10-Q: Phoenix Motor Reports Q3 Loss Amid Revenue Decline, Nasdaq Delisting

Phoenix Motor Inc. reported a significant net loss for the nine months ended September 30, 2025, with revenues sharply down and ongoing concerns about its ability to continue as a going concern following its Nasdaq delisting.

Summary

• Net loss for the nine months ended September 30, 2025, was $8.4 million, a significant decline from a net income of $14.1 million in the same period of 2024.
• Total revenues for the nine months ended September 30, 2025, decreased by 63.2% to $9.6 million from $26.2 million in 2024, primarily due to the prior year's Proterra acquisition fulfilling existing orders and current cash shortage issues slowing production.
• Operating loss improved significantly to $5.6 million for the nine months ended September 30, 2025, compared to $25.9 million in 2024, largely due to a substantial decrease in selling, general, and administrative expenses and no goodwill impairment in 2025.
• Gross margin increased to 30.6% for the nine months ended September 30, 2025, from 20.8% in 2024, attributed to higher margins on a limited number of EV and transit bus sales.
• Cash and cash equivalents decreased to $276,000 as of September 30, 2025, from $764,000 at December 31, 2024.
• Net cash used in operating activities increased to $5.8 million for the nine months ended September 30, 2025, from $2.8 million in 2024.
• The company's common stock was delisted from Nasdaq on April 15, 2025, and now trades on the OTC Pink Market under PEVM.
• A 1-for-5 reverse stock split was effected on July 31, 2025, in an attempt to regain Nasdaq compliance.
• The company faces substantial doubt about its ability to continue as a going concern due to recurring losses and significant cash burn.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by significant net losses, declining revenues, increased cash burn, and a 'going concern' warning. The Nasdaq delisting and abandoned appeal highlight major operational and governance issues. While gross margins improved on a per-unit basis, overall sales volume is down due to cash shortages. The reliance on dilutive financing and related party transactions, coupled with internal control weaknesses and ongoing legal disputes, paints a very negative picture for investors.

Positives

• Operating loss significantly improved to $5.6 million for the nine months ended September 30, 2025, from $25.9 million in the prior year, driven by reduced operating expenses.
• Selling, general and administrative expenses decreased substantially by 68.4% to $8.5 million for the nine months ended September 30, 2025, primarily due to decreased headcount.
• Gross margin increased to 30.6% for the nine months ended September 30, 2025, from 20.8% in the prior year, indicating improved profitability on units sold, albeit at lower volumes.
• No goodwill impairment was recorded for the nine months ended September 30, 2025, compared to $4.3 million in 2024.

Negatives

• Reported a net loss of $8.4 million for the nine months ended September 30, 2025, a significant reversal from a net income of $14.1 million in the same period of 2024.
• Total revenues decreased by 63.2% to $9.6 million for the nine months ended September 30, 2025, from $26.2 million in 2024, primarily due to cash shortage issues causing slow production.
• Cash and cash equivalents declined to $276,000 as of September 30, 2025, from $764,000 at December 31, 2024.
• Net cash used in operating activities increased to $5.8 million for the nine months ended September 30, 2025, from $2.8 million in 2024, indicating increased cash burn.
• The company's common stock was delisted from Nasdaq on April 15, 2025, and its appeal for relisting was abandoned.
• Substantial doubt exists about the company's ability to continue as a going concern.
• Current convertible notes have experienced events of default, leading to increased interest rates (18% and 19% per annum) and potential for immediate repayment or significant dilution.
• Identified material weaknesses in internal control over financial reporting.

