B) Have recourse to collect all amounts owing from any Borrower
or Guarantor (if any); C) File suit and obtain judgment; D) Take possession of any Collateral; or E) Sell, lease,
or otherwise dispose of, any Collateral at public or private sale, with or without advertisement.
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6.
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SBA’S GENERAL POWERS: Without notice and without Borrower’s consent, SBA may: A) Bid on or buy the Collateral
at its sale or the sale of another lienholder, at any price it chooses; B) Collect amounts due under this Note, enforce the terms
of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments
for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney’s fees and costs.
If SBA incurs such expenses, it may demand immediate reimbursement from Borrower or add the expenses to the principal balance; C) Release
anyone obligated to pay this Note; D) Compromise, release, renew, extend or substitute any of the Collateral; and E) Take
any action necessary to protect the Collateral or collect amounts owing on this Note.
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7.
|
FEDERAL LAW APPLIES: When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations.
SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By
using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note,
Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal
law.
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8.
|
GENERAL PROVISIONS: A) All individuals and entities signing this Note are jointly and severally liable. B) Borrower
waives all suretyship defenses. C) Borrower must sign all documents required at any time to comply with the Loan Documents and
to enable SBA to acquire, perfect, or maintain SBA’s liens on Collateral. D) SBA may exercise any of its rights separately
or together, as many times and in any order it chooses. SBA may delay or forgo enforcing any of its rights without giving up any of them.
E) Borrower may not use an oral statement of SBA to contradict or alter the written terms of this Note. F) If any part of
this Note is unenforceable, all other parts remain in effect. G) To the extent allowed by law, Borrower waives all demands and
notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses
based upon any claim that SBA did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral;
or did not obtain the fair market value of Collateral at a sale. H) SBA may sell or otherwise transfer this Note.
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9.
|
MISUSE OF LOAN FUNDS: Anyone who wrongfully misapplies any proceeds of the loan will be civilly liable to SBA for one and one-
half times the proceeds disbursed, in addition to other remedies allowed by law.
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10.
|
BORROWER’S NAME(S) AND SIGNATURE(S): By signing below, each individual or entity acknowledges and accepts personal
obligation and full liability under the Note as Borrower.
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|
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Phoenix Cars LLC
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/s/ Gillray Cadet
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Gillray Cadet, Owner/Officer
|
SECURITY AGREEMENT
Read
this document carefully. It grants the SBA a security interest (lien) in all the property described
in paragraph 4.
This document is predated. DO NOT CHANGE
THE DATE ON THIS DOCUMENT.
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U.S. Small Business Administration
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SECURITY AGREEMENT
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SBA Loan #:
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3463267808
|
|
Borrower:
|
Phoenix Cars LLC
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Secured Party:
|
The Small Business Administration, an Agency of the U.S. Government
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|
Date:
|
05.26.2020
|
|
Note Amount:
|
$150,000.00
|
Unless otherwise specified, all terms used in this Agreement
will have the meanings ascribed to them under the Official Text of the Uniform Commercial Code, as it may be amended from time to time,
(“UCC”). “SBA” means the Small Business Administration, an Agency of the U.S. Government.
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2.
|
GRANT OF SECURITY INTEREST.
|
For value received, the Borrower grants to the Secured Party
a security interest in the property described below in paragraph 4 (the “Collateral”).
This
Agreement secures the payment and performance of: (a) all obligations under a Note dated 05.26.2020, made by Phoenix Cars LLC , made
payable to Secured Lender, in the amount of $150,000.00 (“Note”), including all
costs and expenses (including reasonable attorney’s fees), incurred by Secured Party in the disbursement, administration and collection
of the loan evidenced by the Note; (b) all costs and expenses (including reasonable attorney’s fees), incurred by Secured Party
in the protection, maintenance and enforcement of the security interest hereby granted; (c) all obligations of the Borrower in any
other agreement relating to the Note; and (d) any modifications, renewals, refinancings, or extensions of the foregoing obligations.
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4.
|
COLLATERAL DESCRIPTION.
|
The Collateral in which this security interest is
granted includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or
creation thereof: all tangible and intangible personal property, including, but not limited to: (a) inventory,
(b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and
electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including health-care insurance
receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j) general intangibles,
including payment intangibles and software and (k) as-extracted collateral as such terms may from time to time be defined in
the Uniform Commercial Code. The security interest Borrower grants includes all accessions, attachments, accessories, parts,
supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating
thereto.
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5.
|
RESTRICTIONS ON COLLATERAL TRANSFER.
|
Borrower will not sell, lease, license or otherwise transfer
(including by granting security interests, liens, or other encumbrances in) all or any part of the Collateral or Borrower’s interest
in the Collateral without Secured Party’s written or electronically communicated approval, except that Borrower may sell inventory
in the ordinary course of business on customary terms. Borrower may collect and use amounts due on accounts and other rights to payment
arising or created in the ordinary course of business, until notified otherwise by Secured Party in writing or by electronic communication.
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6.
|
MAINTENANCE AND LOCATION OF COLLATERAL; INSPECTION; INSURANCE.
|
Borrower must promptly notify Secured Party by written or
electronic communication of any change in location of the Collateral, specifying the new location. Borrower hereby grants to Secured Party
the right to inspect the Collateral at all reasonable times and upon reasonable notice. Borrower must: (a) maintain the Collateral
in good condition; (b) pay promptly all taxes, judgments, or charges of any kind levied or assessed thereon; (c) keep current
all rent or mortgage payments due, if any, on premises where the Collateral is located; and (d) maintain hazard insurance on the
Collateral, with an insurance company and in an amount approved by Secured Party (but in no event less than the replacement cost of that
Collateral), and including such terms as Secured Party may require including a Lender’s Loss Payable Clause in favor of Secured
Party. Borrower hereby assigns to Secured Party any proceeds of such policies and all unearned premiums thereon and authorizes and empowers
Secured Party to collect such sums and to execute and endorse in Borrower’s name all proofs of loss, drafts, checks and any other
documents necessary for Secured Party to obtain such payments.
|
7.
|
CHANGES TO BORROWER’S LEGAL STRUCTURE, PLACE OF BUSINESS, JURISDICTION OF ORGANIZATION, OR NAME.
|
Borrower must notify Secured Party by written or electronic
communication not less than 30 days before taking any of the following actions: (a) changing or reorganizing the type of organization
or form under which it does business; (b) moving, changing its place of business or adding a place of business; (c) changing
its jurisdiction of organization; or (d) changing its name. Borrower will pay for the preparation and filing of all documents Secured
Party deems necessary to maintain, perfect and continue the perfection of Secured Party’s security interest in the event of any
such change.
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8.
|
PERFECTION OF SECURITY INTEREST.
|
Borrower consents, without further notice, to Secured Party’s
filing or recording of any documents necessary to perfect, continue, amend or terminate its security interest. Upon request of Secured
Party, Borrower must sign or otherwise authenticate all documents that Secured Party deems necessary at any time to allow Secured Party
to acquire, perfect, continue or amend its security interest in the Collateral. Borrower will pay the filing and recording costs of any
documents relating to Secured Party’s security interest. Borrower ratifies all previous filings and recordings, including financing
statements and notations on certificates of title. Borrower will cooperate
with Secured Party in obtaining a Control Agreement satisfactory to Secured Party with respect to any Deposit Accounts or Investment Property,
or in otherwise obtaining control or possession of that or any other Collateral.
Borrower is in default under this Agreement if:
(a) Borrower fails to pay, perform or otherwise comply with any provision of this Agreement; (b) Borrower makes any
materially false representation, warranty or certification in, or in connection with, this Agreement, the Note, or any other
agreement related to the Note or this Agreement; (c) another secured party or judgment creditor exercises its rights against
the Collateral; or (d) an event defined as a “default” under the Obligations occurs. In the event of default and if
Secured Party requests, Borrower must assemble and make available all Collateral at a place and time designated by Secured Party.
Upon default and at any time thereafter, Secured Party may declare all Obligations secured hereby immediately due and payable, and,
in its sole discretion, may proceed to enforce payment of same and exercise any of the rights and remedies available to a secured
party by law including those available to it under Article 9 of the UCC that is in effect in the jurisdiction where Borrower or
the Collateral is located. Unless otherwise required under applicable law, Secured Party has no obligation to clean or otherwise
prepare the Collateral for sale or other disposition and Borrower waives any right it may have to require Secured Party to enforce
the security interest or payment or performance of the Obligations against any other person.
When SBA is the holder of the Note, this Agreement will
be construed and enforced under federal law, including SBA regulations. Secured Party or SBA may use state or local procedures for filing
papers, recording documents, giving notice, enforcing security interests or liens, and for any other purposes. By using such procedures,
SBA does not waive any federal immunity from state or local control, penalty, tax or liability. As to this Agreement, Borrower may not
claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.
Unless SBA is the holder of the Note, in which case federal
law will govern, Borrower and Secured Party agree that this Agreement will be governed by the laws of the jurisdiction where the Borrower
is located, including the UCC as in effect in such jurisdiction and without reference to its conflicts of laws principles.
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12.
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SECURED PARTY RIGHTS.
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All rights conferred in this Agreement on Secured Party
are in addition to those granted to it by law, and all rights are cumulative and may be exercised simultaneously. Failure of Secured Party
to enforce any rights or remedies will not constitute an estoppel or waiver of Secured Party’s ability to exercise such rights or
remedies. Unless otherwise required under applicable law, Secured Party is not liable for any loss or damage to Collateral in its possession
or under its control, nor will such loss or damage reduce or discharge the Obligations that are due, even if Secured Party’s actions
or inactions caused or in any way contributed to such loss or damage.
If any provision of this Agreement is unenforceable, all
other provisions remain in effect.
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14.
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BORROWER CERTIFICATIONS.
|
Borrower certifies that: (a) its Name (or Names) as
stated above is correct; (b) all Collateral is owned or titled in the Borrower’s name and not in the name of any other organization
or individual; (c) Borrower has the legal authority to grant the security interest in the Collateral; (d) Borrower’s ownership
in or title to the Collateral is free of all adverse claims, liens, or security interests (unless expressly permitted by Secured Party);
(e) none of the Obligations are or will be primarily for personal, family or household purposes; (f) none of the Collateral
is or will be used, or has been or will be bought primarily for personal, family or household purposes; (g) Borrower has read and
understands the meaning and effect of all terms of this Agreement.
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15.
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BORROWER NAME(S) AND SIGNATURE(S).
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By signing or otherwise authenticating below, each individual
and each organization becomes jointly and severally obligated as a Borrower under this Agreement.
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Phoenix Cars LLC
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/s/ Gillray Cadet
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Date:
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05.26.2020
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Gillray Cadet, Owner/Officer
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Paycheck Protection Program (PPP) Loan Application and Agreement
Zions Bancorporation, N.A. (“Bank”) may require financial information and documentation in addition to this application to
review and underwrite a loan request. Supporting information and documentation on the Business/Applicant and/
or owners includes (but is not limited to) eligible loan amount tax documents and/or applicable SBA forms. Please note that
decisioning this Application may take longer than your First Draw PPP Loan as a result of additional requirements imposed by
the SBA.
Business Applicant Information
Legal Business Name: Business TIN #:
Doing Business as Name:
State of Business Organization:
Complete the following information for one individual with significant responsibility for managing the legal entity
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
1 Zions Bancorporation, N.A. Member FDIC
Date Business Established:
Authorized Signer Information
Is the Applicant or are any owners a director, executive officer or principal shareholder of a financial institution? Yes N o
Was the Applicant in operation on February 15, 2020 or is the Applicant a seasonal business that was in
operation for any 12-week period between February 15, 2019 and February 15, 2020? Yes N o
Is your business permanently closed?
Annual Revenues:
Version 2.15
Is your income derived from rental real estate activities? Yes No
Initials Here
Applicant is not a hedge fund or private equity business nor a publicly traded company (except for a qualified
news organization).
Applicant does not have application(s) for a Second Draw PPP loan pending with another lender and will not if
this application is approved.
This loan is not for an individual who is using the loan proceeds for personal household employees such as
nannies or housekeepers.
The Applicant is NOT engaged in any activity that is illegal under federal, state or local law.
For purposes of determining payroll costs and employee count, Applicant has properly counted its number of
employees, including part-time and/or seasonal employees and confirmed that that for employees included in
the average monthly payroll in this application, their principal place of residence is in the United States.
YesYes No
Yes No
Did the Applicant realize a reduction in gross receipts in excess of 25% for one quarter in 2020 relative to the
borrower's gross receipts for the corresponding quarter of 2019 or if not in business in 2019, for the 2nd, 3rd
or 4th quarter from the 1st quarter of 2020?
Yes No
Do any of the following apply to the Applicant: Is a hospital owned by a governmental agency; electrical
cooperative; telephone cooperative; or an entity engaged in lobbying; or an entity that has any income
derived from gaming.
Yes N o
Did the Applicant receive a First Draw Paycheck Protections Program Loan?
Before the Second Draw Paycheck Protection Program Loan is disbursed, will you have used the full loan
amount (including any increase) of the First Draw Paycheck Protection Program Loan only for eligible
expenses.
Yes N o
Second Draw
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
X
Delaware
No
Yes
No
Rolando Cortez
X
4685823
1963-04-07
Yes
No
586-25-2244
Phoenix Motorcars LLC
X
X
X
No
Phoenix Cars, LLC
X
X
X
90-0509051
Official
Yes
2009-08-17
Yes
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Name Title SSN Address % Owned
Business Entity Owner Information (if applicable)
% Owned:
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
Individual Owners Information (Information as required by SBA)
Ownership Information - (Section not applicable to nonprofit organizations otherwise list all owners of 20% or more of the equity of the applicants)
Legal Business Name: Business TIN/SSN:
Business Type:
State of Business Organization:
Date Business Established:
Business Address:
% Owned:
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
Legal Business Name: Business TIN/SSN:
Business Type:
State of Business Organization:
Date Business Established:
Business Address:
%
%
%
%
%
%
%
2 Zions Bancorporation, N.A. Member FDIC Version 2.15
% Owned:
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
Legal Business Name: Business TIN/SSN:
Business Type:
State of Business Organization:
Date Business Established:
Business Address:
%
% Owned:
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
Legal Business Name: Business TIN/SSN:
Business Type:
State of Business Organization:
Date Business Established:
Business Address:
%
U.S. Citizen*
* U.S. Citizen or has lawful permanent resident status
% Owned:
Authorized Signer Name: SSN:
Role in the Business: Date of Birth:
Legal Business Name: Business TIN/SSN:
Business Type:
State of Business Organization:
Date Business Established:
Business Address:
%
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
94303 Xiaofeng Palo Alto 642-93-1580 740 Mayview Ave Owner 100% California Peng Yes
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The Business, Owner and person(s) signing below hereby (each, an “Applicant”): (1) certify that all information provided
herein is true, correct and complete; (2) authorize the current and past creditors to release information to Bank regarding
the creditworthiness of the Applicant and authorize Bank to check the credit history of the Applicant and verify the
information with any source; (3) authorize Bank to obtain credit reports, including consumer credit reports, and other
information about the Applicant (and if the Applicant is a sole proprietorship, consumer credit reports and employment
history of the Owner’s spouse, if living in a community property state), in connection with this application or in connection
with updates, renewals, extensions or from time to time until any credit granted as a result of this application is repaid in full
and the credit has matured; (4) authorize Bank to report information about credit obtained in connection with this
application to credit bureaus. Late payments, missed payments, or other defaults on credit obtained in connection with this
application may be reflected in credit reports of the Applicant; (5) authorize Bank to release any and all financial and other
information concerning the Applicant to (i) the U.S. Small Business Administration (“SBA”), Office of Inspector General and
other governmental agencies, and (ii) to third parties as Bank desires in its sole discretion in connection with Bank’s
consideration of the proposed credit transactions; (6) represent and warrant that the person(s) signing on behalf of the
Business is/are duly authorized to execute this PPP Loan Application and Agreement and duly bind the Business and delivery
of this PPP Loan Application and Agreement has been authorized by all necessary legal action by the Business and the
Business will provide Bank written confirmation of such action upon request; (7) agrees that by providing a wireless
telephone number(s) herein, the Applicant consents to receiving autodialed and prerecorded message calls and text
messages from Bank or its third-party debt collector at the number(s) provided and confirm that the Applicant is/are the
primary owner(s) of the number(s) and have the authority to provide this consent for the wireless number(s) provided; (8) an
imaged or electronic facsimile or copy of the signatures of the Applicant may be used as evidence of the Applicant’s
agreement to the terms of this PPP Loan Application and Agreement and I (i) waive any right to insist or require that Bank
produce paper originals, (ii) agree that such images shall be accorded the same force and effect as the paper originals, (iii)
agree that Bank is entitled to use such images in lieu of destroyed or archived originals for any purpose, including as
admissible evidence in any demand, presentment or other proceedings, and (iv) further agree that any executed facsimile
(faxed), scanned, or other imaged copy of this document or any document related to the credit applied for hereunder shall
be deemed to be of the same force and effect as the original manually executed document; (9) understand and agree that
the credit applied for under this PPP Loan Application and Agreement may be used only for purposes allowed by applicable
Paycheck Protection Program rules and guidance from the SBA; (10) understand the information provided in this PPP Loan
Application and Agreement is made for the purpose of obtaining credit and any FALSE information may result in forfeiture of
benefits and possible prosecution; (11) agree to provide such information and documentation as Bank may request during
the term of the loan to confirm or update the continued accuracy of any information provided herein.
ADVERSE ACTION NOTICE: If your application for business credit is denied, you have the right to a written statement of the
specific reasons for the denial. To obtain the statement, please contact Business Banking Loan Center, 2460 South 3270
West, West Valley City, UT 84119 or call (888) 290-8509 within 60 days from the date you are notified of our decision. We
will send you a written statement of reasons for the denial within 30 days of receiving your request for the statement.
NOTICE: The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the
basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a
binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the
applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that
administers compliance with this law concerning this creditor is the Bureau of Consumer Financial Protection, 1700 G Street,
NW, Washington, DC 20006
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT AND/OR APPLYING FOR A LOAN. To help
the government fight the funding of terrorism and money-laundering activities, Federal law requires all financial institutions
to obtain, verify, and record information that identifies each business entity and/or person who opens an account. What this
means for you: When you open an account or apply for a loan, we will ask for your Federal Tax Identification Number, full
legal name of your business, the physical address of your business; if you are an individual, we will ask for your full name,
physical address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s
license or other identifying documents that will aid in confirming this information. The Applicant agrees to promptly notify
the Bank (A) of any change in direct or indirect ownership interests in the Applicant as reported in this Application, or (B) if
the individual with significant managerial responsibility identified immediately below cease to have that responsibility, or if
the information reported about that individual changes.
Additional Notice and Acknowledgement Regarding SBA PPP Loan Request
3 Zions Bancorporation, N.A. Member FDIC Version 2.15
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2
Zions Bancorporation, N.A. Member FDIC 4 Version 2.15
Additional Notice and Acknowledgement Regarding SBA PPP Loan Request (continued)
Additional Notice and Acknowledgement Regarding SBA PPP Loan Request (Signature)
Business Entity Applicant Name:
Authorized Officer: Signature: Date:
Printed Name: Title:
Under SBA rules for its Paycheck Protection Program, the borrower is responsible for determining whether it is eligible to
apply for and receive a loan and the maximum amount the borrower may receive for a loan. Because of the SBA rules we are
not in a position to help you make this determination. To help you, however, we have provided links to public information
about the program that might help you determine your eligibility, including information about the Paycheck Protection
Program generally and more specific information about business size limits, affiliation rules affecting those size limits and
business types that are ineligible for Paycheck Protection Program loans. Please note the links provided do not set forth all
applicable SBA rules and may not be the most recent information from the SBA.
If you need assistance in determining your eligibility and the maximum loan amount you may receive, you should consult with
your own advisors, such as a CPA or attorney. There are certain business types – including, but not limited to, companies
associated with private equity or venture capital investors, businesses related to real estate development and businesses
operating under a multi-level marketing model -- for which the eligibility determination can be quite difficult. Rules
pertaining to affiliation are also complex. We strongly advise applicants facing complicated eligibility questions to consult
with such advisors and obtain any confirmations from the advisors, such as written opinions, as the applicant believes is
prudent.
The federal government, the SBA and we will be relying on your certifications in making the loan. If your certifications,
including certifications relating to eligibility or payroll, are incorrect, untrue, or fail to follow the SBA Paycheck Protection
Program rules you may be subject to penalties under the Paycheck Protection Program or other federal laws making it
unlawful to submit false information to a bank or federal agency in connection with a loan and/or if a loan is approved, you
may not receive loan forgiveness.
The SBA has issued several rules and answered several questions in the form of Frequently Asked Questions (“FAQs”)
regarding the Paycheck Protection Program including, but not limited to issues pertaining to, eligibility, how to calculate loan
amounts, and loan forgiveness. As you determine your eligibility, loan amounts, loan forgiveness and other aspects of the
Paycheck Protection Program, you should ensure you are reviewing all updated SBA rules, FAQs and other SBA directives
pertaining to the Paycheck Protection Program.
