As filed with the Securities and Exchange Commission on May 16, 2022.

Registration No. 333-261384​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 7
to

FORM S-1

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)

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.

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 ☐

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.

 

 

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.

 

ii

 

 

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.

 

iv

 

 

​

2

 

​

3

 

​

4

 

5

 

​

6

 

​

7

 

8

 

 

10

 

 

​

​

​

Successor

​

​

​

Predecessor

​

​

​

​

Year Ended December 31, 2021

​

​

Period from November 13, 2020 to December 31, 2020

​

​

​

Period from January 1, 2020 to November 12, 2020

​

Operating expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Selling, general and administrative

​

​

​

​

13,750

​

​

​

​

​

1,147

​

​

​

​

​

​

3,686

​

​

Operating loss

​

​

​

​

(14,313)

​

​

​

​

​

(1,249)

​

​

​

​

​

​

(4,005)

​

​

Other income (expenses):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest expenses, net

​

​

​

​

(3)

​

​

​

​

​

(4)

​

​

​

​

​

​

(4)

​

​

Others

​

​

​

​

(287)

​

​

​

​

​

12

​

​

​

​

​

​

587

​

​

Total other income, net

​

​

​

​

(290)

​

​

​

​

​

8

​

​

​

​

​

​

583

​

​

Loss before income taxes

​

​

​

​

(14,603)

​

​

​

​

​

(1,241)

​

​

​

​

​

​

(3,422)

​

​

Income tax expenses

​

​

​

​

(11)

​

​

​

​

​

(2)

​

​

​

​

​

​

—

​

​

Net loss

​

​

​

$

(14,614)

​

​

​

​

$

(1,243)

​

​

​

​

​

$

(3,422)

​

​

Net loss per share of common stock:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Basic and Diluted

​

​

​

$

(0.83)

​

​

​

​

$

(0.07)

​

​

​

​

​

​

​

​

​

Weighted average shares outstanding*

​

​

​

​

17,500,000

​

​

​

​

​

17,500,000

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2022

​

​

December 31, 2021

​

​

December 31, 2021

​

In thousands:

​

​

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

Summary Consolidated Balance Sheet Data:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

​

​

$

66

​

​

​

​

$

2,683

​

​

​

​

$

15,699

​

​

Total current assets

​

​

​

​

4,341

​

​

​

​

​

6,637

​

​

​

​

​

19,249

​

​

Total assets

​

​

​

$

12,748

​

​

​

​

$

15,436

​

​

​

​

$

29,227

​

​

Total current liabilities

​

​

​

​

4,612

​

​

​

​

​

4,452

​

​

​

​

​

4,254

​

​

Total liabilities

​

​

​

​

4,779

​

​

​

​

​

5,208

​

​

​

​

​

4,437

​

​

Total equity

​

​

​

​

7,969

​

​

​

​

​

10,228

​

​

​

​

​

24,790

​

​

Total liabilities and equity

​

​

​

$

12,748

​

​

​

​

$

15,436

​

​

​

​

$

29,227

​

​

12

 

 

and for the period from January 1, 2020 to November 12, 2020 (Predecessor) stated that certain factors, including that we had recurring losses from operations, raise substantial doubt to our ability to continue as a going concern. We have incurred a net loss of $2.3 million during the three months ended March 31, 2022, and the net cash used in operating activities was $2.7 million. We have incurred a net loss of $14.6 million during the year ended December 31, 2021, and the cash flow used in operating activities was $12.9 million. As of March 31, 2022, we had net current liability of $0.3 million. As of December 31, 2021, we had net current assets of $2.2 million, however, considering the planned level of capital expenditures expected during the next twelve months, there will be an expected capital deficit to occur. These conditions raise substantial doubt about our ability to continue as a going concern. Because we are not yet producing sufficient revenue to sustain our operating costs, we are dependent upon raising capital to continue our business. If we are unable to raise capital, increase revenue and reduce operating expenses we may not be able to continue as a going concern.

Our lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud, which may affect the market for and price of our Common Stock.

To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to filing the registration statement of which this prospectus is a part, we were a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of and for the years ended December 31 2021 and 2020, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting as well as other control deficiencies for the above mentioned periods. As defined in the standards established by the Public Company Accounting Oversight Board (“PCAOB”) of the United States, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company has identified the following material weaknesses, in the design or operation of internal controls, which could adversely affect the Company’s ability to record, process, summarize and report financial data: (1) failure to maintain an effective control environment of internal control over financial reporting; (2) failure to develop an effective risk assessment process to identify and evaluate at a sufficient level of detail all relevant risks of material misstatement, including business, operational, and fraud risks; (3) ineffective monitoring activities to assess the operation of internal control over financial reporting; and (4) lack of sufficient controls designed and implemented for financial information processing and reporting and lacked resources with requisite skills for the financial reporting under U.S. GAAP.

We intend to implement measures designed to improve our internal control over financial reporting to address the underlying causes of these material weaknesses, including (1) hiring more qualified staff and increasing resources with sufficient knowledge and experience to strengthen financial reporting; (2) setting up a financial and system control framework to ensure proper segregation of duty and review procedures, with formal documentation of polices and controls in place; (3) forming a task force to design and improve processes and controls to monitor operations and record financial data; and (4) devoting proper time by senior management to perform comprehensive review of procedures to assess risks and enforce effective accountability.

We will be subject to the requirement that we maintain internal controls and that management perform periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our shares of Common Stock, may be materially and adversely affected if we do not have effective internal controls. Before this offering, we were a private company with limited resources. As a result, we may not discover any problems in a timely manner and current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our shares of Common Stock. The absence of internal controls over

 

14

 

financial reporting may inhibit investors from purchasing our shares and may make it more difficult for us to raise funds in a debt or equity financing.

Additional material weaknesses or significant deficiencies may be identified in the future. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may decline and we may be unable to maintain compliance with the Nasdaq Listing Rules.

