DEF: Phoenix Motor Inc. Seeks Stockholder Approval for Reverse Stock Split, Director Elections, and Incentive Plan Amendment

Phoenix Motor Inc. is holding its annual meeting on March 21, 2025, seeking stockholder approval for key proposals including a reverse stock split to maintain Nasdaq listing, director elections, an amendment to the equity incentive plan, and ratification of the company's auditor.

Summary

• Phoenix Motor Inc. is holding its 2024 Annual Meeting of Stockholders on March 21, 2025, to vote on several key proposals.
• The proposals include electing five directors, ratifying the appointment of Yu Certified Public Accountant PC as the independent auditor, and approving executive compensation.
• Stockholders will also vote on an amendment to the 2021 Omnibus Equity Incentive Plan to increase the authorized shares to 20% of the company's outstanding shares on a fully diluted basis.
• A significant proposal involves authorizing the Board to approve a reverse stock split with a ratio between 1-for-5 and 1-for-10 to maintain the company's Nasdaq listing.
• The record date for determining stockholders eligible to vote is March 3, 2025.
• As of the record date, there were 45,979,404 shares of common stock outstanding.
• EdisonFuture and PACT, along with certain directors, intend to vote in favor of all proposals, collectively holding approximately 38.1% of the company's outstanding shares.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects such as the intention to maintain the Nasdaq listing and incentivize employees, the need for a reverse stock split and the risk of delisting introduce negative sentiment. The company's past issues with delinquent filings also contribute to a neutral to slightly negative outlook.

Positives

• The proposed reverse stock split aims to maintain the company's Nasdaq listing, potentially increasing investor confidence.
• The amendment to the equity incentive plan is intended to attract and retain key personnel by aligning their interests with those of stockholders.
• The Board of Directors includes three independent directors: Julia Yu, Yongmei (May) Huang, and James Young.
• The company has a code of ethics and an insider trading policy in place.

Negatives

• The company received a letter from Nasdaq indicating non-compliance with the minimum bid price requirement.
• Failure to approve the reverse stock split could lead to delisting from Nasdaq, potentially reducing liquidity and investor interest.
• The reverse stock split may not result in a sustained increase in the stock price.
• The reverse stock split could lead to a decrease in the overall market capitalization of the company.
• The company has had issues with delinquent Section 16(a) reports.

Risks

• The company faces the risk of delisting from Nasdaq if the reverse stock split is not approved or if the stock price does not meet the minimum bid price requirement.
• There is no guarantee that the reverse stock split will result in a sustained increase in the stock price or attract new investors.
• The reverse stock split could decrease the liquidity of the common stock.
• The company faces cybersecurity threats, requiring ongoing assessment and mitigation efforts.
• The company has related party transactions with SPI Energy Co., Ltd., which could present potential conflicts of interest.

Future Outlook

The company aims to maintain its Nasdaq listing through a reverse stock split and continue attracting and retaining key personnel through equity-based incentives.

Management Comments

• The Board believes that effecting the Reverse Stock Split is in the Company's and our stockholders best interests.
• The Board strongly believes that the Reverse Stock Split is necessary to maintain our listing on Nasdaq.

Industry Context

The company's efforts to maintain its Nasdaq listing and incentivize employees through equity plans are common practices among publicly traded companies, particularly in the competitive electric vehicle (EV) sector.

Comparison to Industry Standards

• The proposed reverse stock split is a common strategy for companies facing delisting from major exchanges, with companies like Mullen Automotive and Faraday Future having previously undertaken similar actions.
• The level of director compensation, including cash retainers and stock options, is generally in line with that of other small-cap public companies in the automotive and technology sectors.
• The equity incentive plan amendment, seeking authorization for shares equal to 20% of outstanding shares, is within the typical range for growth-oriented companies aiming to attract and retain talent, although the specific percentage can vary based on company size and industry.

Related Party Transactions

• At December 31, 2023, the amount of $130,000 due from related parties is receivable from SolarJuice Co., Ltd., a subsidiary of SPI Energy Co., Ltd. (SPI), an affiliated entity under the common control of the Company, for sales of electric forklift during 2023.
• At December 31, 2023, the amount of $863,000 due to related parties is loan principal due to SPI.
• During the year ended December 31, 2024, the Company borrowed $1,051,000 from SPI.
• During the year ended December 31, 2024, the Company collected $46,000 from SolarJuice Co., Ltd for sales of electric forklift during 2023, resulting in a decrease in the balance of forklift receivables from $130,000 to $84,000.
• During the year ended December 31, 2024, SolarJuice Co., Ltd billed the Company storage fee of $128,000 which is paid in full as of December 31, 2024.
• During the year ended December 31, 2024, SPI borrowed $594,000 from the Company, and the loan principal was paid in full as of December 31, 2024.
• On June 22, 2024, the Company entered into a loan agreement with SPI. In the agreement, the Company agreed to lend up to an aggregate amount of $3,000,000 to SPI at a rate of 12% per annual.
• During the year ended December 31, 2024, SPI billed the Company $794,000 for legal, human resources and IT services provided by SPI employees and $766,000 was paid, with $28,000 remaining outstanding at of December 31, 2024.
• On March 6, 2024, SPI entered into a Deed of Settlement with its creditor, Streeterville Capital, LLC (Streeterville) to settle the unpaid balances of certain convertible notes via installment payments as agreed in the Deed of Settlement. As of part of this Deed of Settlement, the Company, as the guarantor, covenants to Streeterville to pay and satisfy on demand all liabilities due from SPI to Streeterville with a total amount of $14,980,000.
• On September 6, 2024, Streeterville provided a Deed of Release of Guarantor to the Company, confirming that Streeterville releases and discharges the Company from all past, present and future liability to Streeterville under the guarantee to Streeterville for SPI and also from all actions, claims and demands under or in connection with this guarantee.

Stakeholder Impact

• Shareholders face potential dilution from the equity incentive plan amendment.
• Shareholders could experience increased transaction costs if the reverse stock split results in odd-lot holdings.
• Employees may benefit from the equity incentive plan, aligning their interests with the company's success.
• The company's ability to maintain its Nasdaq listing impacts its access to capital and overall financial stability, affecting all stakeholders.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on March 21, 2025.
• The Board will determine the final ratio for the reverse stock split if approved by stockholders.
• The company will file an amendment to its certificate of incorporation to reflect the reverse stock split if approved.
• The company will notify stockholders of the effective time of the reverse stock split.

Key Dates