General PPP Information on Second Draw Loans: Click here
For list of ineligible businesses under SBA 7(a) program (ineligibility of certain business types may have been overridden by
PPP rules): Click here
For information on ineligible businesses under SBA 7a program (ineligible of certain business types may have been overridden
by PPP rules.): Click here
For detailed information on SBA 7(a) size standards: Click here
For information on affiliations (aggregation of employees of affiliated companies): Click here
For information on affiliations among faith-based organizations Click here
For additional information on PPP: Click here
For frequently asked questions: Click here
Confirm Applicant is an eligible business under the SBA Paycheck Protection Program and satisfies the size requirements of
the SBA after applying the affiliation rule. Initials Here
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
LINK
LINK
Phoenix Cars, LLC
LINK
LINK
LINK
LINK
Rolando Cortez
LINK
1/21/2021
Official
LINK
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1 SBA Form 2483-SD (1/21)
Paycheck Protection Program
Second Draw Borrower Application Form
OMB Control No.: 3245-0417
Expiration Date: 7/31/2021
Check One: DBA or Tradename (if
applicable)
Year of Establishment (if
applicable)
Business Legal Name NAICS Code
Business Address (Street, City, State, Zip Code - No P.O. Box addresses
allowed) Business TIN (EIN, SSN) Business Phone
Primary Contact Email Address
Average Monthly
Payroll:
x 2.5 (or x 3.5 for NAICS
72 applicants) equals Loan
Request Amount (may not
exceed $2,000,000):
Number of Employees
(including affiliates, if
applicable; may not exceed 300):
Purpose of the
loan (select all that
apply):
☐Payroll Costs ☐Rent / Mortgage Interest ☐Utilities ☐Covered Operations
Expenditures
☐Covered Property
Damage
☐Covered Supplier Costs ☐Covered Worker
Protection Expenditures
☐Other (explain):
______________________
PPP First Draw
SBA Loan Number:
Reduction in Gross Receipts of at Least
25% (Applicants for loans of $150,000 or
less may leave blank but must provide
upon or before seeking loan forgiveness
or upon SBA request):
2020 Quarter
(e.g., 2Q 2020):
Reference Quarter
(e.g., 2Q 2019):
Gross Receipts: Gross Receipts
Applicant Ownership
List all owners of 20% or more of the equity of the Applicant. Attach a separate sheet if necessary.
Owner Name Title Ownership % TIN (EIN, SSN) Address
If questions (1), (2), (4), or (5) are answered “Yes,” the loan will not be approved.
Question Yes No
1. Is the Applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible,
voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any
bankruptcy?
2. Has the Applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or
guaranteed loan from SBA or any other Federal agency that is (a) currently delinquent, or (b) has defaulted in the last 7 years and
caused a loss to the government?
3. Is the Applicant or any owner of the Applicant an owner of any other business, or have common management (including a
management agreement) with any other business? If yes, list all such businesses (including their TINs if available) and describe the
relationship on a separate sheet identified as addendum A.
4. Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant presently incarcerated or, for
any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges
are brought in any jurisdiction?
Initial here to confirm your response to question 4 →
5. Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an
application for federal financial assistance, or within the last year, for any other felony, has the Applicant (if an individual) or any
owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) commenced any form of parole or
probation (including probation before judgment)?
Initial here to confirm your response to question 5 →
6. Is the United States the principal place of residence for all employees included in the Applicant’s payroll calculation above?
7. Is the Applicant a franchise?
8. Is the franchise listed in SBA’s Franchise Directory? If yes, enter SBA Franchise Identifier Code here:
Sole Proprietor Partnership C-Corp S-Corp LLC
Independent Contractor Self-Employed Individual
501(c)(3) nonprofit 501(c)(6) organization
501(c)(19) veterans organization Housing cooperative
Tribal Business Other
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
100%
94303
X
No
No
8068697702
Yes
740 Mayview Ave
No
34
Owner
X
No
401 S. Doubleday Avenue
642-93-1580
No
Xiaofeng
234533.18
91761
909-287-9660
Rolando
X
California
X
rolandoc@phoenixmotorcars.com
336112
Palo Alto
1736008.24
Phoenix Cars, LLC
No
Ontario
90-0509051
X
California
LLC
Peng
633406.40
Cortez
X
Q3 2020 Q2 2019
Phoenix Motorcars LLC
X
Utilities;Payroll Costs;Rent / Mortgage Interest;Covered Operations Expenditures
2009-08-17
586332.00
X
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2 SBA Form 2483-SD (1/21)
Paycheck Protection Program
Second Draw Borrower Application Form
By Signing Below, You Make the Following Representations, Authorizations, and Certifications
I certify that:
• I have read the statements included in this form, including the Statements Required by Law and Executive Orders, and I understand them.
• The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the Small
Business Administration (SBA) and the Department of the Treasury (Treasury) implementing Second Draw Paycheck Protection Program Loans
under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Economic Aid to Hard-Hit Small
Businesses, Nonprofits, and Venues Act (the Paycheck Protection Program Rules).
• The Applicant, together with its affiliates (if applicable), (1) is an independent contractor, self-employed individual, or sole proprietor with no
employees; (2) employs no more than 300 employees; or (3) if NAICS 72, employs no more than 300 employees per physical location; (4) if a
news organization that is majority owned or controlled by a NAICS code 511110 or 5151 business or a nonprofit public broadcasting entity with
a trade or business under NAICS code 511110 or 5151, employs no more than 300 employees per location.
• I will comply, whenever applicable, with the civil rights and other limitations in this form.
• All loan proceeds will be used only for business-related purposes as specified in the loan application and consistent with the Paycheck Protection
Program Rules including the prohibition on using loan proceeds for lobbying activities and expenditures. If Applicant is a news organization
that became eligible for a loan under Section 317 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, proceeds of
the loan will be used to support expenses at the component of the business concern that produces or distributes locally focused or emergency
information.
• I understand that SBA encourages the purchase, to the extent feasible, of American-made equipment and products.
• The Applicant is not engaged in any activity that is illegal under federal, state or local law.
For Applicants who are individuals: I authorize the SBA to request criminal record information about me from criminal justice agencies for the
purpose of determining my eligibility for programs authorized by the Small Business Act, as amended.
The authorized representative of the Applicant must certify in good faith to all of the below by initialing next to each one:
The Applicant was in operation on February 15, 2020, has not permanently closed, and was either an eligible self-employed individual,
independent contractor, or sole proprietorship with no employees, or had employees for whom it paid salaries and payroll taxes or paid
independent contractors, as reported on Form(s) 1099-MISC.
Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.
The Applicant has realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period. For loans greater
than $150,000, Applicant has provided documentation to the lender substantiating the decline in gross receipts. For loans of $150,000 or
less, Applicant will provide documentation substantiating the decline in gross receipts upon or before seeking loan forgiveness for the Second
Draw Paycheck Protection Program Loan or upon SBA request.
The Applicant received a First Draw Paycheck Protection Program Loan and, before the Second Draw Paycheck Protection Program Loan
is disbursed, will have used the full loan amount (including any increase) of the First Draw Paycheck Protection Program Loan only for
eligible expenses.
The funds will be used to retain workers and maintain payroll; or make payments for mortgage interest, rent, utilities, covered operations
expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures as specified under the
Paycheck Protection Program Rules; I understand that if the funds are knowingly used for unauthorized purposes, the federal government
may hold me legally liable, such as for charges of fraud.
I understand that loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered
rent payments, covered utilities, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker
protection expenditures, and not more than 40% of the forgiven amount may be for non-payroll costs. If required, the Applicant will provide
to the Lender and/or SBA documentation verifying the number of full-time equivalent employees on the Applicant’s payroll as well as the
dollar amounts of eligible expenses for the covered period following this loan.
The Applicant has not and will not receive another Second Draw Paycheck Protection Program Loan.
The Applicant has not and will not receive a Shuttered Venue Operator grant from SBA.
The President, the Vice President, the head of an Executive department, or a Member of Congress, or the spouse of such person as determined
under applicable common law, does not directly or indirectly hold a controlling interest in the Applicant, with such terms having the meanings
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6 THIS IS A COPY
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3 SBA Form 2483-SD (1/21)
provided in Section 322 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
The Applicant is not an issuer, the securities of which are listed on an exchange registered as a national securities exchange under section 6
of the Securities Exchange Act of 1934 (15 U.S.C. 78f).
The Applicant is not a business concern or entity (a) for which an entity created in or organized under the laws of the People’s Republic of
China or the Special Administrative Region of Hong Kong, or that has significant operations in the People’s Republic of China or the Special
Administrative Region of Hong Kong, owns or holds, directly or indirectly, not less than 20 percent of the economic interest of the business
concern or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership; or (b) that retains, as
a member of the board of directors of the business concern, a person who is a resident of the People’s Republic of China.
The Applicant is not required to submit a registration statement under section 2 of the Foreign Agents Registration Act of 1938 (22 U.S.C.
612).
The Applicant is not a business concern or entity primarily engaged in political or lobbying activities, including any entity that is organized
for research or for engaging in advocacy in areas such as public policy or political strategy or otherwise describes itself as a think tank in any
public documents.
I further certify that the information provided in this application and the information provided in all supporting documents and forms is true
and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable
under the law, including under 18 U.S.C. 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under
15 U.S.C. 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured
institution, under 18 U.S.C. 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.
I acknowledge that the Lender will confirm the eligible loan amount using required documents submitted. I understand, acknowledge, and
agree that the Lender can share any tax information that I have provided with SBA’s authorized representatives, including authorized
representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA
reviews.
_________________________________________________________ ________________________
Signature of Authorized Representative of Applicant Date
_________________________________________________________ ________________________
Print Name Title
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1/21/2021
Official Rolando Cortez
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4 SBA Form 2483-SD (1/21)
Paycheck Protection Program
Second Draw Borrower Application Form
Purpose of this form:
This form is to be completed by the authorized representative of the Applicant and submitted to your SBA Participating Lender. Submission of the requested
information is required to make a determination regarding eligibility for financial assistance. Failure to submit the information would affect that
determination.
Instructions for completing this form:
With respect to “purpose of the loan,” payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the
form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such
records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave (except those paid leave
amounts for which a credit is allowed under FFCRA Sections 7001 and 7003); allowance for separation or dismissal; payment for the provision of employee
benefits consisting of group health care coverage (including insurance premiums), group life, disability, vision, or dental insurance, and retirement benefits;
payment of state and local taxes assessed on compensation of employees; and, for an independent contractor or sole proprietor, wage, commissions, income,
or net earnings from self-employment or similar compensation.
For purposes of calculating “Average Monthly Payroll,” most Applicants will use the average monthly payroll for 2019 or 2020, excluding costs over
$100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, for
each employee. For seasonal businesses, the Applicant may elect to instead use average total monthly payroll for any twelve-week period selected by the
Applicant between February 15, 2019 and February 15, 2020, excluding costs over $100,000 on an annualized basis, as prorated for the period during which
the payments are made or the obligation to make the payments is incurred, for each employee. For new businesses without 12 months of payroll costs but
that were in operation on February 15, 2020, average monthly payroll may be calculated based on the number of months in which payroll costs were incurred,
excluding costs over $100,000 on an annualized basis for each employee, as prorated for the period during which the payments are made or the obligation
to make the payments is incurred, for each employee. For farmers and ranchers that operate as a sole proprietorship or as an independent contractor, or who
are eligible self-employed individuals and report farm income or expenses on a Schedule F (or any equivalent successor IRS form), payroll costs are
computed using eligible payroll costs for employees, if any, plus the lesser of $100,000 and the difference between gross income and any eligible payroll
costs for employees, as reported on a Schedule F. For Applicants that file IRS Form 1040, Schedule C, payroll costs are computed using line 31 net profit
amount, limited to $100,000, plus any eligible payroll costs for employees. For Applicants that are partnerships, payroll costs are computed using net
earnings from self-employment of individual general partners, as reported on IRS Form 1065 K-1, reduced by section 179 expense deduction claimed,
unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties, multiplied by 0.9235, that is not more than $100,000, plus any
eligible payroll costs for employees.
In determining whether the Applicant experienced at least a 25% reduction in gross receipts, for loans above $150,000, the Applicant must identify the 2020
quarter meeting this requirement, identify the reference quarter, and state the gross receipts amounts for both quarters, as well as provide supporting
documentation. For loans of $150,000 and below, these fields are not required and the Applicant only must certify that the Applicant has met the 25% gross
receipts reduction at the time of application; however, upon or before seeking loan forgiveness (or upon SBA request) the Applicant must provide
documentation that identifies the 2020 quarter meeting this requirement, identifies the reference quarter, states the gross receipts amounts for both quarters,
and supports the amounts provided. For all loans, the appropriate reference quarter depends on how long the Applicant has been in operation:
• For all entities other than those satisfying the conditions set forth below, Applicants must demonstrate that gross receipts in any quarter of 2020 were
at least 25% lower than the same quarter of 2019. Alternatively, Applicants may compare annual gross receipts in 2020 with annual gross receipts in
2019; Applicants choosing to use annual gross receipts must enter “Annual” in the 2020 Quarter and Reference Quarter fields and, as required
documentation, must submit copies of annual tax forms substantiating the annual gross receipts reduction.
• For entities not in business during the first and second quarters of 2019 but in operation during the third and fourth quarters of 2019, Applicants must
demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than either the third or fourth quarters of 2019.
• For entities not in business during the first, second, and third quarters of 2019 but in operation during the fourth quarter of 2019, Applicants must
demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the fourth quarter of 2019.
• For entities not in business during 2019 but in operation on February 15, 2020, Applicants must demonstrate that gross receipts in the second, third, or
fourth quarter of 2020 were at least 25% lower than the first quarter of 2020.
Gross receipts includes all revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source,
including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally,
receipts are considered “total income” (or in the case of a sole proprietorship “gross income”) plus “cost of goods sold” and excludes net capital gains or
losses as these terms are defined and reported on IRS tax return forms. Gross receipts do not include the following: taxes collected for and remitted to a
taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its
employees; proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real
estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. All other items, such as subcontractor costs,
reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be
excluded from gross receipts. Gross receipts of a borrower must be aggregated with gross receipts of its affiliates. For a nonprofit organization, veterans
organization, nonprofit news organization, 501(c)(6) organization, and destination marketing organization, gross receipts has the meaning in section 6033
of the Internal Revenue Code of 1986.
For purposes of reporting Number of Employees, sole proprietors, self-employed individuals, and independent contractors should include themselves as
employees (i.e., the minimum number in the box “Employees” is one). For NAICS 72 or eligible news organizations, applicants may not exceed 300 per
physical location.
For purposes of reporting Year of Establishment, self-employed individuals and independent contractors may enter “NA”.
For purposes of reporting NAICS Code, applicants must match the business activity code provided on their IRS income tax filings, if applicable. For
purposes of calculating an Applicant’s maximum payroll costs, an Applicant may multiply its average monthly payroll costs by 3.5 only if the Applicant is
in the Accommodation and Food Services sector and has reported a NAICS code beginning with 72 as its business activity code on its most recent IRS
income tax return.
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5 SBA Form 2483-SD (1/21)
All parties listed below are considered owners of the Applicant as well as “principals”:
• For a sole proprietorship, the sole proprietor;
• For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;
• For a corporation, all owners of 20% or more of the corporation;
• For limited liability companies, all members owning 20% or more of the company; and
• Any Trustor (if the Applicant is owned by a trust).
Paperwork Reduction Act – You are not required to respond to this collection of information unless it displays a currently valid OMB Control Number.
The estimated time for completing this application, including gathering data needed, is 8 minutes. Comments about this time or the information requested
should be sent to: Small Business Administration, Director, Records Management Division, 409 3rd St., SW, Washington DC 20416, and/or SBA Desk
Officer, Office of Management and Budget, New Executive Office Building, Washington DC 20503. PLEASE DO NOT SEND FORMS TO THESE
ADDRESSES.
Privacy Act (5 U.S.C. 552a) – Under the provisions of the Privacy Act, you are not required to provide your social security number. Failure to provide your
social security number may not affect any right, benefit or privilege to which you are entitled. (But see Debt Collection Notice regarding taxpayer
identification number below.) Disclosures of name and other personal identifiers are required to provide SBA with sufficient information to make a character
determination. When evaluating character, SBA considers the person’s integrity, candor, and disposition toward criminal actions. Additionally, SBA is
specifically authorized to verify your criminal history, or lack thereof, pursuant to section 7(a)(1)(B), 15 USC Section 636(a)(1)(B) of the Small Business
Act.
Disclosure of Information – Requests for information about another party may be denied unless SBA has the written permission of the individual to release
the information to the requestor or unless the information is subject to disclosure under the Freedom of Information Act. The Privacy Act authorizes SBA
to make certain “routine uses” of information protected by that Act. One such routine use is the disclosure of information maintained in SBA’s system of
records when this information indicates a violation or potential violation of law, whether civil, criminal, or administrative in nature. Specifically, SBA may
refer the information to the appropriate agency, whether Federal, State, local or foreign, charged with responsibility for, or otherwise involved in
investigation, prosecution, enforcement or prevention of such violations. Another routine use is disclosure to other Federal agencies conducting background
checks but only to the extent the information is relevant to the requesting agencies’ function. See, 74 F.R. 14890 (2009), and as amended from time to time
for additional background and other routine uses. In addition, the CARES Act, requires SBA to register every loan made under the Paycheck Protection
Program using the Taxpayer Identification Number (TIN) assigned to the borrower.
Debt Collection Act of 1982, Deficit Reduction Act of 1984 (31 U.S.C. 3701 et seq. and other titles) – SBA must obtain your taxpayer identification
number when you apply for a loan. If you receive a loan, and do not make payments as they come due, SBA may: (1) report the status of your loan(s) to
credit bureaus, (2) hire a collection agency to collect your loan, (3) offset your income tax refund or other amounts due to you from the Federal Government,
(4) suspend or debar you or your company from doing business with the Federal Government, (5) refer your loan to the Department of Justice, or (6) take
other action permitted in the loan instruments.
Right to Financial Privacy Act of 1978 (12 U.S.C. 3401) – The Right to Financial Privacy Act of 1978, grants SBA access rights to financial records held
by financial institutions that are or have been doing business with you or your business including any financial institutions participating in a loan or loan
guaranty. SBA is only required provide a certificate of its compliance with the Act to a financial institution in connection with its first request for access to
your financial records. SBA’s access rights continue for the term of any approved loan guaranty agreement. SBA is also authorized to transfer to another
Government authority any financial records concerning an approved loan or loan guarantee, as necessary to process, service or foreclose on a loan guaranty
or collect on a defaulted loan guaranty.
Freedom of Information Act (5 U.S.C. 552) – This law provides, with some exceptions, that SBA must supply information reflected in agency files and
records to a person requesting it. Information about approved loans that is generally released includes, among other things, statistics on our loan programs
(individual borrowers are not identified in the statistics) and other information such as the names of the borrowers, the amount of the loan, and the type of
the loan. Proprietary data on a borrower would not routinely be made available to third parties. All requests under this Act are to be addressed to the nearest
SBA office and be identified as a Freedom of Information request.
Occupational Safety and Health Act (15 U.S.C. 651 et seq.) – The Occupational Safety and Health Administration (OSHA) can require businesses to
modify facilities and procedures to protect employees. Businesses that do not comply may be fined and required to abate the hazards in their workplaces.
They may also be ordered to cease operations posing an imminent danger of death or serious injury until employees can be protected. Signing this form is
certification that the applicant, to the best of its knowledge, is in compliance with the applicable OSHA requirements, and will remain in compliance during
the life of the loan.
Civil Rights (13 C.F.R. 112, 113, 117) – All businesses receiving SBA financial assistance must agree not to discriminate in any business practice, including
employment practices and services to the public on the basis of categories cited in 13 C.F.R., Parts 112, 113, and 117 of SBA Regulations. All borrowers
must display the "Equal Employment Opportunity Poster" prescribed by SBA.
Equal Credit Opportunity Act (15 U.S.C. 1691) – Creditors are prohibited from discriminating against credit applicants on the basis of race, color, religion,
national origin, sex, marital status or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s
income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection
Act.
Debarment and Suspension Executive Order 12549 (2 C.F.R. Part 180 and Part 2700) – By submitting this loan application, you certify that neither
the Applicant or any owner of the Applicant have within the past three years been: (a) debarred, suspended, declared ineligible or voluntarily excluded from
participation in a transaction by any Federal Agency; (b) formally proposed for debarment, with a final determination still pending; (c) indicted, convicted,
or had a civil judgment rendered against you for any of the offenses listed in the regulations or (d) delinquent on any amounts owed to the U.S. Government
or its instrumentalities as of the date of execution of this certification.
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6 SBA Form 2483-SD (1/21)
PPP Borrower Demographic Information Form (Optional)
Instructions
1. Purpose. Veteran/gender/race/ethnicity data is collected for program reporting purposes only.
2. Description. This form requests information about each of the Borrower’s Principals. Add additional sheets if necessary.
3. Definition of Principal. The term “Principal” means:
• For a self-employed individual, independent contractor, or a sole proprietor, the self-employed individual, independent
contractor, or sole proprietor.
• For a partnership, all general partners and all limited partners owning 20% or more of the equity of the Borrower, or any partner
that is involved in the management of the Borrower’s business.
• For a corporation, all owners of 20% or more of the Borrower, and each officer and director.
• For a limited liability company, all members owning 20% or more of the Borrower, and each officer and director.
• Any individual hired by the Borrower to manage the day-to-day operations of the Borrower (“key employee”).
• Any trustor (if the Borrower is owned by a trust).
• For a nonprofit organization, the officers and directors of the Borrower.
4. Principal Name. Insert the full name of the Principal.
5. Position. Identify the Principal’s position; for example, self-employed individual; independent contractor; sole proprietor; general
partner; owner; officer; director; member; or key employee.