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. Accordingly, there are a number of obstacles to wide acceptance of Phoenix’s EVs.

Our plan to shift focus and primarily design, develop, manufacture and sell the EF-1 pickup truck and EF-1 V van, makes it difficult to evaluate our future business prospects.

Although we have designed concept vehicles, we will need to design, develop, manufacture, market and sell the EF-1 pickup truck and EF-1 V van as finished products. Accordingly, we are a company with no operating history on the EF-1 product line, and have not generated any revenue from sales of our EF-1 vehicles to date. As we attempt to transition from EF-1 vehicle from concept, research and development activities to production and sales, it is difficult, if not impossible, to forecast our future results, and we have limited insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed to reach full scale commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development activities to the large-scale manufacture and sale of vehicles. There can be no assurance that our estimates related to the costs and timing necessary to complete the design and engineering of the EF-1 vehicle line will prove accurate. These are complex processes that may be subject to long delays, cost overruns and other unforeseen issues. In addition, we have engaged in limited concept vehicle marketing activities to date, so even if we are able to bring the EF-1 product line to market, on time and on budget, there can be no assurance that customers will embrace our products in significant numbers. Market conditions, many of which are outside of our control and subject to change, including general economic conditions, the availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for our EF-1 vehicles, if developed,, and ultimately our success.

The automotive market is highly competitive, and we may not be successful in competing in this industry.

Both the automobile industry generally, and the EV segment in particular, are highly competitive, and we will be competing for customers and sales with both EV manufacturers and traditional automotive companies. Most of our current and potential competitors may have significantly greater financial, technical, manufacturing, marketing, or other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products than we may devote to our products. We expect competition for EVs to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. In addition, as fleet operators begin transitioning to EVs on a mass scale, we expect that more well- financed competitors will enter the commercial fleet EV market.

Further, as a result of new entrants in the commercial fleet EV market, we may experience increased competition for components and other parts of our vehicles, which may have limited or single-source supply.

If we are unable to successfully design, develop, manufacture and sell our EF-1 truck and EF-1 V van, our business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected. If we are able to manufacture and market the EF-1 truck and EF-1 V van, factors affecting competition include product performance and quality, technological innovation, customer experience, brand differentiation, product design, pricing and TCO, and manufacturing scale and efficiency. Increased

 

15

 

competition will lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, prospects, financial condition, results of operations, and cash flows.

We have never manufactured vehicles on a higher volume commercial scale and our ability to design, develop and manufacture vehicles of sufficient quality and appeal to customers on schedule and on a large scale is unproven.

Our business depends in large part on our ability to develop, manufacture, market and sell our vehicles. We will need to convert our concept vehicles — the EF-1 pickup truck and the EF-1 V van — into production and sales. We have no experience as an organization in high volume manufacturing of EVs. The continued development of and the ability to manufacture our vehicles, are and will be subject to risks, including with respect to:

•

our ability to secure necessary funding;

​

•

our ability to negotiate and execute definitive agreements, and maintain arrangements on reasonable terms, with our various suppliers for hardware, software, or services necessary to engineer or manufacture parts or components of our vehicles;

​

•

securing necessary components, services, or licenses on acceptable terms and in a timely manner;

​

•

delays by us in delivering final component designs to our suppliers;

​

•

our ability to accurately manufacture vehicles within specified design tolerances;

​

•

quality controls, including within our manufacturing operations, that prove to be ineffective or inefficient;

​

•

defects in design and/or manufacture that cause our vehicles not to perform as expected or that require repair, field actions, including product recalls, and design changes;

​

•

delays, disruptions or increased costs in our supply chain, including raw material supplies;

​

•

other delays, backlog in manufacturing and research and development of new models, and cost overruns;

​

•

obtaining required regulatory approvals and certifications;

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•

compliance with environmental, safety, and similar regulations; and

​

•

our ability to attract, recruit, hire, retain and train skilled employees.

​

We do not expect to make initial deliveries of EF-1 pickup and EF-1 V van for several years. Our ability to develop, manufacture and obtain required regulatory approvals for vehicles of sufficient quality and appeal to customers on schedule and on a large scale is unproven. Our vehicles may not meet customer expectations and may not be commercially viable.

Any of the foregoing could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

Even if this offering is successful, we will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our electric vehicles.

We believe that the net proceeds from this offering and our existing cash, together with interest thereon, will be sufficient to fund our operations through at least the next 12 months. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available capital resources much faster than we currently expect or require more capital to fund our operations than we currently expect.

The design, manufacture and sale of electric vehicles is a capital-intensive business. Our business plan to design, produce, sell and service commercial electric buses, vans and trucks, including the EF-1 truck and EF-1 V van, is expected to require continued capital investment to fund operations, to continue research

 

16

 

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, you may lose your entire investment.

We expect to make additional capital expenditures and incur substantial costs as we prepare to develop and commercially launch sales of our EF-1 line vehicles and grow our business, including research and development expenses, raw material procurement costs, sales and distribution expenses as we build our brand and market our vehicles, costs in connection with expanding our charging networks, and general and administrative expenses as we scale our operations, identify and commit resources to investigate new areas of demand and incur costs as a public company. Our ability to become profitable in the future will not only depend on our ability to complete the design and development of our vehicles but also to control our capital expenditures and costs. As we expand our product portfolio, including the introduction of lower-priced vehicles, we will need to manage costs effectively to sell those products at our expected margins. If we are unable to cost efficiently design, manufacture, market, sell and distribute and service our vehicles and provide our services, our business, prospects, financial condition, results of operations, and cash flows would be materially and adversely affected.

If we need additional capital, we cannot be certain that additional funding will be available on acceptable terms, or at all. In addition, future debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back or discontinue the development or commercialization of one or more of our EV products, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, stock price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained. If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing some or all of their investment in us. In addition, our ability to achieve profitability or to respond to competitive pressures would be significantly limited.