Risks

• Going Concern Uncertainty: Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and significant cash used in operating activities.
• Liquidity Risk: The company needs to raise additional funds to sustain operations and there is no assurance that financing will be obtained on timely or acceptable terms.
• Nasdaq Delisting and OTC Trading: Trading of common stock was suspended on Nasdaq and the appeal for relisting was abandoned, leading to trading on the OTC Pink Market, which may adversely affect liquidity, trading price, and ability to raise capital.
• Dilution from Convertible Notes: Holders of convertible notes may elect to convert into common stock, potentially causing substantial dilution to existing shareholders, especially given anti-dilution provisions.
• Cash Drain from Convertible Notes: If the company cannot make payments on convertible notes in stock (due to limitations or lack of shareholder approval), it may be forced to use substantial cash resources, potentially impacting operations.
• Internal Control Weaknesses: Material weaknesses in internal control over financial reporting could adversely affect the ability to record, process, summarize, and report financial information accurately.
• Supply Chain Challenges: Ongoing industry-wide challenges, including significant delivery delays and supply shortages of key components, are expected to continue affecting the ability to obtain parts and components on a timely basis.
• Inflation and Interest Rates: Increased costs due to inflation and higher interest rates impact demand for EVs and financing for customers, potentially affecting business, financial condition, and results of operations.
• Legal Proceedings: The company is involved in various legal disputes (landlord, former employee, lender, warrant exercise) with uncertain outcomes and potential financial losses.
• Government Subsidies and Incentive Policies: Delays in receiving IRS guidance on new tax credits (Inflation Reduction Act) and the establishment of other government funding programs have reduced customer orders.

Future Outlook

The company plans to improve liquidity and raise additional funds through strategies including operational integration, cost structure re-establishment, expanding strategic partnerships for outsourcing design and engineering, implementing working capital initiatives (negotiating payment terms, requiring down payments), tighter cash control, and a robust capital market strategy involving public/private stock offerings, debt financings, and federal/state incentive funding programs. There is no assurance these plans will be successfully implemented, and failure to do so could materially adversely affect the company's ability to continue as a going concern.

Management Comments

• We plan to continue pursuing strategies to improve liquidity and raise additional funds while implementing various measures to cut costs.
• Continue to drive for operation integration under ONE Phoenix, re-alignment operating units under ONE Goal, right sizing workforce under ONE Team.
• Re-establish the cost structure and cost base with the new integrated ERP and other operating systems.
• Expand and strengthen strategic partnership to outsource a significant portion of design and engineering work for the next generation product to third party vendors and suppliers to control overall development and supply chain costs.
• Implement working capital initiatives and negotiate better payment terms with customers and for some of the new orders, require down payments.
• Implement cash saving initiatives and tighter cash control, and calibrate capital allocation to manage liquidity.
• Continue to proactively implement a robust capital market strategy to provide financing for the Groups operations through proceeds from public or private stock offering, debt financings including but not limited to term loans, revolving line of credit and equity linked instruments, and potentially federal and state incentive funding programs.
• We remain committed to pursuing all reasonable and strategic options to regain compliance and restore our listing on a national securities exchange.

Industry Context

The company operates in the commercial electric vehicle industry, which is driven by increasing government mandates for zero-emission transportation (e.g., California's 2040 transit bus mandate, 2035 airport shuttle mandate, 2030 medium-duty truck mandate). Various state and federal agencies provide significant funding and incentives, such as the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project ($60,000 per Class 4 EV), New York Truck Voucher Incentive Program ($100,000 per Class 4 EV), and federal/state funding for charging infrastructure. However, delays in IRS guidance on new tax credits from the Inflation Reduction Act have caused customers to delay orders, impacting the company's sales. The industry also faces ongoing supply chain challenges and cost increases due to inflation and rising interest rates, which affect demand and financing for EVs.

Comparison to Industry Standards

• The company claims to have delivered a total of 141 EVs to more than 48 customers as of September 30, 2025, which it believes is the largest number of Class 4 cutaway medium duty electric shuttle bus deployments in the U.S. and the most electric vehicles deployed on the Ford E-Series chassis.
• With over four million zero-emission miles accumulatively driven by its vehicles, the company highlights significant industry experience compared to most commercial EV manufacturers still in the prototype phase.
• The company's acquisition of Proterra's transit business unit positions it as an OEM for North American public transit agencies, airports, universities, and other commercial transit fleets, a segment with specific regulatory drivers.

Corporate Governance

Legal Proceedings

• Dispute with the landlord of Folsom warehouse seeking damages in excess of $250,000 (April 2024). Lawsuit is in early stage, outcome uncertain, company is negotiating settlement.
• Breach of contract regarding payment to a former employee (December 2024). Lawsuit is in early stage, outcome uncertain.
• Dispute with Agile Lending, LLC (March 2025) where the company seeks to recover $180,000 of accounts receivable held back by the lender. Lawsuit is in early stage, outcome uncertain.
• Legal proceedings with an investor to recover excessive shares issued from cashless warrant exercises on March 31, 2025 (2,378,644 shares) and April 3, 2025 (1,155,322 shares), based on incorrect calculations.