Principal Name Position
Disclosure is voluntary and will have no bearing on the loan application decision
Veteran 1=Non-Veteran; 2=Veteran; 3=Service-Disabled Veteran; 4=Spouse of Veteran; X=Not
Disclosed
Gender M=Male; F=Female; X=Not Disclosed
Race (more than 1
may be selected)
1=American Indian or Alaska Native; 2=Asian; 3=Black or African-American; 4=Native
Hawaiian or Pacific Islander; 5=White; X=Not Disclosed
Ethnicity H=Hispanic or Latino; N=Not Hispanic or Latino; X=Not Disclosed
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
Senior Accountat
Male
Not Hispanic or Latino
Asian
Non-Veteran
Rolando M Cortez
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Business Lending Resolutions
Name of Business (Entity):___________________________________
Banking Resolutions
The undersigned, hereby certifies to Zions Bancorporation, N.A. (“Bank”) that if the Entity identified above is: (i) a corporation,
then the undersigned is the Secretary or Executive Officer or other authorized person, and designated keeper of the records
and minutes of the Entity identified above; (ii) a sole proprietorship, then the undersigned is the individual owner; (iii) a
partnership, then the undersigned is a general partner; (iv) a limited liability company, then the undersigned is a member (if
management is by members), or a manager (if management is by a manager); (vii) a trust, then the undersigned is a trustee of
the trust; or (viii) not one of the aforementioned entities, then the undersigned is a representative of the governing body of the
Entity and designated keeper of the records and minutes of the Entity identified above. Also, the undersigned hereby certifies
to the Bank that: (i) the undersigned has full authority to make the representations set forth in these Resolutions on behalf of
the Entity and the following is a true and correct copy or description of the Resolutions duly adopted by the requisite Board of
Directors (if a corporation), by the partners (if a partnership), by the members/managers (if a limited liability company), by the
proprietor (if a sole proprietorship), or otherwise by the other governing authority of the Entity at a meeting, at which a
quorum was present and acting throughout, or adopted by the written consent of a majority of those entitled or required to act
to bind the Entity; and, in addition to certifying the following Resolutions, if a trust, the undersigned trustee certifies that (a) the
trust is in existence as of this date this document is executed and is evidenced by a trust instrument executed on the date set
forth in the trust instrument; (b) the trust will not be revoked or substantially amended for the term of the Loan Agreements
without the consent of the Bank and SBA; (c) the trustee has authority to act, including the power to do, or perform, all of the
acts and things on behalf of the trust set forth in this document; (d) the trust has the authority to borrow funds; (e) the trust
agreement has specific language confirming the above; (f) upon request, the trustee will provide to Bank and the SBA with a
true and complete list of all trustors, settlors and donors and copies of excerpts from the trust instrument and amendments
which designate the trustee and confer upon the trustee the power to act in these transactions, and that Lender may require
such further identification or legal opinion supporting the Trustee authority and power as Lender shall deem necessary and
prudent; and (ii) that such Resolutions are in full force and effect:
1. Resolved, that the person signing below (“Authorized Principal” also "Authorized Officer"), acting alone, may now and in
the future enter into any agreement, on behalf of and in the name of the Entity, with the Bank in order to: (i) borrow
money in any sum that an Authorized Principal deems necessary for the Entity; (ii) promise to repay the sum or sums
borrowed on the terms set by the Bank; and (iii) pledge any property of the Entity as security for the payment of any sums
borrowed.
2. Resolved, that the Authorized Principal, acting alone, is authorized to read, acknowledge and execute on behalf of the Entity
the: (i) Paycheck Protection Program (PPP) Loan Application & Agreement (“Application”); (ii) the Promissory Note; (iii) the
Credit Agreement (or agree to the terms of the Credit Agreement); and (iv) any and all other agreements, documents, or
instruments Lender may require in connection with the loan contemplated hereby (collectively, the “Loan
Agreements” or “Credit Agreement”);
3. Resolved that the Authorized Principal, acting alone, may now and in the future: authorize one or more individuals
(“Authorized User”), regardless of whether he or she is an Authorized Principal, to execute and/or deliver any document,
agreement, instruction, notice, and amendment as the Authorized Principal deems necessary in connection with the Loan
Agreements, this Application & Agreement, or any loan forgiveness applications.
4. Resolved that the Authorized Principal or Authorized User, acting alone, may now or in the future: accept and enter into
deposit account, investment, funds transfer, and other banking service and product agreements including but not limited
to Bank's Treasury Management Master Services Agreement (“MSA”), Acceptances of Treasury Management Agreements
(“Acceptances”), and “Specifications” (as defined in the MSA) for treasury management services (“Services”), including
amendments and addenda to any of the foregoing; designate from time to time who is authorized to withdraw funds, initiate
and approve payment orders, endorse instruments, and execute service and product agreements; appoint
“Administrators” (as defined in the MSA) who are able to establish other Administrators, authorized users, security
procedures, Specifications (as defined in the MSA), and other setup details for Services; (D) request Services and execute
documents that Bank may request, and any amendments or renewals thereof, pertaining to the use of Services, including but not
limited to designating one or more persons (which may include himself or herself) authorized to initiate, amend, cancel, confirm,
or verify the authenticity of instructions to Bank for Services, whether given orally, electronically, or by facsimile instructions,
and to revoke any authorization granted to any such person, as he or she deems appropriate; and otherwise give instructions
and authorizations on behalf of this Company for security procedures, the Services and other banking services.
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5. Resolved, that the authorizations by Entity as described in these Resolutions are in addition to all other authorizations in
effect; however, if these Resolutions conflict with any other authorizations in effect, then these Resolutions will prevail only to
extent to resolve the conflict, and these Resolutions will remain in full force and effect until the Bank receives written notice of
their revocation at the address of 2460 South 3270 West, Attn: Business Banking Loan Center, West Valley City, UT 84119.
6. Resolved, that these Resolutions may be signed and transmitted by electronic mail of a .PDF document or other electronic
format and thereafter maintained in imaged or electronic form, and that such imaged or electronic record shall be valid and
effective to bind the party so signing as a paper copy bearing such party’s hand-written signature and that the signatures
appearing on these Resolutions (whether in imaged or other electronic format) shall be treated, for purpose of validity,
enforceability and admissibility, the same as hand-written signatures.
7. Resolved, that in the event the Bank requests, from time to time, Entity will deliver certified copies of documents evidencing
authorizations and approvals (e.g., organizational documents filed with the Entity’s state or jurisdiction of organization, bylaws,
operating agreements, resolutions, minutes and incumbency certificates, etc.).
8. The undersigned hereby certify, under penalty of perjury of the laws of the state or jurisdiction for which the Entity is
organized: (i) I am the Authorized Representative of the above named Entity; (ii) the foregoing Resolutions were duly adopted
by the governing body of this Entity and are in effect; (iii) the foregoing Resolutions are true, correct, and complete; (iv) that the
signatures or initials appearing on this Application & Agreement are those of the persons authorized in accordance with the
Resolutions; and (v) that Loan Agreements are the binding obligation of this Entity.
Business Entity
Borrower Name:
Authorized Officer: Signature by: Date:
Printed Name Title: Authorized Officer of
Borrower
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Rolando Cortez
1/21/2021
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PROMISSORY NOTE
The undersigned borrower (“Borrower”) understands, acknowledges and agrees that, even though Borrower is executing
this Promissory Note (the “Note”) and an accompanying Credit Agreement and submitting them together with Borrower’s
application for a Paycheck Protection Program (“PPP”) loan (a “Loan”), Borrower’s execution of this Note and the Credit
Agreement does not mean that the Lender has approved any Loan. The Lender will hold this Note and the Credit Agreement
in escrow until the Loan application is approved or denied. Borrower further understands, acknowledges and agrees that
the Loan is subject to and may be approved (if at all) only in accordance with all applicable PPP rules and all policies and
procedures of the Lender and the U.S. Small Business Administration. If the application is denied, the Note and the Credit
Agreement will have no force and effect. If the application is approved, the Lender will provide a Confirmation Letter to
Borrower that will establish the Maturity Date of the Loan. Borrower further agrees, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, as follows:
PROMISE TO PAY:
In return for the Loan, Borrower promises to pay to Zions Bancorporation, N.A. dba
("Lender"), the principal amount of in lawful money of the United States of America, plus interest on the
unpaid principal balance, and all other amounts required by this Note.
CONFIRMED LOAN TERMS: Lender must obtain a SBA loan number and Lender must provide Borrower a letter (the
“Confirmation Letter”) confirming certain loan terms, as conditions to the Loan becoming approved by Lender. The
Confirmation Letter will set forth general terms of the Loan, including, without limitation, the principal amount, the loan type,
the Loan Origination Date, Loan Maturity, and other miscellaneous terms. This Note and the Confirmation Letter, together
with the Credit Agreement (which is included with the Paycheck Protection Program (PPP) Loan Application and
Agreement (the “Application”), set forth the terms and conditions which shall govern the Loan. All of the terms and
conditions of the Confirmation Letter and the Credit Agreement are hereby incorporated in this Note by reference and
represent the final agreement between Lender and Borrower, and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreement of the parties. References to this Note shall include the Confirmation
Letter and the Credit Agreement as applicable. Acceptance of the Loan proceeds by Borrower shall further evidence that the
Loan is governed by the Confirmation Letter.
This Note, the Confirmation Letter, the Credit Agreement, the Business Lending Resolutions, and any and all other documents,
instruments, or agreements executed and/or delivered in connection with the Loan shall be collectively referred to as the
“Loan Documents”. By signing below, Borrower agrees to be bound by all of the terms of the Loan Documents, as amended
and modified from time to time.
DEFINITIONS:
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), as amended.
“Deferment Period” shall be the earlier of (i) the date on which the amount of forgiveness determined under section 1106 of
the CARES Act is remitted to Lender (or, if earlier, the date the SBA determines that the loan is not eligible for forgiveness in
the full amount requested), or (ii) if Borrower fails to apply for forgiveness within 10 months after the date that is 24 weeks
after the Loan Origination Date (with that 24-week period referred to as the “Imputed Covered Period”), the date that is 10
months after the last day of the Imputed Covered Period. Lender will provide Borrower the monthly payment amount after the
Deferment Period.
“Division” means the lending division of Lender designated above as the bank “dba” of Lender.
“Economic Aid Act” means the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (P.L.116-260), as
amended.
“Loan” means the loan evidenced by this Note, the Confirmation Letter and the other Loan Documents.
“Loan Origination Date” means the date the Loan is approved as stated in the Confirmation Lender.
“Paycheck Protection Program” means the SBA Paycheck Protection Program authorized and governed by the CARES Act and
the Economic Aid Act.
“PPP Rules” means the Paycheck Protection Program rules, directives, and regulations made by the SBA or United States
Treasury.
“SBA” means the Small Business Administration, an Agency of the United States of America.
PAYMENT TERMS:
Borrower must make all payments at the place Lender designates. The payment terms for this Note are:
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The interest rate on this Note shall be calculated from the Loan Origination Date set forth in the Confirmation Letter using an
interest rate of 1.00% per annum, until paid in full. Interest on the Note is computed on an actual/365 simple interest basis;
that is by applying the ratio of the interest rate over the number of days in a year (365 for all years, including leap years),
multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.
All interest payment under this Note is computed using this method. Interest will continue to accrue during the Deferment
Period.
Borrower will pay the Loan in accordance with the following payment schedule: Borrower will pay the Loan in monthly
installment payments of the outstanding balance of principal and interest after the Deferment Period amortized over the
remaining term of the Loan. Borrower's first payment is due 30 days after the last day of the Deferment Period, and all
subsequent payments are due on the same day of each month after that (or the last day of any subsequent month that does
not have the same day as the first payment date). Borrower's final payment will be due on the Maturity Date which is five
years from the Loan Origination Date, and will be for all principal and all accrued interest not yet paid. Payments shall include
principal and interest, with Lender to provide to Borrower the amount of the monthly payment and the first payment date.
Notwithstanding the forgoing and to the extent not otherwise prohibited by law, any principal balance, remaining after the SBA
remits its forgiveness decision, that is equal to or less than what would have been a principal and interest payment amortized
over the term of the Loan calculated prior to any forgiveness, as such shall be provided by Lender to Borrower, shall be paid
in full on Borrower’s first payment after the Deferment Period unless otherwise agreed to in writing by Borrower and Lender.
LOAN PREPAYMENT:
Notwithstanding any provision in this Note to the contrary:
Borrower may prepay this Note. Borrower may prepay 20 percent or less of the unpaid principal balance of the Loan at any
time without notice. If Borrower prepays more than 20 percent of the unpaid principal balance of the Loan and the Loan has,
prior to such prepayment, been sold on the secondary market, Borrower must:
a. Give Lender written notice;
b. Pay all accrued interest; and
c. If the prepayment is received less than 21 days from the date the Lender receives the notice, pay an amount equal to
21 days' interest from the date Lender receives the notice, less any interest accrued during the 21 days and paid under
subparagraph b. above.
If Borrower does not prepay within 30 days from the date Lender receives the notice, Borrower must give Lender a new notice.
Prepayments of principal shall be applied to payments in the inverse order of their maturities.
LOAN FORGIVENESS:. Borrower may apply to Lender for loan forgiveness pursuant to the CARES Act and the Economic Aid Act,
and in accordance with the requirements of the PPP Rules.
ANNUAL AMORTIZATION: Notwithstanding any other term in this Note, Lender may in its sole discretion, re-amortize the loan
not more than once each year to obtain full amortization at the Maturity Date.
MATURITY DATE: This Note will mature five years from Loan Origination Date which date is set forth in the Confirmation Letter.
LATE CHARGE: If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly
scheduled payment.
DISHONORED ITEM FEE: Borrower will pay Lender a dishonored item fee in the amount charged by the Division which made the
Loan up to $25 if Borrower’s payment is later dishonored, or as determined by Lender.
DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if
Borrower:
A. Fails to do anything required by this Note and other Loan Documents
B. Defaults on any other loan or agreement with Lender;
C. Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or the SBA;
D. Makes, or anyone acting on their behalf makes, a false or misleading representation to Lender or the SBA;
E. Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect
Borrower’s ability to pay this Note;
F. Fails to pay any taxes when due;
G. Becomes the subject of a proceeding under any bankruptcy or insolvency law;
H. Has a receiver or liquidator appointed for any part of its business or property;
I. Is dissolved or any other termination of Borrower’s existence or the death of Borrower if Borrower is an individual, or
the death of the sole owner of Borrower;
J. Makes an assignment for the benefit of creditors;
K. Has any adverse change in financial condition or business operation that Lender believes may materially affect
Borrower’s ability to pay this Note;
L. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior
written consent;
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M. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this
Note; or,
N. Borrower is determined to be ineligible for this Paycheck Protection Program loan or otherwise fails to follow the PPP
Rules.
LENDER’S RIGHTS IF THERE IS A DEFAULT: Without notice or demand and without giving up any of its rights, Lender may:
A. Require immediate payment of all amounts owing under this Note;
B. Collect all amounts owing from any Borrower;
C. File suit and obtain judgment; and/or
D. Pursue all other remedies allowed by applicable law.
Except as may be prohibited by law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Lender’s pursuit of any remedy shall not exclude pursuit of any other remedy.
LENDER’S GENERAL POWERS: Without notice and without Borrower’s consent, Lender may take any or all of the following
actions:
A. Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Documents.
Among other things, the expenses may include payments for reasonable attorney’s fees and costs. If Lender incurs such
expenses, it may demand immediate repayment from Borrower or add the expense to the principal balance of the Loan;
B. Release anyone obligated to pay this Note; and
C. Take any action necessary to collect amounts owning on this Note.
WHEN FEDERAL LAW APPLIES. When the SBA is the holder, this Note will be interpreted and enforced under federal law,
including SBA regulations. Lender or the SBA may use state or local procedures for filing papers, recording documents, giving
notice, foreclosing liens, and other purposes. By using such procedures, the SBA does not waive any federal immunity from
state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against the SBA any local or
state law to deny any obligation, defeat any claim of the SBA, or preempt federal law.
SUCCESSORS AND ASSIGNS: Under this Note, Borrower includes is successors and assigns and Lender includes its successors
and assigns.
ELIGIBLE BORROWER AND LOAN AMOUNT: Borrower represents that Borrower is an eligible recipient of the Loan under the
CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower certifies that the Average Monthly Payroll amount and
other required information set forth in Borrower’s Application made in connection with the Loan is true and correct and
calculated in accordance with CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower further represents
that the Loan amount set forth in this Note i s an amount determined by Borrower to be an amount that Borrower is eligible to
receive pursuant to the CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower certifies that Borrower
does not have an application for a Second Draw PPP loan (as defined in the PPP Rules) with another lender and has not received
a Second Draw PPP loan. Borrower certifies that Borrower has not received a shuttered venue operator grant allowed by the
Economic Aid Act, nor does Borrower have an application pending with the SBA for any such grant. Borrower acknowledges
and agrees that al l applicable PPP Rules, as such may be amended, apply to the Loan. Borrower agrees to deliver all
certifications, documents, information and agreements the SBA or Lender may require in connection with the
Paycheck Protection Program. Borrower understands that Lender is relying without independent verification
on Borrower’s certifications and representations made i n connection with the Loan, Borrower’s sole determination that
Borrower is eligible to recei ve the Loan, and the determination made solely by Borrower in the PPP Loan Application with
respect to the Loan amount. Lender a ssumes no responsibility or liability for determining Borrower’s eligibility for the Loan,
the Loan amount or the prospects for Loan forgiveness. If it is determined that Borrower is ineligible to receive the Loan,
Borrower is not entitled to receive the Loan amount, or Borrower fails to follow the PPP Rules, Borrower and its owners
may be subject to (a) penalties under the Paycheck Protection Program and (b) remedies available to Lender and the
SBA, and Borrower may not be entitled to forgiveness for some or all of the Loan with the resulting obligation of
Borrower to repay the unforgiven Loan in full. Borrower hereby agrees to indemnify and hold Lender and its directors,
officers, employees and representatives harmless from any and all losses, costs, penalties, obligations and liabilities incurred by
Borrower as a result of the foregoing representations and assurances and all other representations and certifications
made, and liabilities and obligations i ncurred, by Borrower with respect to the PPP Loan Application and the Loan.
Borrower further agrees that all such representations, warranties, covenants and indemnifications made by Borrower will
survive the making of the Loan and shall be continuing in nature, and shall remain in full force and effect even after the Loan is
forgiven or paid in full.
GENERAL PROVISIONS:
a. Borrower and the individual signing this Note waive all suretyship defenses which Borrower could otherwise assert under
applicable law or in equity.
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b. Borrower must sign all documents necessary at any time to comply with the Loan Documents and the Paycheck Protection
Program.
c. Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay
or forgo enforcing any of its rights without giving up any of them.
d. Borrower may not use an oral statement of Lender or the SBA to contradict or alter the written terms of this Note.
e. If any part of this Note is unenforceable, all other parts remain in effect.
f. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment,
demand, protest, and notice of dishonor.
g. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note
shall be released from liability. Borrower agrees that Lender may renew or extend (repeatedly and for any length of time)
the Loan and take any other action deemed necessary by Lender without the consent of or notice to anyone. Borrower also
agrees that Lender may modify the Loan without the consent of or notice to anyone other than the party with whom the
modification is made.
h. The Loan Documents shall be automatically amended to the extent necessary to reflect any mandatory changes to the
terms of the Loan pursuant to subsequent law or regulation.
CONSENT TO JURISDICTION AND GOVERNING LAW: Borrower hereby submits to the jurisdiction of the state and federal courts
in the county and state where Lender’s Division making the Loan is located in any action or lawsuit to enforce this Note or the
other Loan Documents. The Loan will be governed by federal law applicable to Lender and, to the extent not preempted by federal
law or otherwise required by this Agreement, the laws of the state in which Lender’s Division making the Loan is located, which
shall be applied without regard to its conflicts of law provisions.
STATE-SPECIFIC PROVISIONS:
Notwithstanding the forgoing, the interest on this Note shall never exceed the maximum rate permitted by the usury laws of any
state or any pre-empting federal law, if any, applicable to this kind of loan. Borrower hereby waives presentment, demand,
protects or notice of nonpayment and intent to accelerate this Note and/or demand for payment of past due installments as a
condition precedent to acceleration and enforcement.
Borrower agrees to an effective rate of interest that is the rate specified in this Note plus any additional rate resulting from any
other charges in the nature of interest paid or to be paid in connection with this Note.
SUBSEQUENT APPLICATION TO CORRECT ERROR(S). If a Confirmation Letter has not been provided to Borrower by Lender and
Lender requests and Borrower signs a subsequent Application with Lender, to correct an error in any term or condition of a
prior Application, Promissory Note, or Credit Agreement, signed after the enactment of the Economic Aid Act, the most recently
signed Application, Promissory Note, and Credit Agreement, shall replace the prior documentation and restate the terms of the
Application, the Promissory Note and Credit Agreement and the previously executed Application, Promissory Note and Credit
Agreement shall have no effect. Nothing herein shall impact any loan documents executed in favor of Lender prior to the
Economic Aid Act.
NOTICE OF FINAL AGREEMENT. THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE LOAN CONSTITUTE A
WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE LOAN.
Dispute Resolution
DISPUTE RESOLUTION PROVISION. This Dispute Resolution Provision contains a jury waiver, a class action waiver, and an
arbitration clause (or judicial reference agreement, as applicable), set out in four Sections. READ IT CAREFULLY.
Notwithstanding anything to the contrary herein, the parties acknowledge and agree that the Dispute Resolution Provision
contained herein is not enforceable at any time that the SBA is the holder of the Note which evidences the Loan.
SECTION 1. GENERAL PROVISIONS GOVERNING ALL DISPUTES.
1.1 PRIOR DISPUTE RESOLUTION AGREEMENTS SUPERSEDED. This Dispute Resolution Provision shall supersede and
replace any prior “Jury Waiver,” “Judicial Reference,” “Class Action Waiver,” “Arbitration,” “Dispute Resolution,” or similar
alternative dispute agreement or provision between or among the parties.