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 existing 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 existing 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.

 

17

 

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 third 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 in the second quarter of 2022 (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.

We may experience significant delays in the design, manufacture, financing, regulatory approval, launch and delivery of our vehicles, which could harm our business, prospects, financial condition, results of operations, and cash flows.

Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell our vehicles. Any delay in the financing, design, manufacture, regulatory approval, launch or delivery of our vehicles could materially damage our brand, business, prospects, financial condition, results of operations, and cash flows, and could cause liquidity constraints. Vehicle manufacturers often experience delays in the design, manufacture, and commercial release of new products. To the extent we delay the launch of our vehicles, our growth prospects could be adversely affected as we may fail to establish or grow our market share. Furthermore, we rely on third-party suppliers for the provision and development of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components we could experience delays in delivering on our timelines.

We have no experience to date in high volume manufacturing necessary for our EF-1 vehicles. Even if we are successful in developing our high-volume manufacturing capability and processes and in reliably sourcing our component supply, we cannot assure that 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 vehicle commercialization schedules or in satisfaction of the requirements of customers.

Furthermore, prior to commercial production of the EF-1, we will need the vehicles to be fully designed and engineered and be approved for sale according to differing requirements, including but not limited to regulatory requirements, in the different geographies we intend to launch our vehicles. If we encounter delays in any of these matters, we may consequently delay our deliveries of our vehicles and adversely affect our business, prospects, financial condition, results of operations, and cash flows.

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.

 

18

 

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.

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;

​

 

19

 

•

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.

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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.

 

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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

 

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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.

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

 

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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. 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.

 

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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

 

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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.

We are relying on a limited number of third-party suppliers to provide us with products for our charger and material handling division

Currently we are dependent entirely on third-party suppliers and partners for its chargers and material handling product lines. If these suppliers are not able to provide us with products due to supply chain constrains or other reasons, we do not have the capability or knowledge to produce these products locally. This would result in delays in getting end products to customers and negatively impact our business 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

 

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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.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in building our manufacturing facilities.

Our operations are and will continue to be subject to international, federal, state, and/or local environmental laws and regulations, including laws relating to water use; air emissions; use of recycled materials; energy sources; the protection of human health and the environment, natural resources and endangered species; and the use, handling, storage, disposal and human exposure to hazardous materials. Environmental and health and safety laws and regulations can be complex, and we expect that we will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations which may require us to change our operations, potentially resulting in a material adverse effect on our business, prospects, financial condition, and operating results. We have been required to obtain and comply with the terms and conditions of multiple environmental permits, certificates, or registrations, many of which are difficult and costly to obtain and could be subject to legal challenges. Violations of these laws, regulations, and permits, certificates and registrations can give rise to liability for administrative oversight and correction costs, cleanup costs, property damage, bodily injury and fines and penalties. In some cases, violations may result in suspension or revocation of permits, certificates or registrations. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, suspension of production or a cessation of our operations, and reputational harm.

Contamination at properties we currently own or operate, will own or operate, we formerly owned or operated or to which hazardous substances were sent by us, may result in liability for us under environmental laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for vapor intrusion and other exposure pathways or impacts to human health or the environment and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results. We may face unexpected delays in obtaining the required permits and approvals in connection with our planned production facilities that could require significant time and financial resources and delay our ability to operate these facilities, which would adversely impact our business, prospects, financial condition and operating results.

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

 

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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 may seek to raise additional capital to fund our business plan, 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.

After this offering, we may need additional capital to fund our research, development, production and sales of our Generation 4 chassis and the EdisonFuture product line. 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. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate EV product development or future commercialization efforts.

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,

 

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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 will allow them to control our corporate actions and may prevent new investors from influencing significant corporate decisions.

Upon completion of this offering, our executive officers and directors and their affiliates will beneficially own, in the aggregate, approximately % of our outstanding shares of common stock, which assumes no exercise of the underwriter’s option to purchase additional shares from us, and no exercise of the underwriter’s warrant. Additionally, EdisonFuture, Inc., a wholly-owned subsidiary of SPI Energy, Ltd, which currently owns 100% our common stock, will beneficially own approximately 87.5% (or 85.9% if the underwriters exercise their over-allotment option in full) of our outstanding shares of common stock upon completion of this offering. As a result, SPI 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.

We are a “controlled company” within the meaning of the rules of Nasdaq and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements.

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. EdisonFuture, Inc. currently owns 100% of our outstanding shares and SPI Energy Ltd. owns 100% of Edison Future, Inc. Denton Peng, the chairman and principal shareholder of SPI Energy, Ltd. is also our chairman. “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.”

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 shares 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.

The stock market in general and the market for EVs in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this

 

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volatility, investors may not be able to sell their common stock at or above the price originally paid for the security. The market price for our common stock may be influenced by many factors, including:

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actual or anticipated fluctuations in our financial condition and operating results;

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actual or anticipated changes in our growth rate relative to our competitors;

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competition from existing products or new products that may emerge;

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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;

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failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

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issuance of new or updated research or reports by securities analysts;

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fluctuations in the valuation of companies perceived by investors to be comparable to us;

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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

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additions or departures of key management or scientific personnel;

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disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;

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changes in laws or regulations applicable to our products;

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changes to electric vehicle policies;

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announcement or expectation of additional equity or debt financing efforts;

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sales of our common stock by us, our insiders and principal shareholders or our other stockholders; and

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general economic and market conditions.

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These and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their common stock and may otherwise negatively affect the liquidity of our common stock.

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.

Nasdaq may delist our common stock from trading on its exchange, which could adversely affect the market liquidity of our common stock, limit investors’ ability to make transactions in our common stock and adversely affect our ability to raise additional funds.