Related Party Transactions

• SPI Energy Co., Ltd (affiliated company controlled by Mr. Xiaofeng Denton Peng, Chairman/CEO): Billed $104,000 for legal, HR, and IT services during the nine months ended September 30, 2025; $86,000 paid. $18,000 consulting fee outstanding to SPI.
• Mr. Xiaofeng Denton Peng (Chairman/CEO): $5,000 loan outstanding to him as of September 30, 2025.
• Palo Alto Clean Tech Holding Limited (owned and controlled by Mr. Xiaofeng Denton Peng): Invested $480,000 in a private placement on August 3, 2025, receiving 1,600,000 shares of common stock and a warrant to purchase 1,600,000 shares.
• Two officers: Invested in the same private placement on August 3, 2025, receiving an aggregate of 85,000 shares of common stock and warrants to purchase 85,000 shares.
• The Group billed SPI $17,000 for legal, HR, and IT services provided by the Group's employees during the nine months ended September 30, 2025; $17,000 consulting fee outstanding from SPI.

Stakeholder Impact

• Shareholders: Significant dilution risk from convertible notes and future capital raises. Nasdaq delisting and trading on OTC Pink severely impacts liquidity and potentially share price. Net losses and going concern warning indicate erosion of shareholder value.
• Employees: Decreased headcount contributed to lower SG&A. The Proterra acquisition included a commitment to offer jobs and retain employees for at least one year. Stock options and restricted stock units were granted to management and employees.
• Customers: Cash shortage issues caused slow production of transit buses, potentially impacting delivery times. Delays in government incentives also affect customer purchasing decisions.
• Creditors: Convertible notes are in default, leading to increased interest rates and potential for immediate repayment. The company's liquidity issues pose a risk to timely debt repayment.
• Suppliers: Supply chain challenges and cash flow issues may impact payment terms and relationships with vendors. The company is negotiating better payment terms and down-payment alternatives.

Next Steps

• Continue pursuing strategies to improve liquidity and raise additional funds.
• Implement measures to control costs and improve efficiency, including operational integration, re-establishing cost structure, and right-sizing the workforce.
• Expand and strengthen strategic partnerships to outsource design and engineering work for next-generation products.
• Implement working capital initiatives, including negotiating better payment terms with customers and requiring down payments for new orders.
• Implement cash saving initiatives and tighter cash control, calibrating capital allocation.
• Proactively implement a robust capital market strategy for financing through stock offerings, debt, and incentive funding.
• Address identified material weaknesses in internal control over financial reporting by hiring qualified staff, setting up a financial and system control framework, forming a task force, and senior management review.
• Finalize the determination of fair values allocated to various assets and liabilities related to the Proterra acquisition, following an amendment to the Court order signed on October 17, 2025.
• Continue legal proceedings with an investor to recover excessive shares issued from cashless warrant exercises.
• Negotiate settlement with the Folsom warehouse landlord regarding a dispute seeking over $250,000 in damages.

Key Dates

Recommendation

The company is in severe financial distress, evidenced by a substantial net loss, significant revenue decline, and a 'going concern' warning. Its stock has been delisted from Nasdaq and trades on the less liquid OTC Pink market, with an abandoned appeal for relisting. Multiple convertible notes are in default, leading to high interest rates and the risk of massive dilution or a severe cash drain. The company also reported material weaknesses in internal controls and is involved in several legal disputes. While management outlines strategies to improve liquidity, there is no assurance of success. The combination of poor financial performance, governance issues, and high operational risks makes this a highly speculative and unfavorable investment.

Keywords

Electric Vehicles, EVs, Commercial Vehicles, Electric Transit Buses, Phoenix Motor Inc., PEVM, SEC Filing, 10-Q, Financial Results, Net Loss, Revenue Decline, Nasdaq Delisting, Going Concern, Convertible Notes, Capital Raise, Supply Chain, Corporate Governance, Risk Factors, Q3 2025