1.2 “DISPUTE” DEFINED. As used herein, the word “Dispute” includes, without limitation, any claim by either party against
the other party related to this Note, any other Loan Document, and the Loan evidenced hereby. In addition, “Dispute” also
includes any claim by either party against the other party regarding any other agreement or business relationship between any
of them, whether or not related to the Loan or other subject matter of this Note. “Dispute” includes, but is not limited to,
matters arising from or relating to a deposit account, an application for or denial of credit, warranties and representations made
by a party, the adequacy of a party’s disclosures, enforcement of any and all of the obligations a party hereto may have to another
party, compliance with applicable laws and/or regulations, performance or services provided under any agreement by a party,
including without limitation disputes based on or arising from any alleged tort or matters involving the employees, officers, agents,
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affiliates, or assigns of a party hereto. If a third party is a party to a Dispute (such as a credit reporting agency, merchant accepting
a credit card, junior lienholder or title company), each party hereto agrees to consent to including that third party in any
arbitration or judicial reference proceeding for resolving the Dispute with that party.
1.3 JURY TRIAL WAIVER. Each party waives their respective rights to a trial before a jury in connection with any Dispute,
and all Disputes shall be resolved by a judge sitting without a jury. If a court determines that this jury trial waiver is not
enforceable for any reason, then at any time prior to trial of the Dispute, but not later than 30 days after entry of the order
determining this provision is unenforceable, any party shall be entitled to move the court for an order, as applicable: (A)
compelling arbitration and staying or dismissing such litigation pending arbitration (“Arbitration Order”) under Section 2 hereof,
or (B) staying such litigation and compelling judicial reference under Section 3 hereof.
1.4 CLASS ACTION WAIVER. If permitted by applicable law, each party waives the right to litigate in court or an arbitration
proceeding any Dispute as a class action, either as a member of a class or as a representative, or to act as a private attorney
general.
1.5 SURVIVAL. This Dispute Resolution Provision shall survive any termination, amendment or expiration of this Note, or
any other relationship between the parties.
SECTION 2. ARBITRATION IF JURY WAIVER UNENFORCEABLE (EXCEPT CALIFORNIA). If (but only if) a state or federal court
located outside the state of California determines for any reason that the jury trial waiver in this Dispute Resolution Provision is
not enforceable with respect to a Dispute, then any party hereto may require that said Dispute be resolved by binding arbitration
pursuant to this Section 2 before a single arbitrator. An arbitrator shall have no authority to determine matters (i) regarding the
validity, enforceability, meaning, or scope of this Dispute Resolution Provision, or (ii) class action claims brought by either party
as a class representative on behalf of others and claims by a class representative on either party’s behalf as a class member, which
matters may be determined only by a court without a jury. By agreeing to arbitrate a Dispute, each party gives up any right that
party may have to a jury trial, as well as other rights that party would have in court that are not available or are more limited
in arbitration, such as the rights to discovery and to appeal.
Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, National
Arbitration Forum (“NAF”) or Judicial Arbitration and Mediation Service, Inc. (“JAMS”) (“Administrator”) as selected by the
initiating party. However, if the parties agree, arbitration may be commenced by appointment of a licensed attorney who is
selected by the parties and who agrees to conduct the arbitration without an Administrator. If NAF and JAMS both decline to
administer arbitration of the Dispute, and if the parties are unable to mutually agree upon a licensed attorney to act as arbitrator
with an Administrator, then either party may file a lawsuit (in a court of appropriate venue outside the state of California) and
move for an Arbitration Order. The arbitrator, howsoever appointed, shall have expertise in the subject matter of the Dispute.
Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement,
in the city and state where Lender or Bank is headquartered. The arbitrator shall apply the law of the state specified in the
agreement giving rise to the Dispute.
After entry of an Arbitration Order, the non-moving party shall commence arbitration. The moving party shall, at its discretion,
also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be
adversely prejudiced by electing not to commence arbitration. The arbitrator: (i) will hear and rule on appropriate dispositive
motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment; (ii) will render a
decision and any award applying applicable law; (iii) will give effect to any limitations period in determining any Dispute or
defense; (iv) shall enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable; (v) with
regard to motions and the arbitration hearing, shall apply rules of evidence governing civil cases; and (vi) will apply the law of the
state specified in the agreement giving rise to the Dispute. Filing of a petition for arbitration shall not prevent any party from (i)
seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary
remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin,
garnishment, and/or the appointment of a receiver, (ii) pursuing non-judicial foreclosure, or (iii) availing itself of any self-help
remedies such as setoff and repossession. The exercise of such rights shall not constitute a waiver of the right to submit any
Dispute to arbitration.
Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds
$4,000,000, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such
appeal, if the award (including Administrator, arbitrator, and attorney’s fees and costs) exceeds $4,000,000, the arbitrator will
issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute. A
request for de novo appeal must be filed with the arbitrator within 30 days following the date of the arbitration award; if such a
request is not made within that time period, the arbitration decision shall become final and binding. On appeal, the arbitrators
shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than
deferring in any manner to the original arbitrator. Appeal of an arbitration award shall be pursuant to the rules of the
Administrator or, if the Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.
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Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal
Arbitration Act, 9 U.S.C. § 1 et seq. If the terms of this Section 2 vary from the Administrator’s rules, this Section 2 shall control.
SECTION 3. JUDICIAL REFERENCE IF JURY WAIVER UNENFORCEABLE (CALIFORNIA ONLY). If (but only if) a Dispute is filed in a
state or federal court located within the state of California, and said court determines for any reason that the jury trial waiver in
this Dispute Resolution Provision is not enforceable with respect to that Dispute, then any party hereto may require that Dispute
be resolved by judicial reference in accordance with California Code of Civil Procedure, Sections 638, et seq., including without
limitation whether the Dispute is subject to a judicial reference proceeding. By agreeing to resolve Disputes by judicial reference,
each party is giving up any right that party may have to a jury trial. The referee shall be a retired judge, agreed upon by the
parties, from either the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Service, Inc. (JAMS). If the
parties cannot agree on the referee, the party who initially selected the reference procedure shall request a panel of ten retired
judges from either AAA or JAMS, and the court shall select the referee from that panel. (If AAA and JAMS are unavailable to
provide this service, the court may select a referee by such other procedures as are used by that court.) The referee shall be
appointed to sit with all of the powers provided by law, including the power to hear and determine any or all of the issues in the
proceeding, whether of fact or of law, and to report a statement of decision. The parties agree that time is of the essence in
conducting the judicial reference proceeding set forth herein. The costs of the judicial reference proceeding, including the fee for
the court reporter, shall be borne equally by the parties as the costs are incurred, unless otherwise awarded by the referee. The
referee shall hear all pre-trial and post-trial matters (including without limitation requests for equitable relief), prepare a
statement of decision with written findings of fact and conclusions of law, and apportion costs as appropriate. The referee shall
be empowered to enter equitable relief as well as legal relief, provide all temporary or provisional remedies, enter equitable
orders that are binding on the parties and rule on any motion that would be authorized in a trial, including without limitation
motions for summary adjudication. Only for this Section 3, “Dispute” includes matters regarding the validity, enforceability,
meaning, or scope of this Section, and (ii) class action claims brought by either party as a class representative on behalf of others
and claims by a class representative on either party’s behalf as a class member. Judgment upon the award shall be entered in the
court in which such proceeding was commenced and all parties shall have full rights of appeal. This provision will not be deemed
to limit or constrain Bank or Lender’s right of offset, to obtain provisional or ancillary remedies, to interplead funds in the event
of a dispute, to exercise any security interest or lien Bank or Lender may hold in property or to comply with legal process involving
accounts or other property held by Bank or Lender. Nothing herein shall preclude a party from moving (prior to the court ordering
judicial reference) to dismiss, stay or transfer the suit to a forum outside California on grounds that California is an improper,
inconvenient or less suitable venue. If such motion is granted, this Section 3 shall not apply to any proceedings in the new forum.
This Section 3 may be invoked only with regard to Disputes filed in state or federal courts located in the State of California. In no
event shall the provisions in this Section 3 diminish the force or effect of any venue selection or jurisdiction provision in this Note
or any other Loan Document.
SECTION 4. RELIANCE. Each party (i) certifies that no one has represented to such party that the other party would not seek to
enforce a jury waiver, class action waiver, arbitration provision or judicial reference provision in the event of suit, and (ii)
acknowledges that it and the other party have been induced to enter into this Agreement by, among other things, material
reliance upon the mutual waivers, agreements, and certifications in the four Sections of this DISPUTE RESOLUTION PROVISION.
ORIGINALLY EXECUTED DOCUMENTS:
This Note may be signed and transmitted by electronic mail of a .PDF document or other electronic format and thereafter
maintained in imaged or electronic form, and that such imaged or electronic record shall be valid and effective to bind the party so
signing as a paper copy bearing such party’s hand-written signature. Borrower and Lender further agree that the signatures
appearing on this Note (whether in imaged or other electronic format) shall be treated, for purpose of validity, enforceability and
admissibility, the same as hand-written signatures.
BORROWER’S NAME AND SIGNATURE:
By signing below, Borrower acknowledges having read and understood the provisions of this Note and agrees to its terms.
Business Entity
Borrower Name:
Authorized Officer: Signature by: Date:
Printed
Name
Title: Authorized Officer of
Borrower
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1/21/2021
Rolando Cortez
Phoenix Cars, LLC
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Credit Agreement
The Paycheck Protection Program (PPP) Application and Agreement (the “PPP Loan Application”), the Business Lending
Resolutions, the Promissory Note (the “Note”), the Confirmation Letter, which sets forth general terms of the Loan,
including, without limitation, the principal amount, the loan type, the Loan Origination Date, and Loan Maturity, and other
miscellaneous terms (“Confirmed Loan Terms”), and this Credit Agreement (this “Agreement”) together constitute
Borrower's Paycheck Protection Program Loan Documents ("Loan Documents"). The Loan Documents set forth the terms of
the agreement between Borrower and Zions Bancorporation, N.A. (“Lender”); it contains important terms and obligations that
Borrower should review carefully and keep for its records.
I. Definitions. The following definitions apply to this Agreement:
1. Borrower. The business entity, business organization, individual, or sole proprietorship in whose name the Lender has
granted credit and established the Paycheck Protection Program Loan;
2. CARES Act. The Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) as amended.
3. Deposit Account. The deposit account that Borrower designated in the Confirmation Letter in which Loan proceeds are to
be deposited;
4. Division. The lending division of Lender designated in the Note as the bank “dba” of Lender.
5. Economic Aid Act. The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act as amended (P.L. 116-260);
6. Lender. Zions Bancorporation, N.A. which issued the Loan and which is referenced in the PPP Loan Application, but which
may also be referred to in the Credit Agreement as “Lender”, “Lender”, “we” or “us”;
7. Loan. The term Loan means the loan evidenced by this Agreement, the Note, the Confirmation Letter and the other Loan
Documents.
8. “Loan Origination Date” is means the date the Loan is approved as stated in the Confirmation Lender.
9. Paycheck Protection Program. The term Paycheck Protection Program means the SBA Paycheck Protection Program
authorized and governed by the CARES Act and the Economic Aid Act.
10. PPP Loan Application. The Paycheck Protection Program (PPP) Loan Application and Agreement submitted by Borrower
to request a Paycheck Protection Program Loan.
11. PPP Rules. All Paycheck Protection Program rules, directives and regulations issued by the SBA and U.S. Treasury
pertaining to the Paycheck Protection Program.
12. SBA. SBA means the Small Business Administration, an Agency of the United States of America.
II. Borrower's Representations, Warranties and Covenants.
Effective upon Borrower's submission of its PPP Loan Application, and continuing until termination of the Credit Agreement and
satisfaction of all obligations of Borrower thereunder, Borrower covenants, represents, and warrants to Lender the following:
1. Legal Status. Borrower, whether it is a corporation, partnership, limited liability company, sole proprietorship, or other
type of business entity or organization, is in good standing and duly qualified to do business in each jurisdiction where
Borrower conducts business and has the full power and authority to carry on Borrower’s business as presently conducted.
2. Authority to Enter into Credit Agreement. Borrower has full power and authority to enter into and perform all obligations
under the Credit Agreement, and Borrower has been duly authorized to do so by all necessary organizational action.
3. No Conflict with Other Documents. Borrower's entering into and performing all obligations under the Credit Agreement
are consistent with Borrower's governing documents, and do not and will not contravene any provision of or constitute a
default under any indenture, mortgage, contract, or other instrument to which Borrower is a party or by which Borrower
is bound.
4. Accurate Information. All information that Borrower has provided and will provide at any time in the future is and will be
accurate, and the Borrower's authorized representative will certify the accuracy of such information on request.
5. Eligible Borrower and Loan Amount. Borrower represents that Borrower is an eligible recipient of the Loan under the
CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower certifies that the Average Monthly Payroll amount
and other information set forth in Borrower’s Application made in connection with the Loan is true and correct and
calculated in accordance with CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower further represents
that the Loan amount set forth in the Note is an amount determined by Borrower to be an amount that Borrower is
eligible to receive pursuant to the CARES Act, the Economic Aid Act and all applicable PPP Rules. Borrower certifies that
Borrower does not have an application for any type of a Paycheck Protection Program loan or for an increase in a prior
Paycheck Protection Program loan allowed by the Economic Aid Act, pending with any other lender and has not received
any such loan or increase, nor has the SBA issued a loan number for any such loan to Borrower. Borrower certifies that
Borrower has not received a shuttered venue operator grant allowed by the Economic Aid Act, nor does Borrower have
an application pending with the SBA for any such grant. Borrower acknowledges and agrees that all applicable PPP Rules
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as such may be amended, apply to the Loan. Borrower agrees to deliver all certifications, documents, information and
agreements the SBA or Lender may require in connection with the Paycheck Protection Program and Borrower agrees at
Lender’s request to sign and deliver other documents that Lender may request in connection with the Loan.
6. Loan Governed by PPP Rules. Borrower agrees that the CARES Act, the Economic Aid Act, and all applicable PPP Rules,
as such may be amended, apply to the Loan. Borrower agrees to deliver all certifications, documents, information and
agreements the SBA or Lender may require in connection with the Paycheck Protection Program. Borrower further agrees
to comply with the requirements of the PPP Rules.
7. Lender’s Reliance on Borrower’s Representations; Indemnifications. Borrower understands that Lender is relying
without independent verification on Borrower’s certifications and representations made in connection with the Loan,
Borrower’s sole determination that Borrower is eligible to receive the Loan, and the determination made solely by
Borrower in the PPP Loan Application with respect to the Loan amount. Lender assumes no responsibility or liability for
determining Borrower’s eligibility for the Loan, the Loan amount or the prospects for Loan forgiveness. If it is determined
that Borrower is ineligible to receive the Loan, Borrower is not entitled to receive the Loan amount, or Borrower fails to
follow the PPP Rules, Borrower and its owners may be subject to (a) penalties under the Paycheck Protection Program
and (b) remedies available to Lender, and Borrower may not be entitled to forgiveness for some or all of the Loan with
the resulting obligation of Borrower to repay the unforgiven Loan in full. Borrower hereby agrees to indemnify and hold
Lender and its directors, officers, employees and representatives harmless from any and all losses, costs, penalties,
obligations and liabilities incurred by Borrower as a result of the foregoing representations and assurances and all other
representations and certifications made by Borrower with respect to the PPP Loan Application and the Loan Borrower
further agrees that all such representations, warranties, covenants and indemnifications made by Borrower will survive
the making of the Loan and shall be continuing in nature, and shall remain in full force and effect until such time as the
Loan is forgiven or paid in full.
8. Purpose of Loan. Borrower agrees that the Loan shall only be used for purposes and in portions allowed by the Paycheck
Protection Program, and applicable PPP Rules.
9. Additional Borrower Agreements. Borrower acknowledges and agrees that (a) if there is an Event of Default, the SBA
may be required to pay Lender under the SBA guaranty, and the SBA may seek recovery on the Loan; (b) Borrower will
keep books and records in compliance with the PPP Rules, and in a manner satisfactory to Lender and furnish financial
statements as requested by Lender, allow Lender and the SBA to inspect and audit books, records and papers relating
to Borrower’s financial or business condition; and (c) Borrower will not, without Lender’s consent, change its name,
change or allow a change of its ownership structure, make any distribution or sale of company assets or transfer
(including pledging) or dispose of any assets, except in the ordinary course of business.
10. Further Assistance. At the Lender's request, Borrower shall deliver, in a form acceptable to the Lender, any legal
documents, financial statements or information as may be required by Lender. The Borrower shall also promptly notify
the Lender of any significant change in its business or other development that has or may have a materially adverse effect
on Borrower's business or financial affairs.
III. Deviations in Borrower’s Name.
Borrower hereby acknowledges that if a typographical error exists in Borrower’s name, including but not limited to, missing the
words limited liability company, LLC, corporation, incorporated, Inc., or Corp., or the name corporation or incorporated are
abbreviated, or the name is missing a period or comma after a letter or word, or an apostrophe in the name is missing, or there is
some other deviation in Borrower’s name, Borrower agrees that all references to Borrower in this Agreement, the Note and the
Loan Documents shall mean the Borrower as such name may appear on the records of the department where entities are registered
in the State or Jurisdiction of Borrower’s organization. Borrower further waives any defenses against enforceability of this
Agreement, the Note and the Loan Documents based on any deviation in Borrower’s name with the records of the state of
organization and Borrower agrees that this Agreement, the Note and Loan Documents bind Borrower regardless of any such
deviation of Borrower’s name and that all of the debts, obligations, liabilities, matured or unmatured, undisputed or disputed, and
regardless of how evidenced (whether by loan agreement, promissory note, other loan document, deposit agreement, operation
of law, or otherwise), are the debts, obligations and liabilities of the Borrower. Borrower agrees to pay and perform the debts,
obligations and liabilities as set forth in this Agreement, the Note and Loan Documents pursuant to the same terms and conditions,
and at the times and in the manner, as if they had been originally made, executed, delivered or incurred by and in the name of
Borrower as Borrower’s name appears on the records of the State of Borrower’s organization. This Agreement, the Note, and Loan
Documents are hereby amended to reflect the foregoing.
IV. Loan Advance Conditions. As a condition precedent to loan approval and the initial Advance on the Loan, Lender may
require, in its sole and absolute discretion, (i) that Lender obtain a loan number from the SBA, (ii) that Borrower shall not have
another application for a loan allowed by the CARES Act or Economic Aid Act (except for a First Draw Loan made prior to the
enactment of the Economic Aid Act, if this Loan is a Second Draw Loan) pending with the SBA or another lender, (if Lender
determines that another loan number has been issued by the SBA, Lender may exercise all default remedies, including but not
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limited to the right of offset), (iii) that Borrower execute and deliver to Lender the PPP Loan Application, the Note, the Credit
Agreement, the Business Lending Resolutions, or any other agreement, document, or instrument, Lender may require, (iv) that
Borrower shall have provided to Lender Borrower’s DDA account number in which the Loan is to be deposited and all other
documents Lender may require in connection with the DDA account, (v) that Borrower not be in default under any term of this
Agreement or the Loan Documents, and (vi) that all representations and certifications made in connection with the Loan are true
and correct.
V. Affirmative Covenants. Borrower covenants and agrees that so long as this Agreement remains in effect, Borrower will:
(a) perform and comply, in a timely manner all terms, conditions, and provisions set forth in the Loan Documents or required by
the PPP Rules. Borrower shall notify Lender immediately in writing of any default in connection with any the Loan Documents or
the PPP Rules; (b) comply with all laws, ordinances, and regulations, now or hereafter in effect with respect to Borrower’s
business operations; (c) provide written notice to Lender of any change in executive and management personnel; (d) make,
execute and deliver to Lender such promissory notes, financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence the Loan.
VI. Negative Covenants. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall
not, without the prior written consent of Lender: cease operations, liquidate, merge or restructure as a legal entity, consolidate
with or acquire any other entity, change its name, convert to another type of entity or dissolve.
VII. Right of Setoff. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts
with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone
else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all sums owing on the Indebtedness against any and all such accounts.
VIII. Recovery of Additional Costs. To the extent allowed by applicable law, if the imposition of or any change in any law,
rule, regulation, guideline, or generally accepted accounting principle, or the interpretation or application of any thereof by any
court, administrative or governmental authority, or standard-setting organization (including any request or policy not having the
force of law) shall impose, modify or make applicable any taxes (except federal, state or local income or franchise taxes imposed
on Lender), reserve requirements, capital adequacy requirements or other obligations which would (A) increase the cost to
Lender for extending or maintaining the credit facilities to which this Agreement relates, (B) reduce the amounts payable to
Lender under this Agreement or the Loan Documents, or (C) reduce the rate of return on Lender's capital as a consequence of
Lender's obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such
additional amounts as will compensate Lender therefor, within five (5) days after Lender's written demand for such payment,
which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the
additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.
IX. Default. The Loan shall be in default if Borrower does not make a payment when due under the Loan, or if Borrower:
A. Borrower fails to do anything required by the Note and other Loan Documents
B. Defaults on any other loan or agreement with Lender;
C. Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or the SBA;
D. Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender of the SBA;
E. Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect
Borrower’s ability to pay the Note;
F. Fails to pay any taxes when due;
G. Becomes the subject of a proceeding under any bankruptcy or insolvency law;
H. Has a receiver or liquidator appointed for any part of their business or property;
I. Is dissolved or any other termination of Borrower’s existence or the death of Borrower if Borrower is an individual, or
the death of the sole owner of Borrower or the death of an owner of more than 20% of the equity interest of
Borrower;
J. Makes an assignment for the benefit of creditors;
K. Has any adverse change in financial condition or business operation that Lender believes may materially affect
Borrower’s ability to pay the Note;
L. Reorganizes, merges, consolidates, or otherwise changes any ownership of the equity interests in Borrower or changes
the business structure without Lender’s prior written consent;
M. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay the
Note; or
N. Borrower is determined to be ineligible for this Paycheck Protection Program loan or otherwise fails to follow the PPP Rules.