We cannot assure you that our common stock will continue to be listed on Nasdaq after this offering. In order to continue listing our common stock on Nasdaq, we must maintain certain financial, distribution and share price levels. Generally, following our initial public offering, we must maintain a minimum amount in stockholders’ equity (generally $2.5 million) and a minimum number of holders of our common stock (generally 300 public holders).

If Nasdaq delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we and our stockholders could face significant material adverse consequences, including:

•

a limited availability of market quotations for our securities;

​

•

reduced liquidity for our securities;

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•

a determination that our common stock is “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stock;

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•

a limited amount of news and analyst coverage; and

​

•

a decreased ability to issue additional securities or obtain additional financing in the future.

​

A total of 17,500,000, or 87.5% (or 85.9% assuming the underwriters exercise the over-allotment option in full), 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 17.5 million shares of common stock outstanding as of May 16, 2022, we will have a total of 20.0 million shares of common stock outstanding after this offering, assuming no exercise of the underwriter’s option to purchase additional shares from us, and no exercise of the underwriter’s warrant. Of these shares, the 2,500,000 shares of common stock sold in this offering, assuming no exercise of the underwriter’s option to purchase additional shares, and no exercise of the underwriter’s warrant or existing options of the Company, 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 17.5 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.

In addition, we intend to file a registration statement to register the approximately 1,517,063 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 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 certificate of incorporation, as amended, 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 certificate of incorporation, as amended, 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

 

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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:

•

the inability of stockholders to call special meetings; and

​

•

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.

Our certificate of incorporation, as amended, provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our certificate of incorporation, as amended, provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

•

any derivative action or proceeding brought on our behalf;

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•

any action asserting a claim of breach of fiduciary duty;

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•

any action asserting a claim against us arising under the Delaware General Corporation Law (the “DGCL”), our certificate of incorporation, as amended or our bylaws, as amended;

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•

any action or proceeding to interpret, apply, enforce, or determine the validity of our certificate of incorporation, as amended, or our bylaws, as amended (including any right, obligation, or remedy thereunder);

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•

any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and

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•

any action asserting a claim against us that is governed by the internal-affairs doctrine or otherwise related to our internal affairs.

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This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or its rules and regulations. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation, as amended, further provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation, as amended. This may require significant additional costs

 

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associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive-forum provision in our certificate of incorporation, as amended, to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business, financial condition, results of operations, and prospects.

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, which assumes no exercise of the underwriter’s option to purchase additional shares from us, and no exercise of the underwriter’s warrant. 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 12.5% of our total outstanding shares as of May   , 2022 after giving effect to this offering (assuming no exercise of the over-allotment option). 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.

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 shares of common stock.

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

 

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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 shares of common stock.

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;

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•

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;

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•

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;

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•

reduced disclosure obligations regarding executive compensation; and

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•

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 shares of common stock 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 shares of common stock 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 shares of common stock 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

 

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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.

 

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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.

We are subject to cyber security risks. If a cyber security incident occurs, we could suffer information theft, data corruption, operational disruption and our business and results of operations could be harmed.

Our customers, and our industry generally, have become more dependent on digital and connected technologies to conduct business. We depend on digital and connected technologies to monitor our EVs, perform many of our services and to process and record financial and operating data, among other things. We also expect to increase our dependence on these technologies as we expand our offerings. Ensuring the secure and reliable processing, maintenance and transmission of this data is important to our operations and our customers. As cyber security incidents (including deliberate attacks) have increased in number, scope, and sophistication, energy assets (and related networks) may become the targets of more incidents. Our technologies, systems and networks, and those of our customers, vendors, suppliers and other business partners, may become the target of cyberattacks or information security breaches that could result in the loss or destruction of proprietary and other information, or other disruption of business operations. In addition, while we depend on certain business partners to store certain information regarding our customers and employees, these third parties may be a target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, or misuse of sensitive information. Our recourse against these business partners, if any, may be limited. In addition, we, our customers, vendors, and/or business partners may be unable to detect certain breaches (such as unauthorized surveillance) for an extended period of time. Our systems and controls for protecting against cyber security risks, and those used by our business partners, may be insufficient. The loss, misuse, destruction, unauthorized release, gathering, or monitoring of sensitive information result in significant financial losses, loss of customers and business opportunities, reputation damage, litigation (including any damages awarded), regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect our business, financial condition or results of operations. We will likely be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber security incidents. The reliability and capacity of our systems is critical to our operations. Any difficulties in implementing or integrating new systems or enhancing current systems, or any material disruption in our information technology systems or systems could have an adverse effect on our business and results of operations.

We face risks related to the ongoing Russian invasion of Ukraine and any other conflicts that may arise on a global or regional scale which could adversely affect our business and results of operations.

On February 24, 2022, the Russian Federation launched an invasion of Ukraine that has had an immediate impact on the global economy resulting in higher energy prices and higher prices for certain raw materials and goods and services which in turn is contributing to higher inflation in the United States and other countries across the globe with significant disruption to financial markets and supply and distribution chains for certain raw materials and goods and services on an unprecedented scale. The impact of the sanctions has also included disruptions to financial markets, an inability to complete financial or banking transactions, restrictions on travel and an inability to service existing or new customers in a timely manner in the affected areas of Europe. The Russian Federation could resort to cyberattacks and other action that impact businesses across the United States, the European Union and other nations across the globe including those without any direct business ties to the Russian Federation. The Russian invasion of Ukraine has continued to escalate without any resolution of the invasion foreseeable in the near future with the short and long-term impact on financial and business conditions in Europe remaining highly uncertain.

