8-K/A: Phoenix Motor Inc. Announces Non-Reliance on Previously Issued Financial Statements Following Proterra Acquisition

Phoenix Motor Inc. has determined that previously filed financial statements related to the acquisition of Proterra's Transit business are unreliable due to errors and lack of necessary data.

Summary

• Phoenix Motor Inc. has identified errors in the audited financial statements of the Proterra Transit and Battery Leasing Business for the years ended December 31, 2023 and 2022.
• These financial statements, previously filed as Exhibit 99.1, were incorrectly labeled as audited when they should have been labeled as unaudited.
• The company also determined that the unaudited pro forma condensed combined balance sheet and statements of income, filed as Exhibit 99.2, are incorrect.
• These pro forma financials incorrectly reflected assets that were not acquired and liabilities that were not assumed, and did not apply purchase accounting correctly.
• Phoenix Motor Inc. cannot determine if the historical statement of operations properly reflects the revenue and expenses of the acquired business.
• The company lacks the necessary data to prepare accurate carved-out financial statements for the acquired business due to the integrated nature of Proterra's operations and personnel turnover.
• As a result, the company's management and Audit Committee have concluded that the previously issued financial statements should no longer be relied upon.

Sentiment

Score: 2

Explanation: The document indicates significant issues with financial reporting, which is a major negative for investors. The non-reliance on previously issued statements is a serious concern.

Negatives

• The company has identified significant errors in previously filed financial statements.
• The audited financial statements of Proterra were incorrectly labeled.
• The pro forma financial statements were also incorrect.
• The company lacks the necessary data to prepare accurate financial statements for the acquired business.
• The company has determined that the previously issued financial statements should no longer be relied upon.

Risks

• The inability to produce accurate financial statements could impact investor confidence.
• The lack of historical data from Proterra poses a challenge for future financial reporting.
• The company is evaluating the impact of these errors on its disclosure controls and procedures.
• There is a risk of further financial reporting issues if the underlying problems are not resolved.

Future Outlook

The company is evaluating the impact of the errors on its assessments of the effectiveness of its disclosure controls and procedures.

Management Comments

• Management of the Company, with the subsequent concurrence of the Company's Audit Committee, determined that the following financial statements of the Company may no longer be relied upon.

Industry Context

This announcement highlights the complexities and challenges that can arise during acquisitions, particularly when dealing with carve-out financial statements from integrated businesses. It underscores the importance of thorough due diligence and access to accurate financial data.

Comparison to Industry Standards

• The situation is unusual as it involves a public company having to retract previously filed audited financial statements.
• Typically, companies acquiring businesses ensure they have access to the necessary financial data to prepare accurate carve-out financials.
• The lack of access to Proterra's historical data and the integrated nature of its operations are significant deviations from standard acquisition practices.
• This situation is not comparable to typical acquisitions where the financial data is readily available and auditable.

Stakeholder Impact

• Shareholders may lose confidence due to the financial reporting issues.
• Employees may be concerned about the company's financial stability.
• Creditors may reassess their risk exposure to the company.

Next Steps

• The company is evaluating the impact of the errors on its assessments of the effectiveness of its disclosure controls and procedures.

Key Dates

Keywords

financial statements, non-reliance, Proterra, acquisition, audited, unaudited, pro forma, accounting, disclosure controls