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X. Lender’s Rights if There is a Default. Without notice or demand and without giving up any of its rights, Lender
may:
A. Require immediate payment of all amounts owing under the Note;
B. Collect all amounts owing from any Borrower;
C. File suite and obtain judgment; and/or
D. Pursue all other remedies allowed by applicable law.
Except as may be prohibited by law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly
or concurrently. Lender’s pursuit of any remedy shall not exclude pursuit of any other remedy.
XI. Lender’s General Powers. Without notice and without Borrower’s consent, Lender may take any or all of the
following actions:
A. Incur expenses to collect amounts due under the Note, enforce the terms of the Note or any other Loan Documents.
Among other things, the expenses may include payments for reasonable attorney’s fees and costs. If Lender incurs
such expenses, it may demand immediate repayment from Borrower or add the expense to the principal balance of the
Loan;
B. Release anyone obligated to pay the Note; and
C. Take any action necessary to collect amounts owning on the Note.
XII. When Federal Law Applies. When the SBA is the holder of the Note, this Agreement will be interpreted and enforced
under federal law, including SBA regulations. Lender or the SBA may use state or local procedures for filing papers, recording
documents, giving notice, foreclosing liens, and other purposes. By using such procedures, the SBA does not waive any federal
immunity from state or local control, penalty, tax, or liability. As to this Agreement, Borrower may not claim or assert against
the SBA any local or state law to deny any obligation, defeat any claim of the SBA, or preempt federal law.
XIII. Dispute Resolution.
DISPUTE RESOLUTION PROVISION. This Dispute Resolution Provision contains a jury waiver, a class action waiver, and an
arbitration clause (or judicial reference agreement, as applicable), set out in four Sections. READ IT CAREFULLY.
Notwithstanding anything to the contrary herein, the parties acknowledge and agree that the Dispute Resolution Provision
contained herein is not enforceable at any time that the SBA is the holder of the Note which evidences the Loan.
SECTION 1. GENERAL PROVISIONS GOVERNING ALL DISPUTES.
1.1 PRIOR DISPUTE RESOLUTION AGREEMENTS SUPERSEDED. This Dispute Resolution Provision shall supersede and
replace any prior “Jury Waiver,” “Judicial Reference,” “Class Action Waiver,” “Arbitration,” “Dispute Resolution,” or similar
alternative dispute agreement or provision between or among the parties.
1.2 “DISPUTE” DEFINED. As used herein, the word “Dispute” includes, without limitation, any claim by either party against
the other party related to this Agreement, any other Loan Document, and the Loan evidenced hereby. In addition, “Dispute” also
includes any claim by either party against the other party regarding any other agreement or business relationship between any
of them, whether or not related to the Loan or other subject matter of this Agreement. “Dispute” includes, but is not limited
to, matters arising from or relating to a deposit account, an application for or denial of credit, warranties and representations
made by a party, the adequacy of a party’s disclosures, enforcement of any and all of the obligations a party hereto may have to
another party, compliance with applicable laws and/or regulations, performance or services provided under any agreement by a
party, including without limitation disputes based on or arising from any alleged tort or matters involving the employees, officers,
agents, affiliates, or assigns of a party hereto. If a third party is a party to a Dispute (such as a credit reporting agency, merchant
accepting a credit card, junior lienholder or title company), each party hereto agrees to consent to including that third party in
any arbitration or judicial reference proceeding for resolving the Dispute with that party.
1.3 JURY TRIAL WAIVER. Each party waives their respective rights to a trial before a jury in connection with any Dispute,
and all Disputes shall be resolved by a judge sitting without a jury. If a court determines that this jury trial waiver is not
enforceable for any reason, then at any time prior to trial of the Dispute, but not later than 30 days after entry of the order
determining this provision is unenforceable, any party shall be entitled to move the court for an order, as applicable: (A)
compelling arbitration and staying or dismissing such litigation pending arbitration (“Arbitration Order”) under Section 2 hereof,
or (B) staying such litigation and compelling judicial reference under Section 3 hereof.
1.4 CLASS ACTION WAIVER. If permitted by applicable law, each party waives the right to litigate in court or an arbitration
proceeding any Dispute as a class action, either as a member of a class or as a representative, or to act as a private attorney
general.
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1.5 SURVIVAL. This Dispute Resolution Provision shall survive any termination, amendment or expiration of this Agreement,
or any other relationship between the parties.
SECTION 2. ARBITRATION IF JURY WAIVER UNENFORCEABLE (EXCEPT CALIFORNIA). If (but only if) a state or federal court
located outside the state of California determines for any reason that the jury trial waiver in this Dispute Resolution Provision is
not enforceable with respect to a Dispute, then any party hereto may require that said Dispute be resolved by binding arbitration
pursuant to this Section 2 before a single arbitrator. An arbitrator shall have no authority to determine matters (i) regarding the
validity, enforceability, meaning, or scope of this Dispute Resolution Provision, or (ii) class action claims brought by either party
as a class representative on behalf of others and claims by a class representative on either party’s behalf as a class member, which
matters may be determined only by a court without a jury. By agreeing to arbitrate a Dispute, each party gives up any right that
party may have to a jury trial, as well as other rights that party would have in court that are not available or are more limited
in arbitration, such as the rights to discovery and to appeal.
Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, National
Arbitration Forum (“NAF”) or Judicial Arbitration and Mediation Service, Inc. (“JAMS”) (“Administrator”) as selected by the
initiating party. However, if the parties agree, arbitration may be commenced by appointment of a licensed attorney who is
selected by the parties and who agrees to conduct the arbitration without an Administrator. If NAF and JAMS both decline to
administer arbitration of the Dispute, and if the parties are unable to mutually agree upon a licensed attorney to act as arbitrator
with an Administrator, then either party may file a lawsuit (in a court of appropriate venue outside the state of California) and
move for an Arbitration Order. The arbitrator, howsoever appointed, shall have expertise in the subject matter of the Dispute.
Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if no agreement,
in the city and state where Lender or Lender is headquartered. The arbitrator shall apply the law of the state specified in the
agreement giving rise to the Dispute.
After entry of an Arbitration Order, the non-moving party shall commence arbitration. The moving party shall, at its discretion,
also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be
adversely prejudiced by electing not to commence arbitration. The arbitrator: (i) will hear and rule on appropriate dispositive
motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment; (ii) will render a
decision and any award applying applicable law; (iii) will give effect to any limitations period in determining any Dispute or
defense; (iv) shall enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable; (v) with
regard to motions and the arbitration hearing, shall apply rules of evidence governing civil cases; and (vi) will apply the law of the
state specified in the agreement giving rise to the Dispute. Filing of a petition for arbitration shall not prevent any party from (i)
seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary
remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin,
garnishment, and/or the appointment of a receiver, (ii) pursuing non-judicial foreclosure, or (iii) availing itself of any self-help
remedies such as setoff and repossession. The exercise of such rights shall not constitute a waiver of the right to submit any
Dispute to arbitration.
Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds
$4,000,000, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such
appeal, if the award (including Administrator, arbitrator, and attorney’s fees and costs) exceeds $4,000,000, the arbitrator will
issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute. A
request for de novo appeal must be filed with the arbitrator within 30 days following the date of the arbitration award; if such a
request is not made within that time period, the arbitration decision shall become final and binding. On appeal, the arbitrators
shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than
deferring in any manner to the original arbitrator. Appeal of an arbitration award shall be pursuant to the rules of the
Administrator or, if the Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.
Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal
Arbitration Act, 9 U.S.C. § 1 et seq. If the terms of this Section 2 vary from the Administrator’s rules, this Section 2 shall control.
SECTION 3. JUDICIAL REFERENCE IF JURY WAIVER UNENFORCEABLE (CALIFORNIA ONLY). If (but only if) a Dispute is filed
in a state or federal court located within the state of California, and said court determines for any reason that the jury trial waiver
in this Dispute Resolution Provision is not enforceable with respect to that Dispute, then any party hereto may require that Dispute
be resolved by judicial reference in accordance with California Code of Civil Procedure, Sections 638, et seq., including without
limitation whether the Dispute is subject to a judicial reference proceeding. By agreeing to resolve Disputes by judicial reference,
each party is giving up any right that party may have to a jury trial. The referee shall be a retired judge, agreed upon by the
parties, from either the American Arbitration Association (AAA) or Judicial Arbitration and Mediation Service, Inc. (JAMS). If the
parties cannot agree on the referee, the party who initially selected the reference procedure shall request a panel of ten retired
judges from either AAA or JAMS, and the court shall select the referee from that panel. (If AAA and JAMS are unavailable to
provide this service, the court may select a referee by such other procedures as are used by that court.) The referee shall be
appointed to sit with all of the powers provided by law, including the power to hear and determine any or all of the issues in the
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proceeding, whether of fact or of law, and to report a statement of decision. The parties agree that time is of the essence in
conducting the judicial reference proceeding set forth herein. The costs of the judicial reference proceeding, including the fee for
the court reporter, shall be borne equally by the parties as the costs are incurred, unless otherwise awarded by the referee. The
referee shall hear all pre-trial and post-trial matters (including without limitation requests for equitable relief), prepare a
statement of decision with written findings of fact and conclusions of law, and apportion costs as appropriate. The referee shall
be empowered to enter equitable relief as well as legal relief, provide all temporary or provisional remedies, enter equitable
orders that are binding on the parties and rule on any motion that would be authorized in a trial, including without limitation
motions for summary adjudication. Only for this Section 3, “Dispute” includes matters regarding the validity, enforceability,
meaning, or scope of this Section, and (ii) class action claims brought by either party as a class representative on behalf of others
and claims by a class representative on either party’s behalf as a class member. Judgment upon the award shall be entered in the
court in which such proceeding was commenced and all parties shall have full rights of appeal. This provision will not be deemed
to limit or constrain Lender or Lender’s right of offset, to obtain provisional or ancillary remedies, to interplead funds in the event
of a dispute, to exercise any security interest or lien Lender or Lender may hold in property or to comply with legal process
involving accounts or other property held by Lender or Lender. Nothing herein shall preclude a party from moving (prior to the
court ordering judicial reference) to dismiss, stay or transfer the suit to a forum outside California on grounds that California is an
improper, inconvenient or less suitable venue. If such motion is granted, this Section 3 shall not apply to any proceedings in the
new forum. This Section 3 may be invoked only with regard to Disputes filed in state or federal courts located in the State of
California. In no event shall the provisions in this Section 3 diminish the force or effect of any venue selection or jurisdiction
provision in this Agreement or any other Loan Document.
SECTION 4. RELIANCE. Each party (i) certifies that no one has represented to such party that the other party would not
seek to enforce a jury waiver, class action waiver, arbitration provision or judicial reference provision in the event of suit, and (ii)
acknowledges that it and the other party have been induced to enter into this Agreement by, among other things, material
reliance upon the mutual waivers, agreements, and certifications in the four Sections of this DISPUTE RESOLUTION PROVISION.
XIV. Consent to Jurisdiction and Governing Law. Borrower hereby submits to the jurisdiction of the courts in the county and
state where Lender’s Division making the Loan is located in any action or lawsuit to enforce this Agreement or the other Loan
Documents. The Loan will be governed by federal law applicable to Lender and, to the extent not preempted by federal law or
otherwise required by this Agreement, the laws of the state in which Lender’s Division making the Loan is located, which shall be
applied without regard to its conflicts of law provisions.
XV. Loan Forgiveness Under the Paycheck Protection Program. Loan forgiveness of any portion of the Loan shall be the
sole responsibility of Borrower and shall be subject to all requirements of the CARES Act, the Economic Aid Act, and the PPP
Rules. If the SBA determines a borrower is ineligible for the Paycheck Protection Program loan, Borrower will not be entitled to
loan forgiveness. Borrower must apply for loan forgiveness on such forms as the SBA and Lender may require at the time
forgiveness is sought. Other documents may be required by the SBA or Lender. Borrower’s loan forgiveness may be reduced for
reasons set forth in the CARES Act, the Economic Aid Act, and the PPP Rules. Borrower agrees that Lender is not responsible for
Borrower’s failure to seek properly or receive loan forgiveness, and Borrower hereby agrees to indemnify and hold Lender and its
directors, officers, employees and representatives harmless from any and all losses, costs, penalties, obligations and liabilities
incurred by Borrower as a result of Borrower’s failure to receive loan forgiveness in any amount.
XVI. Online Lender Payments. From time to time, Lender may (but shall not be required to) permit loan payments to be
requested or drawn through its online Lender website. Whether online payments are permitted, and Lender’s applicable terms
and restrictions if such advances are permitted, will be reflected in the features available online when a user logs into the online
Lender website. Lender may impose and change limitations on making online loan payments, such as minimum or maximum
payment amounts, the types of accounts from which loan payments may be made, and the types of payments that may be made
online (i.e. ordinary installment payments, principal-only payments, or other types of payments).
XVII. Automatic Payments. If Borrower checked the box on its PPP Loan Application requesting automatic payments or
Borrower has otherwise requested automatic payments, and the Lender accepts Borrower's request, then in the event any
portion of the Loan is not forgiven after the Deferment Period (as defined in the Note) is over, then each month thereafter,
the Lender will automatically debit the payment from the Deposit Account. The automatic payments will be debited from the
Deposit Account and applied to the Loan on the payment due date set forth in the monthly statement. Automatic payments will
be for the monthly principal and interest payment set forth in the Note after taking into account loan forgiveness granted by the
SBA, if any. If Borrower wishes to pay more than this monthly payment amount, then Borrower will need to pay that
additional amount separately. NOTE: If on the payment due date the Deposit Account does not contain sufficient funds to
cover an automatic payment for the required monthly payment amount, then the amount of the automatic payment made on
the due date will be the amount of the funds actually in the Deposit Account on that day (the automatic payment system will
not overdraft the Deposit Account in order to make the payment amount due on the Loan), which could result in late
payment fees and other charges and a Loan default. The automatic payment system will then check Borrower's designated
Deposit Account daily and continue to debit that account until the full monthly payment amount
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has been reached; however, at any time, Lender may cease checking Borrower’s Deposit Account and cease the Automatic
payments and exercise any default remedy allowed by the law and Loan Documents.
XVIII. Returned Payment Fee. If any check or other instrument submitted as payment on Borrower's Loan is dishonored or
must be returned because it cannot be processed, there will be a returned payment charge of $20, in addition to any fee charged
by the Deposit Agreement.
XIX. Negative Credit Report. Borrower is hereby notified that a negative credit report reflecting on Borrower's credit record
may be submitted to a credit reporting agency if Borrower fails to fulfill the terms of the Credit Agreement.
XX. Beneficial Ownership. Borrower agrees to promptly notify Lender (A) of any change in direct or indirect ownership
interests in the Borrower as reported in any beneficial ownership certification provided to Lender in connection with the Loan or
opening of the Deposit Account (the “Certification”), or (B) if the individual with significant managerial responsibility identified in
the Certification ceases to have that responsibility or if the information reported about that individual changes. Borrower hereby
agrees to provide such information and documentation as Lender may request during the term of the Loan to confirm or update
the continued accuracy of the any information provided in connection with the foregoing.
XXI. Notices and Change of Address. The Borrower agrees to notify the Lender promptly in writing or in person at any Lender
office if Borrower changes its business address, mailing address or email address.
Unless otherwise provided by law, any notice required to be given under the Loan Documents, allowed by the PPP Rules,
or required by law shall be given in writing, and shall be effective when actually delivered in accordance with the law or with
this Agreement, when actually received by email or telefacsimile (unless otherwise required by law), directed to, the email
address provided in the PPP Loan Application, or by text to the mobile number of the authorized signer provided in the
PPP Loan Application, or when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes,
Borrower agrees to keep Lender informed at all times of Borrower's current address and current email address.
Until Borrower notifies the Lender of updated information, the Lender can send statements, notices, and other
communications to the name and address in the Lender’s records, and they will be deemed effectively delivered for all
purposes. If Borrower’s email or mailing address appears to no longer be valid (e.g., mail is returned undelivered), Borrower
agrees that the Lender can suspend emailing or mailing Borrower’s statements, notices, and other communications until a valid
address is received from the Borrower.
XXII. Waiver of Claims. Borrower (i) represents that Borrower and Borrower's affiliates have no defenses to or setoffs against
any Indebtedness or other obligations owing to Lender or its affiliates (the "Obligations"), nor claims against Lender or its affiliates
for any matter whatsoever, related or unrelated to the Obligations, and (ii) release Lender and its affiliates from all claims, causes
of action, and costs, in law or equity, existing as of the date of this Agreement which Borrower has or may have by reason of any
matter of any conceivable kind or character whatsoever, related or unrelated to the Obligations, including the subject matter of
this Agreement. The foregoing release does not apply, however, to claims for future performance of express contractual
obligations that mature after the date hereof that are owing to Borrower by Lender or its affiliates.
XXIII. NOTICE OF FINAL AGREEMENT. THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE LOAN CONSTITUTE
A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE LOAN.
XXIV. Electronic Delivery of Documents. In the event that Texas law applies, (a) The provisions of this section shall be
applicable in the event that Borrower delivers any financial statements of Borrower, or any other person or entity (“Financial
Statements’) or any other documents or information regarding Borrower or any other person or entity to Lender pursuant to this
Agreement, collectively, the (“Financial Information”) in electronic form (by “email”); (b) The financial Information delivered in
electronic form shall, for all purposes, be the same as if, and shall have the same validity, force and effect as if, such Financial
Information had been delivered in paper or other tangible form. Each item of Financial Information delivered in electronic form
shall be deemed to have been originally signed by Borrower for all purposes (including all purposes and interpretations of federal
and state law), whether or not there is an electronic name or signature of Borrower thereon, and Borrower waives any right it
may have to claim that the electronic documents are not original documents or valid documents; (c) Borrower shall deliver
7 Zions Bancorporation, N.A. Member FDIC Version 2.15
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6 THIS IS A COPY
The Authoritative Copy of this record is held at NA3.docusign.net
COPY VIEW
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Financial Information to lender in, and only in, a format that Lender may both retain in its own records (i.e., save as a file on its
own system) and print. In the event that at any time, under the electronic format then currently used by Lender, Lender is unable
to save or print Financial Information delivered in electronic form, Borrower shall no longer be permitted to deliver Financial
Information in electronic form’; (d) This section constitutes an agreement between the parties to conduct transactions by
electronic means pursuant to the Texas Uniform Electronic Transactions Act, Chapter 43, Texas Business & Commerce Code (the
“Act”), and the provisions of the Act shall be applicable to the delivery of Financial Information by Borrower to Lender in electronic
form.
XXV. Originally Executed Documents. This Agreement may be signed and transmitted by electronic mail of a .PDF document
or other electronic format and thereafter maintained in imaged or electronic form, and that such imaged or electronic record
shall be valid and effective to bind the party so signing as a paper copy bearing such party’s hand-written signature. Borrower and
Lender further agree that the signatures appearing on this Agreement (whether in imaged or other electronic format) shall be
treated, for purpose of validity, enforceability and admissibility, the same as hand-written signatures.
XXVI. Interpretation; Effect; Changes to the Credit Agreement
1. Duration. The Credit Agreement shall remain in full force and effect until all amounts owing on its Loan are paid in full.
2. Headings. The headings used in the Credit Agreement are for convenience only and shall have no bearing on the
interpretation of the Credit Agreement.
3. Monetary Denomination. All monetary figures on Borrower's Loan and in the Credit Agreement are and shall be
denominated in United States Dollars.
4. Changing the Credit Agreement. Borrower agrees that the Lender may change the terms of the Credit Agreement at any
time upon written notice to Borrower. The Lender will notify Borrower of any such change as required by applicable law.
5. Severability. The provisions of the Credit Agreement are severable to the extent that any provision hereof held to be
prohibited or unenforceable in any jurisdiction shall not invalidate the remainder of the Credit Agreement in that
jurisdiction and shall be fully enforceable in any other jurisdiction not expressly prohibiting such provision.
6. Delay in Enforcement. The Lender may exercise its rights under the Credit Agreement immediately, or, at the Lender's
sole discretion, may decline to enforce or delay in enforcing any such rights without losing, waiving, or impairing them.
7. Assignment and Binding Effect. Borrower may not sell, assign, or transfer the Credit Agreement or the Loan or any portion
thereof without the express prior written consent of the Lender. The Lender may sell, assign, or transfer the Credit
Agreement or Loan or any portion thereof without notice to Borrower. Subject to the foregoing, the Credit Agreement
shall be binding upon the heirs, representatives, successors, and assigns of the parties hereto.
8. The Loan Documents shall be automatically amended to the extent necessary to reflect any mandatory changes to the
terms of the Loan pursuant to subsequent law or regulation.
BORROWER’S NAME AND SIGNATURE:
By signing below, Borrower acknowledges having read and understood the provisions of this Credit Agreement and agree to
its terms.