The U.S. and the European Union responded to Russia’s invasion of Ukraine by imposing various economic sanctions on the Russian Federation to which the Russian Federation has responded in kind. The United Kingdom, Japan, South Korea, Australia and other countries across the globe have imposed their own sanctions on the Russian Federation. The United States, the European Union and such other countries

 

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acting together or separately could impose wider sanctions or take further actions against the Russian Federation if the conflict continues to escalate. Multinational corporations and other corporations and businesses with business and financial ties to the Russian Federation have either reduced or eliminated their ties to the Russian Federation in a manner that often exceeds what is required pursuant to sanctions by these countries. While we do not have any direct business or financial ties to the Russian Federation or Ukraine as part of our own business, the impact of higher energy prices and higher prices for certain raw materials and goods and services resulting in higher inflation and disruptions to financial markets and disruptions to manufacturing and supply and distribution chains for certain raw materials and goods and services across the globe may impact our business in the future. We will assess and respond where appropriate to any direct or indirect impact that the Russian invasion of Ukraine has on the availability or pricing of the raw materials for our products, manufacturing and supply and distribution chains for our products and on the pricing and demand for our products.

In addition, any deterioration in credit markets resulting directly or indirectly from the ongoing Russian invasion of Ukraine could limit our ability to obtain external financing to fund our operations and capital expenditures. Adverse economic conditions may also result in a higher rate of losses on accounts receivables that we accrue in the future due to credit defaults. As a result, a downturn in the worldwide economy resulting from the Russian invasion of Ukraine and other conflicts with a global impact that may arise from time to time could have a material adverse effect on our business, results of operations, and/or financial condition.

 

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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.

 

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cash, total stockholder’s equity and total capitalization on an as adjusted basis by approximately $2.3 million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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Each 1,000,000 share increase or decrease in the number of shares offered in this offering would increase or decrease each of cash, total stockholder’s equity and total capitalization on an as adjusted basis by approximately $7.4 million, assuming that the price per share for the offering remains at $8.00 (which is the midpoint of the 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.

The pro forma as adjusted information set forth above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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The above table and discussion includes 17,500,000 shares of common stock outstanding as of May 16, 2022, and excludes:

•

1,290,688 shares of common stock issuable upon the exercise of outstanding options at an exercise price of $1.72 per share;

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•

1,517,063 shares reserved for issuance upon the exercise of incentive stock options (ISOs) under the 2021 Omnibus Equity Incentive Plan and non-qualified stock options (NSOs), at a weighted average exercise price of $1.72;

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375,000 shares reserved for the exercise of the underwriter’s over-allotment option;

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•

125,000 shares of common stock issuable upon exercise of the underwriter’s warrant; and

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•

An additional 18,750 shares of common stock issuable upon exercise of the underwriter’s warrant if the underwriter’s over- allotment option is exercised in full .

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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. In the current circumstances, given the dynamic nature of the situation and limited visibility on certain supply chain components, any impact on our financial condition, results of operations or cash flows in the future continues to be difficult to estimate and predict, as it depends on future events that are highly uncertain and cannot be predicted with accuracy, including, but not limited to, the duration and continued spread of the outbreak, its severity, potential additional waves of infection, the emergence of more virulent or more dangerous strains of the virus, the actions taken to mitigate the virus or its impact, the development, distribution, efficacy and acceptance of vaccines worldwide, how quickly and to what extent normal economic and operating conditions can resume, the broader impact that the pandemic is having on the economy and our industry and specific implications the pandemic may have on our suppliers and on global logistics.

•

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.

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•

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. We have been experiencing significant delivery delays and supply shortages with BOM components — battery packs in particular. Because we rely on third party suppliers for the development, manufacture, and development of many of the key

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components and materials used in our vehicles, we have been affected by industry-wide challenges in logistics and supply chains. While we continue to focus on mitigating risks to our operations and supply chain in the current industry environment, we expect that these industry-wide trends will continue to affect our ability and the ability of our suppliers to obtain parts, components and manufacturing equipment on a timely basis for the foreseeable future. We expect supply chain delays, if any, will continue to have a significant impact on our 2022 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.

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For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

*

The shares are presented on a retrospective basis to reflect the Company’s Recapitalization, stock split and reverse stock split (Note 12) to the accompanying consolidated financial statements.

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Net Revenues

Our revenues were primarily derived from sale and lease of EVs, and other revenue. Other revenue consists of engineering and maintenance service, sales of component and charging stations, shipping and delivery fees and others.

For the three months ended March 31, 2022 and 2021:

For the three months ended March 31, 2022 and 2021, our revenues were $0.7 million and $0.5 million, respectively. The increase in revenues is mainly due to increase in vehicle delivery.

 

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For the three months ended March 31, 2022 and 2021, the number of EVs delivered is 2, and 1, respectively. As of March 31, 2022 and December 31, 2021, we had 12 leased vehicles. There was no kit sale for the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022 and 2021, the amount of governmental grant recognized as revenue from sales of EVs and chargers was $0.4 million and $0.08 million, respectively.

For the three months ended March 31, 2022 and 2021, the amount of governmental grant recognized as reductions of the cost of sales for EV leasing was $0.07 million, and $0.06 million, respectively.

For the three months ended March 31, 2022 and 2021, our revenue breakdown by major categories for relevant periods is as follows:

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

For the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor), our revenues were $3.0 million, $0.4 million and $4.1 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 year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor) and the period from January 1, 2020 to November 12, 2020 (Predecessor), the number of EVs delivered is 9, 1, and 13, respectively. As of December 31, 2021 and 2020, we had 12 leased vehicles. There was no kit sale for the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor) and the period from January 1, 2020 to November 12, 2020 (Predecessor).

Our revenue breakdown by major categories for relevant periods is as follows:

We receive grants from government agencies related to sales and leases of EVs, and sales of chargers. The government grants related to the sale of EVs and chargers should be considered as part of the transaction price because it is granted to the EV buyers and we receive such on behalf of the buyers to settle part of the EVs purchase price.