Business Entity
Borrower Name:
Authorized Officer: Signature by: Date:
Printed Name Title: Authorized Officer of
Borrower
8 Zions Bancorporation, N.A. Member FDIC Version 2.15
DocuSign Envelope ID: A2D5535F-6368-4532-BB4E-EB976A6FB6C6
Rolando Cortez
Phoenix Cars, LLC
1/21/2021
THIS IS A COPY
The Authoritative Copy of this record is held at NA3.docusign.net
COPY VIEW
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Certificate Of Completion
Envelope Id: A2D5535F63684532BB4EEB976A6FB6C6 Status: Completed
Subject: Paycheck Protection Program Application Review and Signature
Source Envelope:
Document Pages: 26 Signatures: 5 Envelope Originator:
Certificate Pages: 12 Initials: 23 Michael Hulme
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-07:00) Mountain Time (US & Canada)
One South Main Street, SLC, UT 84133
Salt Lake City, UT 84133
Michael.Hulme@calbt.com
IP Address: 13.110.6.8
Record Tracking
Status: Original
1/21/2021 1:22:21 PM
Holder: Michael Hulme
Michael.Hulme@calbt.com
Location: DocuSign
Status: Authoritative Copy (1 of 1 documents)
1/21/2021 1:35:35 PM
Holder: Michael Hulme
Michael.Hulme@calbt.com
Location: DocuSign
Signer Events Signature Timestamp
Rolando Cortez
rolandoc@phoenixmotorcars.com
Security Level: Email, Account Authentication
(None), Authentication
Signature Adoption: Pre-selected Style
Using IP Address: 65.60.76.74
Sent: 1/21/2021 1:22:57 PM
Viewed: 1/21/2021 1:24:25 PM
Signed: 1/21/2021 1:35:31 PM
Authentication Details
SMS Auth:
Transaction: 25DC9A77960412049195E1A795CA418E
Result: passed
Vendor ID: TeleSign
Type: SMSAuth
Performed: 1/21/2021 1:24:03 PM
Phone: +1 909-287-9660
Electronic Record and Signature Disclosure:
Accepted: 1/21/2021 1:24:25 PM
ID: f3e3c1e3-c0ae-4c6c-9f64-59177a4fff9b
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 1/21/2021 1:22:57 PM
Certified Delivered Security Checked 1/21/2021 1:24:25 PM
Signing Complete Security Checked 1/21/2021 1:35:31 PM
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Envelope Summary Events Status Timestamps
Completed Security Checked 1/21/2021 1:35:31 PM
Payment Events Status Timestamps
Electronic Record and Signature Disclosure
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E-Sign Consent for
Execution and Delivery of Electronic Documents
(Personal Financial Statement, Card Account,
Loan Account, Deposit Account, Online Banking)
This E-Sign Consent for Execution and Delivery
of Electronic Documents (“Consent”) applies to all electronic records for Personal Financial Statement (“PFS”)
and disclosures, agreements or applications for deposit, lending, card and online banking products and services (“Services”).
Specifically, if you would like to get or give a PFS and/or obtain one or more Services by electronic means, then we first need to obtain
your consent. More specifically, we need to obtain your consent in order: (i) for you to provide either or both your electronic agreement
or signature to one or more electronic agreements; and (ii) for us to deliver information to you in electronic rather than in paper
form.
If you would like to provide your consent,
then please read through this Consent and check the applicable check box indicating consent to this Consent. By consenting, you are agreeing
and acknowledging: (i) to the terms and conditions of this Consent; (ii) that electronic execution and/or delivery, electronic
communications, and electronic records shall have the same effect and authority as if hand signed by you and/or delivered in paper; and
(iii) that electronic signatures shall have the same effect and authority as those hand-signed by the named signer.
Also, by providing your consent to this
Consent, you confirm, represent and warrant to us that you have: (i) the system requirements described below; (ii) verified
your hardware and software meets our system requirements; and (iii) the ability to access, view and print or electronically save
(including taking screenshots) electronically executed and/or delivered Electronic Documents, which may include the format of HTML or
PDF.
If you do not want to provide your consent,
then do not check the applicable check box indicating consent to this Consent. However, if you would like to still get or give a PFS and/or
obtain one or more Services but through non-electronic means, then contact us in the applicable manner as set forth below under the heading,
“Requesting Paper Copies.”
Please
Note: The consequences of not agreeing to this Consent and proceeding with paper delivery and execution of the applicable documents
will be that transactions may take a longer time to process. Also, if you are a commercial card customer, then you will be required to
execute an amendment to the Commercial Card Master Agreement.
Definitions.
For purposes of this Consent, the following terms shall have the meanings set forth below:
“Account” means a deposit account,
loan account or other account at the Bank which you have enrolled in one of more of the following: the eStatements service, the eNotices
service, and/or the eTax Documents service.
“Bank,” “we,” “our”
and other similar terms refers to Zions Bancorporation, N.A., including any Division.
“Division” refers to any one of
the following divisions with trade names that the Bank operates through: (i) Amegy Bank; (ii) California Bank & Trust;
(iii) The Commerce Bank of Oregon (“CBO”); (iv) The Commerce Bank of Washington (“CBW”); (v) National
Bank of Arizona; (vi) Nevada State Bank; (vii) Vectra Bank Colorado; and (viii) Zions Bank.
“DocuSign” refers to the Bank’s
third-party service provider, DocuSign Inc., who provides a platform for the Bank to deliver Electronic Documents to you and for you to
provide your electronic signature on Electronic Documents through the DocuSign® electronic signature system.
“eCommunication” can be any periodic
statement, notice, disclosure, agreement, fee schedule, transaction or event record, invoice, response to claim or other communication
(collectively “information”) regarding your enrolled Account that the Bank chooses to provide by eStatement or eNotice instead
of paper. “eCommunication” also includes eTax Documents that we make available for eligible Accounts. An eCommunication is
viewed by logging into online banking or mobile banking. eCommunications may contain information that the Bank is required by law to give
you, or information that the Bank chooses to give you.
“eNotice” means any eCommunication
that is not an eStatement or eTax Documents. (Please note that “eNotice” includes any statement of transactions or balances
in a loan account and is deemed an “e-Notice” rather than an “eStatement.”)
“eStatement” means an electronic
version of the paper periodic statement of debits, credits and balances that the Bank mails to you for a deposit account that is not enrolled
in the eStatements service. “eStatement” also includes notices, disclosures and other information that would be printed on
the paper periodic statement or enclosed with a mailed paper periodic statement.
“eTax Document” means any IRS
tax reporting form that the Bank makes available for electronic delivery for an eligible Account. The Bank may from time to time, in its
discretion, add or delete which IRS forms are included as eTax Documents in the Service.
“Electronic Documents” refers
to any information that we give in electronic form pursuant to this Consent, and as described below under the heading entitled, “Scope.”
For example, this Consent is an “Electronic Document.” Also, “Electronic Documents” include any communication
that you give us in connection with an Electronic Document. For example, if you file a claim, which we may require to be in written form
rather than in electronic form, that your deposit account statement reflects an unauthorized electronic funds transfer from your deposit
account, and you then send us an electronic email response in connection with that claim, the email you sent is an “Electronic Document.”
“Mobile Device” refers to
any portable computing device that meets the system requirements set forth in this Consent, such as a smartphone or tablet. For
purposes of mobile banking, “Mobile Device” means a cellular telephone, tablet or similar wireless communication device:
(i) that is installed with mobile banking software that is permitted by us; or (ii) that can conduct mobile banking
transactions by using other protocols we may choose to permit (e.g., Wireless Application Protocol (WAP) or text (SMS)
messaging).
“you,” “your” and
other similar terms refers to the person, in both his or her individual capacity and agency capacity, if applicable, giving consent to
this Consent, and also each additional account owner or authorized principal of the business, Authorized Agent, Authorized Representative,
Authorized User, user who has been granted Access Credentials, and user identified on any Bank product you enroll or apply for, use or
access that is subject to an agreement or disclosure described in this Consent.
Scope.
The scope of your consent for current and future delivery of Electronic Documents covers this Consent and the Electronic Documents
listed below for each Service you have requested. Specifically, if you consent, then you are giving consent for the Bank to provide, if
it decides to do so, and for you to electronically agree to and/or electronically receive the following Electronic Documents:
For consumer lending:
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1.
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Personal Financial Statement;
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2.
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Consumer Credit Application Addendum (only available at CBO and CBW);
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3.
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Home Equity Credit Line Early Disclosure;
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4.
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Disclosure of Right to Copy of an Appraisal or Right to Appraisal, as applicable;
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6.
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Notice Concerning Extensions of Credit;
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7.
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California Fair Lending Notice;
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8.
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When Your Home is on the Line Disclosure (also known as, “What you Should Know about Home Equity Lines of Credit”);
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9.
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Home Ownership Counseling Disclosure (also known as, “List of homeownership counseling organizations”);
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10.
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Check Reserve Overdraft Line Application or Check Reserve Overdraft Protection Application or Reddi-Reserve Overdraft Line Application
or Credit Reserve Application or Money Reserve-Overdraft Line Application or Overdraft Line of Credit Application;
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11.
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Check Reserve Disclosure; and
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12.
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Check Reserve Agreement.
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For business lending:
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1.
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Personal Financial Statement;
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2.
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Paycheck Protection Program Borrower Application Form;
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3.
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Paycheck Protection Program Loan Application and Agreement;
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4.
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Paycheck Protection Program PPP Loan Forgiveness Application (or similar SBA form);
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7.
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Business Loan Agreement;
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8.
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SBA Addendum to Business Loan Agreement;
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10.
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Disbursement Request and Authorization;
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11.
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Business Access Loan Application & Agreement;
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12.
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Joint Application Declaration, Business Access Loan Application & Agreement;
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13.
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Personal Guarantee; and
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14.
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Business Access Loan Sweep Maintenance Form.
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For deposit account(s):
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2.
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Business Client Services Agreement;
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3.
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Zions Bancorporation, N.A. Deposit Account Agreement;
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5.
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Electronic Funding Authorization;
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6.
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Debit Card Overdraft Service (also known as, “What You Need to Know About Overdrafts and Overdraft Fees”)
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7.
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Account agreement (which provides a summary of the features for your account);
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8.
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Personal Accounts Schedule of Fees, as applicable;
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9.
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Business Accounts Schedule of Fees, as applicable;
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10.
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Service Charge Information, as applicable; and
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11.
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Deposit account disclosure, as applicable.
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For consumer online and mobile banking:
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1.
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The Digital Banking Service Agreement;
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2.
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eDocuments Services Agreement (for one or more of the following: eStatements service; eNotices service; or eTax Documents service)
which is subject to your specific separate enrollment in one or more services for eCommunications through online banking;
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3.
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Authorization to debit a checking or savings account held with the Bank or another financial institution in order to make a transfer
to a deposit account or make a payment on one or more loans held with the Bank;
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4.
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Error resolution notices, billing rights notices, balance calculation notices, federal and state privacy notices, data breach notices
and disclosures or notices that may be required under the Truth in Savings Act, Electronic Funds Transfer Act, Truth in Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Gramm Leach Bliley Act, and the Real Estate Settlement Procedures Act,
including any amendments made to the foregoing laws, or other applicable federal or state law and regulations;
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5.
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Bill Pay Service Agreement;
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6.
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External Account Transfer Addendum or External Transfers Agreement or Personal Electronic External Transfers Agreement or DirectNETSM
Consumer Online Banking External Account Transfers Addendum;
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7.
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External Transfer to a Friend Enrollment Form;
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8.
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Zelle® and Other Payment Services Agreement (rev April 2019);
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9.
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Wire Application for Personal Online Banking
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10.
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Wire Agreement for Online Banking; and
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11.
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Mobile Banking Privacy Policy.
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For business online and mobile banking:
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1.
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Online and Mobile Banking Resolutions;
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2.
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The Digital Banking Service Agreement;
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3.
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eDocuments Services Agreement (for one or more of the following: eStatements service; eNotices service; or eTax Documents service)
which is subject to your specific separate enrollment in one or more services for eCommunications through online banking;
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4.
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Digital Banking Service Application;
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5.
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Digital Banking Service Update;
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6.
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Multiple Party Addendum to Business Digital Banking Services;
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8.
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Wire Application for Business Online Banking;
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9.
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Wire Agreement for Online Banking;
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10.
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Direct Connect Service Agreement (including, but not limited to ACH);
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11.
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Request for Commercial Loan Advance Function or Online Commercial Loan Advance Request Form or Request to Enable Online Commercial
Loan Advance Function, any of which may contain a reaffirmation and acknowledgement of guaranty; and
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12.
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Authorization for Disbursement Service (ACH).
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For treasury management products and services:
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1.
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Treasury Management Master Services Agreement (“MSA”);
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2.
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Acceptance of Treasury Management Agreements (“TMA”);
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3.
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Certification of Resolution and Authorization for Treasury Management Services (“TMR”);
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4.
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Authorization for Disbursement Services; and
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5.
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Treasury Management Specifications (“Specifications”).
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For card products:
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1.
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VISA Business Check Card Application and Agreement;
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2.
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Agreements for using your debit or credit card in connection with virtual wallet, such as, but not limited to, Google Pay, Samsung
Pay and Apple Pay;
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3.
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Consumer Credit Card Agreement & Disclosure Statement;
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5.
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Commercial Card Master Agreement (“CMA”);
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6.
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Commercial Card Guaranty Agreement;
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7.
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Commercial Card Pledge of Deposit Account to Secure;
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8.
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Commercial Card Program Schedule of Fees;
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9.
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Sample Joinder Agreement; and
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10.
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Visa Commercial Cardholder Agreement.
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For telephone calls:
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1.
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Authorizations to obtain prior express written or electronic consent for receiving autodialed and prerecorded message calls and text
messages from the Bank or its third-party debt collector at the wireless telephone number provided by you to the Bank.
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For all accounts:
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1.
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Request for Taxpayer Identification and Certification;
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2.
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Our substitute form for Request for Taxpayer Identification and Certification; and
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For any one of the Services or Accounts:
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1.
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Error resolution notices, billing rights notices, balance calculation notices, federal and state privacy notices, data breach notices
and disclosures or notices that may be required under the Truth in Savings Act, Electronic Funds Transfer Act, Truth in Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Gramm Leach Bliley Act, and the Real Estate Settlement Procedures Act,
including any amendments made to the foregoing laws, or other applicable federal or state law and regulations;
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2.
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Any application (including joint or otherwise), notice or disclosure regarding: (i) preauthorized debits to your accounts that
vary in amounts; (ii) pending or processed payment instructions; (iii) payments, deposits or adjustments made to your account
or transactions involving your account; (iv) a debit, credit and/or a commercial card; (v) a loan account; (vi) a deposit
account; and/or (vii) a product or service fee (such as a transaction fee, late fee, finance charge, an overdraft fee, a fee for
a draft, check or electronic debit (returned for any reason, such as insufficient funds fee, a returned item fee or a fee as a result
of a stop payment order));
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3.
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Any change, amendment or update in terms, including, but not limited to, adding new terms not previously contemplated, deleting existing
terms and modifying current terms, to the foregoing described documents in this Consent or applicable to a loan or deposit accounts or
products or services you obtain from us; and
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4.
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Any other document or other information we are required by law to provide “in writing” as it relates to: (i) a product
or service subject to an Electronic Document; or (ii) your access or use of a product or service through electronic or non-electronic
means.
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Please
Note: Your consent only pertains to the Electronic Documents that are described in this Consent. Therefore, your consent
to this Consent is not applicable to any other consent you may have provided to the Bank in connection with other products or services.
Also, additional consents may be required and presented for acceptance in connection with other Bank products and services.
Method
of Providing Electronic Documents. All Electronic Documents, except for eStatements, eNotices, eTax Documents, that we
provide to you will be delivered by: (i) email to any email address you have provided us in connection with a loan, deposit
account or one or more Services, including attaching documents to the email or providing links to or instructions within the email
for navigating to documents on the DocuSign system; (ii) by SMS text message to any Mobile Device telephone number you have
provided in connection with a loan, deposit account or one or more Services; (iii) posting the information on our website (for
example, on our initial web page where you log into the system that offers one or more Services or as an in product message
(that displays within the system or Service after you have logged in)) that you access or use in connection with a loan, deposit
account, commercial card or one or more Services; (iv) any other electronic means that you have authorized now or later;
(v) any other electronic means that are or may be in the future made available to you that is commercially reasonable and
within the systems requirements described below; or (vi) requesting that you download a PDF file containing an Electronic
Document.
All Electronic Documents, under the eDocuments
Services Agreement, which includes eStatements, eNotices and eTax Documents, that we provide to you will be delivered by: (i) by
posting it to your Division’s website, an online banking message center, or in our mobile banking software; (ii) by message
printed on the periodic statement for your eligible Accounts if you have agreed to receive that statement electronically; or (iii) by
one of the methods described above for all other Electronic Documents.
How
to Withdraw Your Consent and the Effect of Doing So. Except for those documents provided under the eDocuments Services Agreement,
Notices, as defined in the CMA and provided in connection with commercial cards, and Specifications, this Consent applies only to the
current documents provided immediately following your consent to this Consent and/or within the current DocuSign envelope. Therefore,
once you provide consent to this Consent you cannot revoke it for the current documents. However, for those documents provided under the
eDocuments Services Agreement or for Electronic Documents that do not immediately follow this Consent, including, but not limited to,
Notices for commercial card and Specifications, you may withdraw your consent to this Consent at any time by calling us as provided below
under the heading entitled, “How to Contact Us.”
Your withdrawal of consent will need to state
clearly your full e-mail address, entire name, mailing address, telephone number and a statement indicating which future Electronic Documents
and/or which one of the services you are withdrawing your Consent. For example, if you are withdrawing your Consent in connection with
the eDocuments Services Agreement, then please tell us which eCommunication you would like in paper instead (however, we still reserve
the right of also making electronic documents available to you).
The consequences of withdrawing your consent
for future eCommunications, Notices (in connection with commercial card) or Specifications are: (i) it may take a longer time for
the paper communication to be delivered and/or received by you; (ii) it may take a longer time for the particular product or service
to be set up for use or access by you; (iii) you will be required to execute an amendment to the Commercial Card Master Agreement,
if you are a commercial card customer; and (iv) some account types charge a monthly service fee for paper statements. (See the applicable
deposit account disclosure for your account.)
Please
Note: Any cancellation or withdrawal of this Consent: (i) is not applicable to any other consent that you may have provided
the Bank in connection with other products and services; and (ii) is not retroactive and all past electronic agreements and delivered
Electronic Documents in connection with this Consent are still valid.
How
to Update Your Records. It is your responsibility to provide us with an accurate, up to date and complete email address. Specifically,
you must immediately contact us to update changes to your email address, mobile device telephone number and postal address related to
this Consent. You can do so by contacting your local branch in person or calling us at the applicable telephone number provided below
under the heading entitled, “How to Contact Us.”
Hardware
and Software Requirements. The following are the hardware and software requirements that apply if you are providing your consent to this
Consent through the DocuSign platform: In order for you to provide consent to this Consent and execute and/or receive Electronic
Documents, you must have certain computer capabilities and/or Mobile Device capabilities, which we may change from time to time without
prior notice to you unless prohibited by applicable law. Generally, in order to consent to this Consent, you must have: (i) a computer/and/or
a Mobile Device; (ii) an internet connection; (iii) a current operating system; (iv) an up to date browser with adequate
security; (v) sufficient memory to download and retain Electronic Documents; (vi) a printer, if you want to be able to print
your Electronic Documents; (vii) a valid and active email address; (viii) the ability to connect to websites via hyperlinks
provided in an email; (ix) the ability to engage in SMS text messaging on your Mobile Device; and (x) up to date software for
reading and saving PDF and HTML documents. The minimum system requirements for using the DocuSign system may change over time. The current
system requirements are found here: https://support.docusign.com/guides/signer-guide-signing-system-requirements.
In addition to the foregoing, to use the DocuSign
system, you or your agents may be required to register with DocuSign as a user.
The
following are the hardware and software requirements that apply if you are providing your consent to this Consent outside of the
DocuSign platform: (i) you must have a computer and/or a Mobile device; (ii) a current operating system; (iii) a
printer (if you want to be able to print your Electronic Documents); (iv) sufficient memory to download and retain Electronic Documents;
(v) your computer and/or Mobile Device must use commonly accepted and recently updated software for reading and saving PDF and HTML
documents; (vi) you must have an internet service provider and/or mobile communications data service provider; (vii) your computer
or Mobile Device must use a commonly accepted and recently updated version of an HTML compliant web browser that supports the latest protocols
for encryption; (viii) you must maintain, provide and update us with your active and valid email address(es) for use in sending,
receiving and retaining disclosures and other communications; and (ix) you must be able to connect to websites via hyperlinks in
email.
Also, you may be required to be enrolled
in and actively be using online banking, mobile banking or treasury management services, as applicable (e.g. certain Services, such
as eStatements, eNotices and eTax Documents services, require enrollment and activation in online banking, mobile banking or
treasury management services). Further, for mobile banking you must also have: (i) the most recent version of our mobile
banking software installed on your Mobile Device; (ii) your Mobile Device and mobile phone number registered with online
banking or treasury management banking; and (iii) your Mobile Device enabled for SMS text messaging. Finally, you must
regularly install updates as they become available to your computer’s and/or Mobile Device’s operating system, web
browser and PDF reader (and, if applicable, your mobile banking software).
If you are not able to access, view and
print or save the Electronic Documents, then please do not proceed with providing your Consent.
Requesting
Paper Copies. For Electronic Documents subject to this Consent, you may request a paper copy by visiting or calling your local
branch or calling the applicable phone number listed below under the heading entitled, “How to Contact Us.”
Generally, we do not send a paper copy of
any Electronic Document unless you specifically request that we do so. There are no fees for sending you one or more paper copies of an
Electronic Document through the United States Postal Service. However, if your request falls under statement/research services, then applicable
fees apply.
How to Contact Us.
You can contact us by calling the telephone
number for where your accounts are held.
Please note: commercial loan applicants or
customers may choose to contact his or her Commercial Loan Banker directly.
|
For Customers of:
|
Call:
|
|
Amegy Bank
|
(888) 500-2960
|
|
California Bank & Trust
|
(888) 217-1265
|
|
National Bank of Arizona
|
(800) 497-8168
|
|
Nevada State Bank
|
(888) 835-0551
|
|
Vectra Bank Colorado
|
(800) 884-6725
|
|
Zions Bank
|
(800) 974-8800
|
|
Commerce Bank of Oregon
|
(866) 548-1020
|
|
Commerce Bank of Washington
|
(800) 998-4035
|
However, if you are a treasury management
customer and need to contact us in connection with treasury management document(s), then you can contact us by calling or emailing us
as set forth below.
|
For Customers of:
|
Call:
|
E-mail:
|
|
Amegy Bank
|
(888) 539-7928
|
treasurymanagement@amegybank.com
|
|
California Bank & Trust
|
(888) 316-6500
|
corporateservices@calbt.com
|
|
National Bank of Arizona
|
(888) 241-5550
|
treasurymgmt@nbarizona.com
|
|
Nevada State Bank
|
(800) 693-7695
|
nsbtreasurymgmt@nsbank.com
|
|
Vectra Bank Colorado
|
(800) 341-8156
|
tmsupport@vectrabank.com
|
|
Zions Bank
|
(800) 726-7503
|
zbtmsupport@zionsbank.com
|
Communications
in Writing. All information provided by us in electronic form will be considered a “writing.” You should print
or download for your records a copy of this Consent and any other Electronic Document that is important to you.
Federal
Law. You acknowledge and agree that your consent to Electronic Documents is being provided in connection with a transaction
affecting interstate commerce that is subject to the federal Electronic Signatures in Global and National Commerce Act (“Act”),
and that you and we both intend that the Act to apply to the fullest extent possible to validate our ability to conduct business with
you by electronic means.
Termination
and Changes. We reserve the right, in our sole discretion, to discontinue the provision of Electronic Documents, or to terminate
or change the terms and conditions on which we provide Electronic Documents. We will provide you with notice of any such termination or
change as required by law.
Exhibit 10.13
Page: 1
Purchase Order
|
Phoenix Cars LLC
|
P.O. Number: 2100860
|
|
401 S. Doubleday Ave
|
Order
Date: 10/19/2021
|
|
Ontario CA 91761
|
|
|
(909) 987-0815
|
|
|
|
Vendor Number: TM4INC
|
|
Vendor:
|
Ship To:
|
|
|
|
|
TM4 Inc.
|
Phoenix Motorcars
|
|
135 J.-A.-Bombardier
|
1500 Lakeview Loop
|
|
suite 25
|
Anaheim, CA 92807
|
|
J4B 8P1
|
|
|
Boucherville, Québec,
|
|
|
Confirm To:
|
|
|
Required Date
10/19/2021
|
|
Ship VIA
|
|
F.O.B.
|
|
|
Terms Net 30
|
|
|
|
|
|
|
|
|
|
Item Code
|
|
Unit
|
|
Ordered
|
|
|
Received
|
|
|
Backordered
|
|
|
Unit Cost
|
|
|
Amount
|
|
|
INV-HP2MV-0206-06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
4,875.0000
|
|
|
|
146,250.00
|
|
|
MOTOR CONTROL UNIT, DRIVE, 2HP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MO-340_240-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
10,938.0000
|
|
|
|
328,140.00
|
|
|
MOTOR ASSY - IOTA EV MP 450V A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KIT-0141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
8.0000
|
|
|
|
240.00
|
|
|
PHASE CABLE BOLTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KIT-0108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
60.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
53.0000
|
|
|
|
3,180.00
|
|
|
KIT CABLE END 47MM M8 AWG 1/0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KIT-0094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
55.0000
|
|
|
|
1,650.00
|
|
|
CO200 PHASE CABLES AWG 1/0 HAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KIT-0055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
8.0000
|
|
|
|
240.00
|
|
|
DC CABLE BOLTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KIT-0123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
PACK
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
37.0000
|
|
|
|
1,110.00
|
|
|
M8 DC CABLES AWG 1/0 HARDWARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WH-0665-L1000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
133.0000
|
|
|
|
3,990.00
|
|
|
MOTOR SENSOR CABLE, I/F AMPHEN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3315-0253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Whse: 100
|
|
EACH
|
|
|
30.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
158.0000
|
|
|
|
4,740.00
|
|
|
Flange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Order:
|
|
489,540.00
|
|
|
|
Sales Tax:
|
|
0.00
|
|
|
|
Freight:
|
|
0.00
|
|
|
|
Order Total:
|
|
489,540.00
|
|
Exhibit 14.1
FORM OF
CODE OF ETHICS
OF
PHOENIX MOTOR INC.
The Board of Directors (the
“Board”) of Phoenix Motor Inc., a Delaware corporation (the “Company”), has adopted this code of
ethics (this “Code”), as may be amended from time to time by the Board and which is applicable to all of the Company’s
directors, officers and employees (to the extent that employees are hired in the future) to:
|
|
●
|
promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
|
|
|
●
|
promote the full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”), as well as in other public communications made by or on behalf of the Company;
|
|
|
●
|
promote compliance with applicable governmental laws, rules and regulations;
|
|
|
●
|
require prompt internal reporting of breaches of, and accountability for adherence to, this Code.
|
This Code may be amended and
modified by the Board. In this Code, references to the “Company” mean Nocturne Acquisition Corporation and, in appropriate
context, the Company’s subsidiaries, if any.
|
|
2.
|
Honest, Ethical and Fair Conduct
|
Each person owes a duty to
the Company to act with integrity. Integrity requires, among other things, being honest, fair and candid. Deceit, dishonesty and subordination
of principle are inconsistent with integrity. Service to the Company should never be subordinated to personal gain and advantage.
Each person must:
|
|
●
|
act with integrity, including being honest and candid while still maintaining the confidentiality of the Company’s information where required or when in the Company’s interests;
|
|
|
●
|
observe all applicable governmental laws, rules and regulations;
|
|
|
●
|
comply with the requirements of applicable accounting and auditing standards, as well as Company policies, in order to maintain a high standard of accuracy and completeness in the Company’s financial records and other business-related information and data;
|
|
|
●
|
adhere to a high standard of business ethics and not seek competitive advantage through unlawful or unethical business practices;
|
|
|
●
|
deal fairly with the Company’s customers, suppliers, competitors and employees;
|
|
|
●
|
refrain from taking advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice;
|
|
|
●
|
protect the assets of the Company and ensure their proper use;
|
|
|
●
|
Until the earliest of (i) the Company’s initial business combination (as such is defined in the Company’s initial registration statement filed with the U.S. Securities and Exchange Commission (“SEC”)), (ii) liquidation, or (iii) such time as such person ceases to be an officer or director of the Company, to first present to the Company for its consideration, prior to presentation to any other entity, any business opportunity suitable for the Company and presented to such person solely in his or her capacity as an officer or director of the Company, subject to any other fiduciary or contractual obligations such officer may have; and
|
|
|
●
|
Avoid conflicts of interest, wherever possible, except as may be allowed under guidelines or resolutions approved by the Board (or the appropriate committee of the Board) or as disclosed in the Company’s public filings with the SEC. Anything that would be a conflict for a person subject to this Code also will be a conflict for a member of his or her immediate family or any other close relative. Examples of conflict of interest situations include, but are not limited to, the following:
|
|
|
●
|
any significant ownership interest in any supplier or customer;
|
|
|
●
|
any consulting or employment relationship with any supplier or customer;
|
|
|
●
|
the receipt of any money, non-nominal gifts or excessive entertainment from any entity with which the Company has current or prospective business dealings;
|
|
|
●
|
selling anything to the Company or buying anything from the Company, except on the same terms and conditions as comparable officers or directors are permitted to so purchase or sell;
|
|
|
●
|
any other financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the Company; and
|
|
|
●
|
any other circumstance, event, relationship or situation in which the personal interest of a person subject to this Code interferes - or even appears to interfere - with the interests of the Company as a whole.
|
The Company strives to ensure
that the contents of and the disclosures in the reports and documents that the Company files with the SEC and other public communications
shall be full, fair, accurate, timely and understandable in accordance with applicable disclosure standards, including standards of materiality,
where appropriate. Each person must:
|
|
●
|
not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent registered public accountants, governmental regulators, self-regulating organizations and other governmental officials, as appropriate; and
|
|
|
●
|
in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness.
|
In addition to the foregoing,
the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company and each
subsidiary of the Company (or persons performing similar functions), and each other person that typically is involved in the financial
reporting of the Company must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the
business and financial operations of the Company.
Each person must promptly
bring to the attention of the Chairman of the Board any information he or she may have concerning (a) significant deficiencies in
the design or operation of internal and/or disclosure controls that could adversely affect the Company’s ability to record, process,
summarize and report financial data or (b) any fraud that involves management or other employees who have a significant role in the
Company’s financial reporting, disclosures or internal controls.
It is the Company’s
obligation and policy to comply with all applicable governmental laws, rules and regulations. All directors, officers and employees
of the Company are expected to understand, respect and comply with all of the laws, regulations, policies and procedures that apply to
them in their positions with the Company. Employees are responsible for talking to their supervisors to determine which laws, regulations
and Company policies apply to their position and what training is necessary to understand and comply with them.
Directors, officers and employees
are directed to specific policies and procedures available to persons they supervise.
|
5.
|
Reporting and Accountability
|
The Board is responsible for
applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular
situation. Any person who becomes aware of any existing or potential breach of this Code is required to notify the Chairman of the Board
promptly. Failure to do so is, in and of itself, a breach of this Code.
Specifically, each person
must:
|
|
●
|
Notify the Chairman of the Board promptly of any existing or potential violation of this Code.
|
|
|
●
|
Not retaliate against any other person for reports of potential violations that are made in good faith.
|
The Company will follow the
following procedures in investigating and enforcing this Code and in reporting on the Code:
|
|
●
|
The Board will take all appropriate action to investigate any breaches reported to it.
|
|
|
●
|
Upon determination by the Board that a breach has occurred, the Board (by majority decision) will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Company’s internal or external legal counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities.
|
No person following the above
procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion
suspension, threat, harassment or in any manner, discrimination against such person in terms and conditions of employment.
|
|
6.
|
Waivers and Amendments
|
Any waiver (defined below)
or an implicit waiver (defined below) from a provision of this Code for the principal executive officer, principal financial officer,
principal accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code
is required to be disclosed in a Current Report on Form 8- K filed with the SEC. In lieu of filing a Current Report on Form 8-K
to report any such waivers or amendments, the Company may provide such information on a website, in the event that it establishes one
in the future, and if it keeps such information on the website for at least 12 months and discloses the website address as well as any
intention to provide such disclosures in this manner in its most recently filed Annual Report on Form 10-K.
A “waiver”
means the approval by the Board of a material departure from a provision of the Code. An “implicit waiver” means the
Company’s failure to take action within a reasonable period of time regarding a material departure from a provision of the Code
that has been made known to an executive officer of the Company. An “amendment” means any amendment to this Code other
than minor technical, administrative or other non-substantive amendments hereto.
All persons should note that
it is not the Company’s intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance
with this Code.
|
|
7.
|
Insider Information and Securities Trading
|
The Company’s directors,
officers or employees who have access to material, non-public information are not permitted to use that information for securities trading
purposes or for any purpose unrelated to the Company’s business. It is also against the law to trade or to “tip”
others who might make an investment decision based on inside company information. For example, using non-public information to buy or
sell the Company securities, options in the Company shares or the shares of any Company supplier, customer or competitor is prohibited.
The consequences of insider trading violations can be severe. These rules also apply to the use of material, nonpublic information
about other companies (including, for example, the Company’s customers, competitors and potential business partners). In addition
to directors, officers or employees, these rules apply to such person’s spouse, children, parents and siblings, as well as
any other family members living in such person’s home.
|
|
8.
|
Financial Statements and Other Records
|
All of the Company’s
books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s
transactions and must both conform to applicable legal requirements and to the Company’s system of internal controls. Unrecorded
or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation.
Records should always be retained
or destroyed according to the Company’s record retention policies. In accordance with those policies, in the event of litigation
or governmental investigation, please consult the Board or the Company’s internal or external legal counsel.
|
|
9.
|
Improper Influence on Conduct of Audits
|
No director or officer, or
any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently
influence any public or certified public accountant engaged in the performance of an audit or review of the financial statements of the
Company or take any action that such person knows or should know that if successful could result in rendering the Company’s financial
statements materially misleading. Any person who believes such improper influence is being exerted should report such action to such person’s
supervisor, or if that is impractical under the circumstances, to any of the Company’s directors.
Types of conduct that could
constitute improper influence include, but are not limited to, directly or indirectly:
|
|
●
|
Offering or paying bribes or other financial incentives, including future employment or contracts for non-audit services;
|
|
|
●
|
Providing an auditor with an inaccurate or misleading legal analysis;
|
|
|
●
|
Threatening to cancel or canceling existing non-audit or audit engagements if the auditor objects to the Company’s accounting;
|
|
|
●
|
Seeking to have a partner removed from the audit engagement because the partner objects to the Company’s accounting;
|
|
|
●
|
Making physical threats.
|
The Company complies with
the anti-corruption laws of the countries in which it does business, including the U.S. Foreign Corrupt Practices Act (“FCPA”).
Directors, officers and employees will not directly or indirectly give anything of value to government officials, including employees
of state-owned enterprises or foreign political candidates. These requirements apply both to Company employees and agents, such as third
party sales representatives, no matter where they are doing business. If you are authorized to engage agents, you are responsible for
ensuring they are reputable and for obtaining a written agreement to uphold the Company’s standards in this area.
Violation of this Code is
grounds for disciplinary action up to and including termination of employment. Such action is in addition to any civil or criminal liability
which might be imposed by any court or regulatory agency.
|
|
12.
|
Other Policies and Procedures
|
Any other policy or procedure
set out by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof
or hereafter are separate requirements and remain in full force and effect.
All inquiries and questions
in relation to this Code or its applicability to particular people or situations should be addressed to the Company’s Secretary,
or such other compliance officer as shall be designated from time to time by the Company.
PROVISIONS FOR
CHIEF EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS
The CEO and all senior financial
officers, including the CFO and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct,
conflicts of interest, and compliance with law. In addition to the Code, the CEO and senior financial officers are subject to the following
additional specific policies:
1. Act with honesty and integrity,
avoiding actual or apparent conflicts between personal, private interests and the interests of the Company, including receiving improper
personal benefits as a result of his or her position.
2. Disclose to the CEO and
the Board any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest.
3. Perform responsibilities
with a view to causing periodic reports and documents filed with or submitted to the SEC and all other public communications made by the
Company to contain information that is accurate, complete, fair, objective, relevant, timely and understandable, including full review
of all annual and quarterly reports.
4. Comply with laws applicable
to the Company, including but not limited to rules and regulations of U.S. federal, state and other local governments and with the
rules and regulations of private and public regulatory agencies having jurisdiction over the Company.
5. Act in good faith, responsibly,
with due care, competence and diligence, without misrepresenting or omitting material facts or allowing independent judgment to be compromised
or subordinated.
6. Respect the confidentiality
of information acquired in the course of performance of his or her responsibilities except when authorized or otherwise legally obligated
to disclose any such information; not use confidential information acquired in the course of performing his or her responsibilities for
personal advantage.
7. Share knowledge and maintain
skills important and relevant to the needs of the Company, its stockholders and other constituencies and the general public.
8. Proactively promote ethical
behavior among subordinates and peers in his or her work environment and community.
9. Use and control all corporate
assets and resources employed by or entrusted to him or her in a responsible manner.
10. Not use corporate information,
corporate assets, corporate opportunities or his or her position with the Company for personal gain; not compete directly or indirectly
with the Company.
11. Comply in all respects
with this Code.
12. Advance the Company’s
legitimate interests when the opportunity arises.
The Board will investigate
any reported violations and will oversee an appropriate response, including corrective action and preventative measures. Any officer who
violates this Code will face appropriate, case specific disciplinary action, which may include demotion or discharge.
Any request for a waiver of
any provision of this Code must be in writing and addressed to the Chairman of the Board. Any waiver of this Code will be disclosed as
provided in Section 6 of this Code.
It is the policy of the Company
that each officer covered by this Code shall acknowledge and certify to the foregoing annually and file a copy of such certification with
the Chairman of the Board.
OFFICER’S CERTIFICATION
I have read and understand
the foregoing Code. I hereby certify that I am in compliance with the foregoing Code and I will comply with the Code in the future. I
understand that any violation of the Code will subject me to appropriate disciplinary action, which may include demotion or discharge.
Exhibit 21.1
Subsidiaries of Phoenix
Motor, Inc.
|
Legal Name of Subsidiary
|
|
Jurisdiction of Organization
|
|
Phoenix Cars, LLC
|
|
Delaware
|
|
Phoenix Motorcars Leasing, LLC
|
|
California
|
|
EdisonFuture Motor, Inc.
|
|
Delaware
|
Exhibit 23.1
|
New York Office
7 Penn Plaza Suite 830
New York, New York, 10001
T 646.442.4845
|
Independent
Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration
Statement of Phoenix Motor Inc. on Form S-1 of our report dated August 24, 2021, with respect to our audits of the consolidated
financial statements of Phoenix Motor Inc. as of December 31, 2020 (Successor) and December 31, 2019 (Predecessor), the related
consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the period from November 13,
2020 through December 31, 2020 (Successor), the period from January 1, 2020 through November 12, 2020 (Predecessor) and
the year ended December 31, 2019 (Predecessor), which report appears in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Marcum Bernstein & Pinchuk llp
Marcum Bernstein & Pinchuk LLP
New York, NY
November 26, 2021
www.marcumbp.com
Exhibit 99.1
PHOENIX MOTOR INC.
AUDIT COMMITTEE CHARTER
I. Purpose
The Audit Committee (the “Committee”)
of the Board of Directors (the “Board”) of Phoenix Motor Inc., a Delaware corporation (the “Company”),
shall provide assistance to the Board in fulfilling its legal and fiduciary obligations to oversee:
(a) the integrity of the financial
statements and other financial information provided by the Company to its stockholders, the public, any stock exchange and others;
(b) the Company’s compliance
with legal and regulatory requirements;
(c) the qualifications and independence
of the Company’s independent auditor;
(d) the performance of the Company’s
internal audit function and its system of internal controls and independent auditor; and
(e) such other matters as are assigned
to the Committee by the Board pursuant to this Charter or as mandated under applicable laws, rules and regulations (including the
U.S. Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended (the “Exchange Act”))
as well as listing standards of The Nasdaq Capital Market (together, the “Applicable Requirements”).
Although the Committee has
the powers and responsibilities set forth in this Charter, the role of the Committee is oversight. The members of the Committee are not
full-time employees of the Company and may or may not be accountants or auditors by profession or experts in the fields of accounting
or auditing and, in any event, do not serve in such capacity. Consequently, it is not the duty of the Committee to conduct audits or to
determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”) and other Applicable Requirements. These are the responsibilities of management
and the Company’s independent auditor.
II. Organization
The Committee shall consist
of three or more directors, each of whom shall satisfy the independence, financial literacy, and other qualifications required by the
Company’s corporate governance guidelines, Section 10A-3 of the Exchange Act and any other Applicable Requirements, subject
to any phase-in periods or cure periods permitted by Rule 10A-3(b)(1)(iv)(A) under the Exchange Act and other Applicable Requirements.
At least one member of the Committee shall be an “audit committee financial expert” (as defined by the U.S. Securities and
Exchange Commission (the “SEC”)). Determinations of independence, financial literacy, experience and expertise shall
be made by the Board as the Board interprets such qualifications in its business judgment.
No Committee member shall
simultaneously serve on the audit committees of more than two other public companies unless the Board determines that such simultaneous
service does not impair the ability of such member to effectively serve on the Committee and such determination is disclosed in accordance
with the Applicable Requirements.
Members of the Committee shall
be appointed by the Board. Members of the Committee may be removed at any time by action of the Board; provided, however, that if removing
a member or members of the Committee would cause the Committee to have fewer than three members, then the Board must at the same time
appoint enough additional members to the Committee so that the Committee will have at least three qualified members. The Committee’s
chairperson shall be designated by the Board or, if not so designated, the members of the Committee shall elect a chairperson by a vote
of the majority of the full Committee.
The Committee may form and
delegate authority to subcommittees from time to time as it sees fit, provided that the subcommittees are composed entirely of directors
who satisfy the applicable independence requirements of the Company’s corporate governance guidelines and the Applicable Requirements.
The Committee shall not delegate to any such subcommittee any power or authority required by law, regulation or listing standard to be
exercised by the Committee as a whole.
III. Meetings
The Committee shall meet at
least four times per year on a quarterly basis, or more frequently as required. Meetings shall be called by the chairperson of the Committee
or, if there is no chairperson, by a majority of the members of the Committee. Meetings may be held telephonically or by other electronic
means to the extent permitted by the Company’s organizational documents and applicable law. Committee actions may be taken by unanimous
written resolutions of all the members.
The Committee shall also meet
periodically with management, the chief internal auditor and the Company’s independent auditor in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be discussed privately.
The Committee shall maintain
minutes of its meetings and records relating to those meetings.
IV. Authority and Responsibilities
In fulfilling its duties and
responsibilities hereunder, the Committee will be entitled to rely reasonably on (a) the integrity of those persons within the Company
and the professionals and experts (such as the Company’s independent auditor) from whom it receives information, (b) the accuracy
of the financial and other information provided to the Committee by such persons and (c) representations made by the Company’s
independent auditor as to any services provided by such firm to the Company.
To fulfill its responsibilities,
the Committee shall:
With respect to the engagement of the Company’s
independent and other auditors:
|
1.
|
Be directly responsible for (a) the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by the Company (including for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services or other work for the Company), and (b) the resolution of any disagreements between management and any such firm regarding financial reporting.
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2.
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Have the sole authority to review in advance, and pre-approve (which may be pursuant to pre-approval policies and procedures) all audit or non-audit services to be provided by the Company’s independent auditors or any other registered public accounting firm as permitted by Section 10A of the Exchange Act and to approve all related fees and other terms of engagement. The Committee shall also review and approve disclosures required to be included by the Company in periodic reports filed with the Securities and Exchange Commission (the “SEC”) under Section 13(a) of the Exchange Act with respect to audit and non-audit services.
|
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3.
|
At least annually, obtain and review a formal written report from the Company’s independent auditor (a) describing such firm’s internal quality control procedures, (b) describing any material issues raised by the most recent internal quality control review, peer review or Public Company Accounting Oversight Board (“PCAOB”) review or inspection of such firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by such firm, and any steps taken to deal with any such issues, and (c) assessing such firm’s independence, including delineating all relationships and engagements that may reasonably be thought to bear on the independence of the auditor, including those between the auditor and the Company. The Committee shall discuss this report with the Company’s independent auditor and shall take appropriate action to ensure the independence of the independent auditor and to address any other matters based on such report.