For the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor) and the period from January 1, 2020 to November 12, 2020 (Predecessor), the amount of governmental grant recognized as revenue from sales of EVs and chargers was $1.2 million, $0.1 million, and $1.9 million, respectively.

For the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor) and the period from January 1, 2020 to November 12, 2020 (Predecessor), the amount of

 

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governmental grant recognized as reductions of the cost of sales for EV leasing was $0.3 million, $0.2 million, and $0.03 million, respectively.

Cost of Revenues

For the three months ended March 31, 2022 and 2021:

For the three months ended March 31, 2022 and 2021, our costs of revenues were $0.6 million and $0.4 million, respectively. The increase in cost of revenues is consistent with the increase in revenues.

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

For the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor), our costs of revenue were $3.5 million, $0.5 million and $4.5 million, respectively. The decrease in cost of revenues is consistent with the decrease in revenues. Our costs of revenue consist primarily of direct parts, material and labor costs, as well as shipping and delivery and other costs.

 

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Other income (expense)

Our other expense for the year ended December 31, 2021 was $0.3 million, primarily due to loss on disposal of property and equipment.

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

For the three months ended March 31, 2022 and 2021:

As a result of the above factors, the net loss for the three months ended March 31, 2022 and 2021, was $2.3 million and $1.9 million, respectively.

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

As a result of the above factors, our net loss for the year ended December 31, 2021, the period from November 13, 2020 through December 31, 2020 (Successor), January 1, 2020 through November 12, 2020 (Predecessor), was $14.6 million, $1.2 million, and $3.4 million, respectively.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in Note 3 — Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this registration statement, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

Impairment of Long-lived Assets and Goodwill

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.

The Company tests goodwill for impairment as of December 31 every year by either performing a qualitative assessment or a quantitative test. The qualitative impairment assessment is an assessment of historical information and relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect not to perform the qualitative impairment assessment and perform a quantitative impairment test. The quantitative goodwill impairment test compares the fair values of the reporting unit to its carrying amount, including goodwill. A reporting unit constitutes a business for which discrete profit and loss financial information is available. In performing the quantitative impairment test, the Company may determine the fair values of its reporting unit using a combination of the income and market approach. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying

 

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amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Following the completion of our IPO, our stock price and associated market capitalization will also be considered in the determination of reporting unit fair value.

The judgments and estimates involved in identifying and quantifying the impairment of long-lived assets or goodwill involve inherent uncertainties, and the measurement of the fair value is dependent on the accuracy of the assumptions used in making the estimates and how those estimates compare to our future operating performance.

The Company tested goodwill for impairment as of December 31, 2021 by performing a qualitative assessment test and no impairment indicator was noted. The Group evaluates long-lived assets for impairment and did not note events or changes in circumstances that indicate the carrying amount of the asset groups may not be recoverable. As a result no impairments were recorded during the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor) for goodwill and long-lived assets. And there was no impairment recorded during the three months ended March 31, 2022.

Stock-Based Compensation

The Group granted employees and directors stock-based incentive awards. These awards are in the form of options. The Group measures stock-based compensation expense for all stock-based awards granted based on the estimated fair value of those awards on their grant date and expenses over the period during which an employee is required to provide service in exchange for the award (the vesting period). The Company estimates the fair value of service-based stock options granted using the Black-Scholes option-pricing formula. The Black-Scholes model requires the input of subjective assumptions, including fair value of common stock, expected term, expected volatility, risk-free interest rate and expected dividends, which are described in greater detail below. 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. Service-based options typically have a ten-year life from date of grant and vesting periods of four years.

Fair Value of Common Stock — Historically, as there has been no public market for our common stock, the fair value of our common stock was determined by our board of directors based in part on valuations of our common stock prepared by a third-party valuation firm. See the subsection titled “Fair Value of Common Stock” below.

Expected Term — The expected term of the options represents the average period the stock options are expected to remain outstanding. As we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the expected term of options granted is derived from the average time of the option from issuance to the vesting and expiration dates, also known as the simplified method.

Expected Volatility — Since we are not yet a public company and do not have any trading history for our common stock, the expected volatility is based on the historical volatilities of the common stock of comparable publicly traded companies. We selected companies with comparable characteristics, including enterprise value, risk profiles, position within the industry, and, where applicable, with historical share price information sufficient to meet the expected life of our stock-based awards. We will continue to apply this process until enough historical information regarding the volatility of our own stock price becomes available.

Risk-Free Interest Rate — The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury notes as of the grant date with maturities commensurate with the expected term of the awards.

Expected Dividends — The expected dividends assumption is based on our expectation of not paying dividends in the foreseeable future; therefore, we used an expected dividend yield of zero.

Assumptions we used in applying the Black-Scholes option-pricing model to determine the estimated fair value of our stock options granted involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our equity-based compensation could be materially different.

 

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We recorded stock-based compensation expense of approximately $0.06 million and $0.04 million, respectively, for the three months ended March 31, 2022 and 2021.

We recorded stock-based compensation expense of approximately $0.05 million for the year ended December 31, 2021 and Nil for the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor). We expect to continue to grant stock options and other equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in the future periods will likely increase.

The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. If we had made different assumptions, our stock- based compensation expense, net loss and net loss per share of common stock could have been significantly different. See Note 13 to our audited financial statements included elsewhere in this Annual Report on Form S-1 Amendment No. 7 for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted during the year ended December 31, 2021.

Fair Value of Common Stock

Historically, for all periods prior to this initial public offering, the fair values of the shares of common stock underlying our share-based awards were estimated on each grant date by our board of directors. Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; our actual operating results and financial performance; progress of our new product development efforts; conditions in the industry and economy in general; the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial public offering or a sale of our company, given prevailing market conditions; equity market conditions affecting comparable public companies; the lack of marketability of our common stock and the results of independent third-party valuations prepared in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Guide). The Guide identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date.