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4.
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Confirm that the “lead partner,” the “concurring partner” and the other “audit partner” rotation requirements under the Applicable Requirements, including Regulation S-X have been complied with and set clear policies for audit partner rotation in compliance with applicable laws and regulations.
|
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5.
|
Review all reports and communications required to be submitted by the Company’s independent registered public accounting firm to the Committee under Section 10A of the Securities Exchange Act and other Applicable Requirements.
|
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6.
|
At least annually, evaluate the performance of the Company’s independent auditor, including the lead audit partner. In making its evaluation, the Committee should take into account the opinions of management and the internal audit group.
|
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7.
|
Review and discuss with the Company’s independent auditor all relationships the auditor has with the Company and evaluate the auditor’s continued independence.
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8.
|
Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the Company’s independent auditor.
|
With respect to the Company’s financial
statements and other financial reporting:
|
9.
|
Review and discuss the Company’s annual audited and quarterly unaudited financial statements with management (including the Company’s internal audit group) and the Company’s independent auditor, including disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to be included in the Company’s annual report on Form 10-K or quarterly reports on Form 10-Q.
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10.
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Recommend to the Board whether the Company’s annual audited financial statements should be included in the Company’s annual report for filing with the SEC and timely prepare the report required by the SEC to be included in the Company’s annual proxy statement, if applicable, and any other reports of the Committee required by any Applicable Requirement.
|
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11.
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Review and discuss with management and the Company’s independent auditor (a) major issues regarding, or significant changes in, the Company’s accounting principles and financial statement presentations, (b) analyses prepared by management or the Company’s independent auditor concerning significant financial reporting issues and judgments made in connection with the preparation of the financial statements, (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company, and (d) the type and presentation of information to be included in earnings press releases and any financial information and earnings guidance provided to analysts and rating agencies.
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12.
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Prior to the filing of any audited financial statements with the SEC, review with management and the Company’s independent auditor (a) all critical accounting policies and practices used by the Company, (b) all alternative accounting treatments of financial information reported in GAAP related to material items that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the Company’s independent auditor, (c) any reports or communications (and management’s responses thereto) submitted to the Committee by the Company’s independent auditor in accordance with PCAOB Auditing Standard No. 16, Communications with Audit Committees, as amended or supplemented, and (d) any other material written communications between the Company’s independent auditor and management.
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13.
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Periodically review separately with each of management, the Company’s independent auditor and the internal audit group (a) any significant disagreement between management and the Company’s independent auditor or the internal audit group in connection with the preparation of the financial statements, (b) any audit problems or difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information, and (c) management’s response to each. The Committee shall discuss with the independent auditor material issues on which the national office of the independent auditor was consulted by the Company’s audit team.
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14.
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Periodically discuss with the Company’s independent auditor, without management being present, (a) their judgment about the quality, integrity and appropriateness of the Company’s accounting principles and financial disclosure practices as applied in its financial reporting and (b) the completeness and accuracy of the Company’s financial statements.
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15.
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Review and discuss with management the Company’s earnings press releases, including the use of non-GAAP financial measures and other “pro forma” or “adjusted” presentations, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussions may be general (consisting of discussing the types of information to be disclosed and the types of presentations to be made), and each earnings release or each instance in which the Company provides earnings guidance need not be discussed in advance.
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16.
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Review and discuss with management all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with unconsolidated entities or other persons.
|
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17.
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Review and approve the Company’s decision to enter into swaps and other derivatives transactions that are exempt from exchange-execution and clearing under “end-user exception” regulations established by the Commodity Futures Trading Commission; and review and approve the Company’s policies governing the Company’s use of swaps and other derivatives transactions subject to the end- user exception.
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18.
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Review and discuss with management and the internal audit group the Company’s major financial risk exposures and management’s risk assessment and risk management policies.
|
With respect to the internal audit function
and internal controls:
|
19.
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Review, based on the recommendation of the Company’s independent auditor and the person responsible for the Company’s internal audit group, the scope and plan of the work to be done by the internal audit group and the responsibilities, budget, audit plan, activities, organizational structure and staffing of the internal audit group as needed.
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20.
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Receive reports from the internal audit group on the status of significant findings and recommendations, and management’s responses.
|
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21.
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Review on an annual basis the performance of the internal audit group.
|
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22.
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In consultation with the Company’s management, independent auditor and the internal audit group, review the adequacy of the Company’s internal controls, disclosure processes and its procedures designed to ensure compliance with laws and regulations, and any special audit steps adopted in light of material control deficiencies.
|
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23.
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Review, at least annually, (a) the internal control report prepared by management, including management’s assessment of the effectiveness of the Company’s internal control over financial reporting and (b) the Company’s independent auditor’s attestation, and report, on the assessment made by management, in each case, as and when required by Section 404 of the U.S. Sarbanes-Oxley Act of 2002. Discuss with management, the internal audit group and the independent auditor any changes in internal control over financial reporting disclosed or considered for disclosure in the Company’s periodic filings with the SEC.
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24.
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Review with management and the Company’s independent auditor any reports or disclosure submitted by management to the Committee as contemplated by the certifications required under Section 302 of the U.S. Sarbanes-Oxley Act of 2002.
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25.
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Review with management any management letters and the steps management intends to take to address the issues raised by those letters.
|
With respect to the Company’s compliance
programs:
|
26.
|
Monitor compliance with the Company’s Code of Ethics, and oversee, review and discuss with management, at least annually, the implementation and effectiveness of the Company’s compliance and ethics programs. Review and take appropriate action with respect to any reports to the Committee from legal counsel for the Company concerning any material violation of securities law or breach of fiduciary duty or similar violation by the Company, its subsidiaries or any person acting on their behalf. As appropriate, the Committee shall report and make recommendations to the Board with respect to these matters.
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27.
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Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submission by employees of the Company or any subsidiary or affiliate of the Company whose financial information is included in the Company’s financial statements of concerns regarding questionable accounting or auditing matters.
|
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28.
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Review and approve (a) any amendment to or waiver from the Company’s code of ethics for the chief executive officer and senior financial officers and (b) any public disclosure made regarding such change or waiver and advise the Board with respect to the Company’s policies and procedures regarding compliance with the Company’s Code of Ethics.
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29.
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Develop and recommend to the Board for approval policies and procedures for the review, approval or ratification of related person transactions required to be disclosed pursuant to Item 404 of Regulation S-K, as may be amended from time to time, and any other applicable requirements (the “Related Person Transactions Policy”). Review the Related Person Transactions Policy at least annually and recommend to the Board for approval any changes to the Policy. Oversee the implementation of and compliance with the Related Person Transactions Policy, including reviewing, approving or ratifying related person transactions, as appropriate pursuant to the Related Person Transaction Policy.
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30.
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Review with management, the independent registered public accounting firm, and legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding the Company’s financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
|
With respect to the Committee’s other
authorities and responsibilities:
|
31.
|
Review and assess annually its own performance and the adequacy of this Charter and recommend to the Board any changes to this Charter deemed appropriate by the Committee.
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32.
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Report regularly to the Board.
|
|
33.
|
Perform any other activities consistent with this Charter, the Company’s organizational documents, as required under the Applicable Requirements or as the Committee or the Board otherwise deems necessary or appropriate.
|
V. Resources
The Committee shall have the
authority to retain or terminate, at its sole discretion, independent legal, accounting and other advisors, consultants or professionals
(collectively, “Advisors”) to assist the Committee in its responsibilities and shall be directly responsible for overseeing
the work of such Advisors. The chairperson of the Committee, at the request of any member of the Committee, may request any officer, employee
or advisor of the Company or the Company’s independent auditor to attend a meeting of the Committee or otherwise respond to Committee
requests.
The Committee shall have the
sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Company) for payment
of (a) compensation to the Company’s independent auditor engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, (b) any compensation to any Advisors retained to advise the Committee
and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
Exhibit 99.2
PHOENIX MOTOR INC.
COMPENSATION COMMITTEE CHARTER
The Compensation Committee
(the “Committee”) of the Board of Directors of Phoenix Motor Inc., a Delaware corporation (the “Company”),
shall have responsibility for the compensation of the Company’s executive officers, including the Company’s Chief Executive
Officer (the “CEO”), and for incentive compensation, equity-based and pension plans as further provided in this Charter.
The Committee shall consist
of two or more directors, each of whom shall satisfy the applicable independence and other compensation committee membership requirements
of the Company’s corporate governance guidelines, The Nasdaq Capital Market and any other applicable regulatory requirements subject
to any exceptions or cure periods that are applicable pursuant to the foregoing requirements and the phase-in periods permitted under
the rules of The Nasdaq Capital Market under which the Committee is required to have only one independent member at the time of listing,
a majority of independent members within 90 days of listing and all independent members within one year of listing.
At least one member of the
Committee shall have experience in matters relating to executive compensation either as a professional or as a business executive. At
least two members shall qualify as (a) “outside directors” within the meaning of Section 162(m) of the U.S.
Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, including Treasury Regulations Section 1.162-27
(“Outside Directors”), and (b) “non-employee directors” within the meaning of Section 16 of the
U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated
thereunder (“Non-Employee Directors”).
Members of the Committee shall
be appointed by the Board and may be removed by the Board at any time; provided, however, that if removing a member or members of the
Committee would cause the Committee to have fewer than two members, then the Board must at the same time appoint an additional member
to the Committee so that the Committee will have at least two members who qualifies as an (a) Outside Directors and (b) Non-Employee
Directors. The Committee’s chairperson shall be designated by the Board or, if not so designated, the members of the Committee shall
elect a chairperson by a vote of the majority of the full Committee.
The Committee may form and
delegate authority to subcommittees from time to time as it sees fit, provided that the subcommittees are composed entirely of directors
who satisfy the applicable independence requirements of the Company’s corporate governance guidelines and The Nasdaq Capital Market.
The Committee shall meet as
often as necessary to carry out its responsibilities. Meetings shall be called by the chairperson of the Committee or, if there is no
chairperson, by a majority of the members of the Committee. Meetings may be held telephonically or by other electronic means to the extent
permitted by the Company’s organizational documents and applicable law. Committee actions may be taken by unanimous written resolutions
of all the members.
|
IV.
|
Authority and Responsibilities
|
To fulfill its responsibilities, the
Committee shall:
|
1.
|
Review and make recommendations to the Board with respect to the Company’s compensation strategy to ensure it is appropriate to attract, retain and motivate senior management and other key employees.
|
|
2.
|
Review and make recommendations to the Board with respect to the executive compensation philosophy, policies and programs that in the Committee’s judgment support the Company’s overall business strategy and review and discuss, at least annually, the material risks associated with executive compensation structure, policies and programs to determine whether such structure, policies and programs encourage excessive risk-taking and to evaluate compensation policies and practices that could mitigate any such risk.
|
|
3.
|
On an annual basis, review and approve corporate goals and objectives relevant to the compensation of the Company’s CEO, evaluate the CEO’s performance in light of those goals and objectives and determine and approve CEO compensation based on this evaluation. In evaluating, determining and approving the long-term incentive component of CEO compensation, the Committee may consider, among such other factors as it may deem relevant, the Company’s performance, stockholder returns, the value of similar incentive awards to executive officers at comparable companies, the value of similar awards given to other executive officers of the Company, the results of the most recent stockholder advisory vote on executive compensation required by Section 14A of the Exchange Act (the “Say-on-Pay Vote”) and the awards given to the executive officer in past years. The CEO shall not be present during voting or deliberations relating to his or her compensation.
|
|
4.
|
On an annual basis, review and make recommendations to the Board with respect to corporate goals and objectives relevant to the compensation of the Company’s other executive officers, evaluate the executive officers’ performance in light of those goals and objectives and determine and make recommendations to the Board with respect to executive officer compensation based on this evaluation. In evaluating and making recommendations with respect to the long-term incentive component of executive officer compensation, the Committee may consider, among such other factors as it may deem relevant, the Company’s performance, stockholder returns, the value of similar incentive awards to executive officers at comparable companies, the value of similar awards given to other executive officers of the Company, the results of the most recent stockholder advisory vote on executive compensation required by Section 14A of the Exchange Act (the “Say-on-Pay Vote”) and the awards given to the executive officer in past years. No executive officer may be present during voting or deliberations relating to his or her compensation.
|
|
5.
|
Review on an annual basis and make recommendations to the Board with respect to the Company’s incentive compensation, equity-based and pension plans, if any. With respect to each such plan, the Committee shall have responsibility for:
|
|
|
(a)
|
implementing and administering the plan;
|
|
|
(b)
|
setting performance targets under all annual bonus and long-term incentive compensation plans as appropriate and committing to writing any and all performance targets for executive officers who may be “covered employees” under applicable laws and regulations;
|
|
|
(c)
|
if called for by the plan, certifying that any and all performance targets used for any performance-based equity compensation plans have been met before payment of any executive bonus or compensation or exercise of any executive award granted under any such plans;
|
|
|
(d)
|
approving all amendments to, and terminations of, all compensation plans and any awards under such plans;
|
|
|
(e)
|
granting any awards under any performance-based annual bonus, long- term incentive compensation and equity compensation plans to executive officers or current employees with the potential to become the CEO or an executive officer, including share options and other equity rights (e.g., restricted shares and share purchase rights);
|
|
|
(f)
|
approving which executive officers are entitled to awards under the Company’s stock option plans; and
|
|
|
(g)
|
approving repurchases of securities from terminated employees.
|
In reviewing the Company’s incentive
compensation, equity-based and pension plans, the Committee may consider the plan’s administrative costs, current plan features
relative to any proposed new features, the results of the most recent Say-on-Pay Vote and the performance of the plan’s internal
and external administrators if any duties have been delegated.
|
6.
|
Review and recommend to the Board for approval any employment agreement or compensatory transaction with an executive officer of the Company involving compensation in excess of $120,000 per year.
|
|
7.
|
Establish and periodically review policies concerning perquisite benefits and approve all special perquisites, special cash payments and other special compensation and benefits arrangements for officers and employees of the Company and approve all special perquisites, special cash payments and other special compensation and benefit arrangements for officers and employees of the Company.
|
|
8.
|
Determine and recommend to the Board for approval the Company’s policy with respect to change-of-control or “parachute” payments. In reviewing the Company’s policy with respect to change of control or “parachute” payments, the Committee may consider, among such other factors as it may deem relevant, the results of the most recent Say-on-Pay Vote on “parachute” payments, if any.
|
|
9.
|
Review and make recommendations to the Board with respect to executive officer and director indemnification and insurance matters.
|
|
10.
|
Review and recommend to the Board for approval the compensation of directors for their service to the Board. Review, evaluate and recommend changes, if appropriate, to the remuneration of directors.
|
|
11.
|
Approve compensation awards, including individual awards, as may be required to comply with applicable tax and state corporate laws.
|
|
12.
|
Review the Company’s compensation disclosures in its annual proxy statement and its Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and assist management in complying with proxy statement and annual report requirements. Review and discuss the Company’s Compensation Discussion and Analysis (“CD&A”) with management and based on such review and discussion, determine whether to recommend to the Board that such compensation disclosures and CD&A be disclosed in the Company’s Annual Report on Form 10-K or annual proxy statement filed with the SEC, as applicable.
|
|
13.
|
Review and recommend to the Board for approval the frequency with which the Company will conduct Say-on-Pay Votes, taking into account the results of the most recent stockholder advisory vote on frequency of Say-on-Pay Votes required by Section 14A of the Exchange Act, and review and recommend to the Board for approval the proposals regarding the Say-on-Pay Vote and the frequency of the Say-on-Pay Vote to be included in the Company’s proxy statement filed with the SEC.
|
|
14.
|
Prepare any report required by applicable rules and regulations or listing standards, including reports on executive compensation required by the SEC to be included in the Company’s annual proxy statement, or, if the Company does not file a proxy statement, in the Company’s Annual Report filed on Form 10-K with the SEC.
|
|
15.
|
Review and assess the adequacy of this Charter annually and recommend to the Board any changes deemed appropriate by the Committee.
|
|
16.
|
Review its own performance annually.
|
|
17.
|
Report regularly to the Board.
|
|
18.
|
Perform any other activities consistent with this Charter, the Company’s by-laws and governing law, as the Committee or the Board deems necessary or appropriate.
|
The Committee shall have the
authority to retain or terminate, at its sole discretion, compensation consultants, independent legal counsel or other advisors (collectively,
“Advisors”) to assist the Committee in its responsibilities and shall be directly responsible for the appointment,
compensation and oversight of the work of such Advisors. Before retaining an Advisor (other than in-house legal counsel and any Advisor
whose role is limited to consulting on broad-based, non-discriminatory plans or providing information that is not customized in particular
for the Company (as described in Item 407(e)(3)(iii) of Regulation S-K), the Committee shall consider the independence of such Advisor,
including any independence factors that it is required to consider by law or The Nasdaq Capital Market rules.
The chairperson of the Committee,
at the request of any member of the Committee, may request that any officer, employee or advisor of the Company attend a meeting of the
Committee or otherwise respond to Committee requests.
The Committee shall have the
sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Company) for payment
of compensation to any Advisors or other professionals retained to advise the Committee and ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
Exhibit 99.3
Consent of Director
Nominee of Phoenix Motor Inc.
I hereby consent to being
identified as a director nominee in the Registration Statement on Form S-1 of Phoenix Motor Inc., a Delaware corporation, and
all pre and post-effective amendments and supplements thereto, including the prospectus contained therein, and to all references to me
in connection therewith and to the filing of this consent as an exhibit to such Registration Statement and any amendments or supplements
thereto.
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/s/ John F. Perkowski
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Name: John F. Perkowski
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Date: November 26, 2021
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Exhibit 99.4
Consent of Director
Nominee of Phoenix Motor Inc.
I hereby consent to being
identified as a director nominee in the Registration Statement on Form S-1 of Phoenix Motor Inc., a Delaware corporation, and
all pre and post-effective amendments and supplements thereto, including the prospectus contained therein, and to all references to me
in connection therewith and to the filing of this consent as an exhibit to such Registration Statement and any amendments or supplements
thereto.
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/s/ Sam Van
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Name: Sam Van
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Date: November 26, 2021
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Exhibit 99.5
Consent of Director
Nominee of Phoenix Motor Inc.
I hereby consent to being
identified as a director nominee in the Registration Statement on Form S-1 of Phoenix Motor Inc., a Delaware corporation, and
all pre and post-effective amendments and supplements thereto, including the prospectus contained therein, and to all references to me
in connection therewith and to the filing of this consent as an exhibit to such Registration Statement and any amendments or supplements
thereto.
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/s/ Zhenxing Fu
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Name: Zhenxing Fu
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Date: November 26, 2021
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Exhibit 99.6
Consent of Director
Nominee of Phoenix Motor Inc.
I hereby consent to being
identified as a director nominee in the Registration Statement on Form S-1 of Phoenix Motor Inc., a Delaware corporation, and
all pre and post-effective amendments and supplements thereto, including the prospectus contained therein, and to all references to me
in connection therewith and to the filing of this consent as an exhibit to such Registration Statement and any amendments or supplements
thereto.
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/s/ Steven E. Stivers
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Name: Steven E. Stivers
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Date: November 26, 2021
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Exhibit 99.7
Consent of Director
Nominee of Phoenix Motor Inc.
I hereby consent to being
identified as a director nominee in the Registration Statement on Form S-1 of Phoenix Motor Inc., a Delaware corporation, and
all pre and post-effective amendments and supplements thereto, including the prospectus contained therein, and to all references to me
in connection therewith and to the filing of this consent as an exhibit to such Registration Statement and any amendments or supplements
thereto.
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/s/ Liang Lance Zhou
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Name: Liang Lance Zhou
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Date: November 26, 2021
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![[MISSING IMAGE: LG_PHOENIX-4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_LG_PHOENIX-4CLR.JPG)
![[MISSING IMAGE: TM21222304-PHT_EFHUTTON4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM21222304-PHT_EFHUTTON4CLR.JPG)
![[MISSING IMAGE: TM21222304-PHT_EDISON4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM21222304-PHT_EDISON4CLR.JPG)
![[MISSING IMAGE: TM21222304-PHT_TRUCK4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM21222304-PHT_TRUCK4CLR.JPG)
![[MISSING IMAGE: TM21222304-PHT_VAN4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM21222304-PHT_VAN4CLR.JPG)
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![[MISSING IMAGE: TM2122230D2-PH_CAR4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D2-PH_CAR4CLR.JPG)
![[MISSING IMAGE: TM2122230D2-PH_DUTYEV4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D2-PH_DUTYEV4CLR.JPG)
![[MISSING IMAGE: TM2122230D2-PH_CHARGING4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D2-PH_CHARGING4CLR.JPG)
![[MISSING IMAGE: TM2122230D4-FC_OURCORPBW.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D4-FC_OURCORPBW.JPG)
![[MISSING IMAGE: TM2122230D1-BC_CEVBATT4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D1-BC_CEVBATT4C.JPG)
![[MISSING IMAGE: TM2122230D1-PH_ZEUS4004C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D1-PH_ZEUS4004C.JPG)
![[MISSING IMAGE: TM2122230D1-PH_ZEUS5004C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D1-PH_ZEUS5004C.JPG)
![[MISSING IMAGE: TM2122230D1-PH_ZEUS6004C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D1-PH_ZEUS6004C.JPG)
![[MISSING IMAGE: TM2122230D1-PH_CLASS24C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/11/29/0001104659-21-144051_TM2122230D1-PH_CLASS24C.JPG)