The assumptions underlying these valuations represent our management’s best estimate, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. Following the completion of the offering, the fair value of our common stock will be determined based on the quoted market price of our common stock.

Revenue Recognition

Our accounting practices under ASC Topic 606 are as follows:

Sales of EVs and kits

We generated revenue from sales of EVs and identified the customers who purchase the vehicle as our customers. We also generate revenue from sales of electric drive system kits that are integrated into shuttle buses sold by the customers. EV buyers in California are entitled to government grants when they purchase EV that qualify for 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 and kits 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.

 

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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 consists of engineering and maintenance service, sales of component and charging stations, shipping and delivery fees and other. For engineering and maintenance service, revenues are recognized on a straight-line basis over the contractual term. For sales of component and charging stations, shipping and delivery fees and other, the Group recognizes revenue at a point in time following the transfer of control of such products or service to the customer, which typically occurs upon the delivery to the customer.

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 are included in the cost of revenue in the consolidates statement of operations. These adjustments are based on assumptions about expected demand and market conditions. Our assumption of expected demand is developed based on our analysis of sales backlog, market forecast, and competitive intelligence. Our assumption of expected demand is compared to available inventory, production capacity, available third-party inventory, and growth plans.

Accounts Receivables and Allowance for Doubtful Accounts

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 adopted ASC 326 Financial Instruments — Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1, 2020. Management used an expected credit loss model for the impairment of trading receivables as of period ends. Management believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. Management measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance, when receivable are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote.

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.

 

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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

See Note 3 “Summary of Significant Accounting Policies” to our consolidated financial statements for a description of recently issued or adopted accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.

 

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An initial public offering (“IPO”) financing plan

We plan to conduct an IPO in May 2022.

Cost saving measures

We plan to implement certain measures with an aim to reduce our operating costs in year 2022. Such measures include: 1) reducing payroll and expenses that will not generate cash in short term; 2) reducing the research and development expenses on our next generation of products to convey in the case if the IPO is not successful; and 3) implementing comprehensive budget control.

We prepared the consolidated financial statements assuming we will continue as a going concern as we believe that the measures in the plans will be adequate to allow us to meet our liquidity and cash flow requirements within one year after the date that the consolidated financial statements are issued, however there is no assurance that the plans will be successfully implemented. Failure to successfully implement the plan will have a material adverse effect on our business, results of operations and financial position, and may materially adversely affect our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of such uncertainties. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on the financial statements.

A summary of the cash flow activities is as follows:

For the three months ended March 31, 2022 and 2021:

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

For the three months ended March 31, 2022 and 2021:

Net cash used in operating activities was $2.7 million for three months ended March 31, 2022, primarily as a result of (i) net loss of $2.3 million, adjusted by non-cash items of depreciation and amortization of $0.4 million, and non-cash forgiveness of PPP loan of $0.6 million.

Net cash used in operating activities was $2.9 million for three months ended March 31, 2021, primarily as a result of (i) net loss of $1.9 million, adjusted by non-cash items of depreciation and amortization of

 

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$0.4 million, (ii) increase in inventories of $0.3 million, (iii) increase in prepaid expenses and other assets of $0.8 million, and (iv) decrease in accounts payable of $0.3 million.

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

Net cash used in operating activities operating activities was $12.9 million for the year ended December 31, 2021, primarily as a result of (i) net loss of $14.6 million, adjusted by non-cash items of depreciation and amortization of $1.7 million, noncash write-down on inventory of $0.5 million, and noncash loss on disposition of property and equipment of 0.3 million, (ii) increase in inventories of $1.4 million, (iii) decrease in deferred income of $0.5 million, and (iv) decrease in warranty reserve of $0.2 million; the decrease was partially offset by (i) increase in prepaid expenses and other assets of $0.3 million, (ii) increase in accounts payable of $0.4 million, and (iii) increase in accrued liabilities of $0.3 million.

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, and (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, and (iv) increase in accounts payable of $0.3 million.

Investing Activities

For the three months ended March 31, 2022 and 2021:

Net cash used in investing activities was $nil and $0.3 million for three months ended March 31, 2022 and 2021, respectively, primarily as a result of capital expenditure.

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

For the year ended December 31, 2021, the period from November 13, 2020 to December 31, 2020 (Successor), and the period from January 1, 2020 to November 12, 2020 (Predecessor), net cash used in investing activities was $0.7 million, $0.1million, and $0.6 million, respectively, primarily as a result of capital expenditure.

Financing Activities

For the three months ended March 31, 2022 and 2021:

Net cash generated from financing activities was $0.07 million for the three months ended March 31, 2022, primarily as a result of loan from a related party.

Net cash generated from financing activities was $0.6 million for the three months ended March 31, 2021, primarily as a result of net proceeds received from PPP loan.

For the year ended December 31, 2021 (Successor), the period from November 13, 2020 (Successor) to December 31, 2020, and the period from January 1, 2020 to November 12, 2020 (Predecessor):

Net cash generated from financing activities was $0.6 million for the year ended December 31, 2021, primarily as result of net proceeds from PPP loan of $0.6 million and repayment of other long-term borrowing of $0.03 million.

 

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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.

Trend information

Our operating results substantially depend on revenues derived from our sales and leasing of EVs. As the COVID-19 pandemic continues, the measures implemented to curb the spread of the virus and mutations and variants of the virus such as Omicron, 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 the United States 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 2020 and 2021 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.

 

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Examples of Announced Fleet Electrification Commitments:

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.

 

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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:

•

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

​

•

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.

​

•

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.

​

•

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

 

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(“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:

•

the cost of recharging batteries in our EVs is less than the price of gasoline or diesel fuel; and

​

•

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 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:

•

Non-optimized chassis and body designs

​

•

Limited operating range due to size and capacity of batteries

​

•

Significantly reduced payload due to increased weight of battery packs

​

•

High cost due to need for large battery packs required to accommodate the maximum range use cases, which are often the outliers

​

•

Operational challenges due to high recharge time and lack of adequate charging infrastructure

​

•

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

 

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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 light and 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 addressing 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 a position to generate revenue today with its legacy business line (electric powertrains), while 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 its 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 has 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 December 31, 2021, Phoenix has 31 customers who have deployed a range of electric shuttle buses and trucks. Phoenix also has agreements with Creative Bus Sales, the largest dealership for shuttle buses in the US, and Forest River, the largest OEM for shuttle buses in the US.

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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

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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.

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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 December 31, 2021, we have deployed 104 Class 3 and 4 EVs, generating approximately $20 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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Develop a purpose-built, ground-up, zero-emission, medium-duty EF-1 platform.   As part of our future product development, we plan to develop a purpose-built, ground-up, zero-emission, medium-duty EF-1 platform that will address the market opportunities 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.

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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 Creative Bus Sales, 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 have relocated 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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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 customers 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.

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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 Return On Investment (“ROI”).

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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 capital expenditure.

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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 select from various application service providers that offer dedicated management tools to collect and analyze data and 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.

 

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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

 

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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.

EF-1 Class 2 Pickup Truck and Delivery Van

We have contracted with a global leading and recognized design company, Icona Design (“Icona”), to collaboratively develop concept level 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. The vehicle concept offers various distinct features including solar roof, interior solar mosaic, and retractable solar panels for the pickup bed cover. The light-duty concept is intended to be a platform based solution that will facilitate different versions and applications of the product built off of this platform including the pickup truck model, delivery van and other possible options based on market demand. The concept products were debuted at the Los Angeles Auto Show in November 2021 where show-cars for both the EF-1 pickup truck and EF-1 V delivery van were unveiled to the public. 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.

 

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EdisonFuture Concept EF-1 T Truck

EdisonFuture Concept EF-1 V Van

EV Charging

We currently sell both L2 and DCFC 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 DCFC, 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.

Forklifts:

Currently we offer Class 1all-electric lithium-ion forklifts with 4,000 lbs. 5,000 lbs. and 7,700 lbs. capacity, as well as three different models of pallet jacks aimed at different operation intensity applications.

 

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Phoenix Motorcars All-Electric Lithium-Ion Forklifts

 

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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.

We are extending our expertise in the sale and service of lithium-ion powered vehicles to all-electric lithium-ion forklifts and material handling solutions. In addition to offering these products to the commercial vehicle fleet customers, we are offering these solutions to a range of new customer segments including warehouses, distribution centers and manufacturing facilities. The lithium-ion forklifts offer superior total cost of ownership, with rapid charging capability and longer run time from the higher density batteries. In addition to the forklifts with capacities ranging from 4,000 lbs. – 7,700 lbs. and the three different pallet trucks, the company will further expand its zero-emission material handling portfolio to cater the growing demand zero-emission and automated warehousing solutions.

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.

As of December 31, 2021, our backlog of approximately 63 orders consist of 37 vehicles and 26 electric drive system kits.

We are fulfilling the confirmed backlog of 63 firm orders in 2022. The order backlog represents $11.1 million of revenue, consisting of $7.8 million for vehicles and $3.3 million for electric drive systems. Additionally, Phoenix has binding orders for 17 chargers representing over $0.6 million 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

 

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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. 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 started the design development of our purpose built 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 and Creative Bus Sales, 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.

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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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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.

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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.

PATENTS

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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.

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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.

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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.

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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.

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On November 12, 2021, the Company filed a design application with the European Union Intellectual Property Office (EUIPO) for the design of Pick-up Truck, with the European Union Design Application No. 008757488-0001 and Registration No. 008757488-0001 under the Title: Motor Trucks (As Amended by the EUIPO). Claiming Priority to U.S. Design Application No. 29/783,318 Filed May 12, 2021.

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On November 12, 2021, the Company filed a design application with the European Union Intellectual Property Office (EUIPO) for the design of Van with the European Union Design Application No. 008756067-0001 and Registration No. 008756067-0001 under the Title: Vans. Claiming Priority to U.S. Design Application No. 29/783,529, Filed May 13, 2021.

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On November 12, 2021, the Company filed a design application with the European Union Intellectual Property Office (EUIPO) for the design of Retractable Solar Roof for a Motor Vehicle, with the European Union Design Application No. 008756084-0001 and Registration No. 008756084-0001 under the Title: Vehicle Roofs (As Amended by the EUIPO). Claiming Priority to U.S. Design Application No. 29/804,007 Filed August 17, 2021

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On March 30, 2022, the Company filed an invention patent with United States Patent and Trademark Office for the Tablet Support Mount for Connection to Motor Vehicle Console with Application No. 63324448 and Serial No. 63/324,448.

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PENDING PATENT APPLICATIONS

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3D Real-time Vehicle Motion Scene Display with Associated Intelligent Collision Imminent Warning Telltale

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Providing warning signals for imminent collision based on 4D Radar Return, Object Trajectory Prediction, Real-time Path Planning, and Generic On-board Map

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Connectivity means connecting tablets to a motored vehicle

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This invention addresses the console display hardware and software obsoletion issue by providing a means for connecting a tablet, such as an Apply iPad or Android tablet, to a motored vehicle structurally and electronically as an alternative to the console display as the onboard human-machine interface

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Dynamic HD Map Generation and Ego Vehicle Localization

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Extrinsic Sensor Suite Calibration and Vehicle Sensor Systems Self Health Check

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A Blockchain Consensus Mechanism in Distributed Solar-Powered EV Network

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A clean-energy management system for a distributed solar-powered electric vehicle ecosystem includes a blockchain consensus mechanism, by which nodes within the ecosystem are rewarded with tokens based on the renewable energy produced, consumed, stored, transmitted, shared and/or other use profiles.

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.