# EDGAR Filing Document

**Accession Number:** 0001879848
**File Stem:** 0001493152-25-021920
**Filing Date:** 2025-11
**Character Count:** 158659
**Document Hash:** 774ff4c0b07fb03d13303c6e55b30679
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-25-021920.hdr.sgml**: 20251112

**ACCESSION NUMBER**: 0001493152-25-021920

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 74

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251112

**DATE AS OF CHANGE**: 20251112

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PHOENIX MOTOR INC.
- **CENTRAL INDEX KEY:** 0001879848
- **STANDARD INDUSTRIAL CLASSIFICATION:** TRUCK & BUS BODIES [3713]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-41414
- **FILM NUMBER:** 251472811

**BUSINESS ADDRESS:**
- **STREET 1:** 401 SOUTH DOUBLEDAY AVENUE
- **CITY:** ONTARIO
- **STATE:** CA
- **ZIP:** 91761
- **BUSINESS PHONE:** 909-987-0815

**MAIL ADDRESS:**
- **STREET 1:** 401 SOUTH DOUBLEDAY AVENUE
- **CITY:** ONTARIO
- **STATE:** CA
- **ZIP:** 91761

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(Mark One)**

**☒** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**For the quarterly period ended September 30, 2025**

**OR**

**☐** **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from ___________ to ___________**

**Commission file number: 001-41414**

**Phoenix Motor Inc.**

(Exact Name of Registrant as Specified in Its Charter)

---

| | |
|:---|:---|
| **Delaware** | **85-4319789** |
| (State or Other Jurisdiction of<br> Incorporation or Organization) | (I.R.S. Employer<br> Identification No.) |

---

---

| | |
|:---|:---|
| **1500 Lakeview Loop, Anaheim, CA** | **92807** |
| (Address of Principal Executive Offices) | (Zip Code) |

---

**(909) 978-0815**

(Registrant's Telephone Number, Including Area Code)

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading Symbol(s)** | **Name of Each Exchange on Which Registered** |
| Common Stock, par value $0.0004 per share | PEVM | The Nasdaq Stock Market LLC\* |

---

\*Trading of the registrant's common stock on Nasdaq was suspended on April 15, 2025. The registrant's common stock is currently quoted on the OTC Pink Market under the symbol "PEVM".

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☐ <br> Non-Accelerated Filer ☒ Smaller Reporting Company ☒ <br> Emerging Growth Company ☒

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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 12,870,917 shares of common stock outstanding as of November 10, 2025.

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | Page |
| Part I. | [Financial Information](#j_001) |  |
|  | [Item 1. Interim Financial Statements](#j_002) |  |
|  | [Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024](#j_003) | F-1 |
|  | [Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024](#j_004) | F-2 |
|  | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024](#j_005) | F-3 |
|  | [Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2025 and 2024](#j_006) | F-4 |
|  | [Notes to Unaudited Condensed Consolidated Financial Statements](#j_007) | F-5 |
|  | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](#a_001) | 3 |
|  | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](#a_002) | 11 |
|  | [Item 4. Controls and Procedures](#a_003) | 11 |
| Part II. | [Other Information](#a_004) |  |
|  | [Item 1. Legal Proceedings](#a_005) | 12 |
|  | [Item 1A. Risk Factors](#a_006) | 12 |
|  | [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](#a_007) | 14 |
|  | [Item 3. Defaults Upon Senior Securities](#a_008) | 14 |
|  | [Item 4. Mine Safety Disclosures](#a_009) | 14 |
|  | [Item 5. Other Information.](#a_010) | 14 |
|  | [Item 6. Exhibits](#a_011) | 15 |
| [Signatures](#a_012) | [Signatures](#a_012) | 16 |

---

**PART I - FINANCIAL INFORMATION**

**Item 1. Interim Financial Statements**

**PHOENIX MOTOR INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(In thousands, except for share and per share data)**

---

| | | |
|:---|:---|:---|
|  | **September 30,<br> 2025** | **December 31,<br> 2024** |
|  | **(Unaudited)** |  |
| ASSETS |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $276 | $764 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 3625 | 4015 |
| &nbsp;&nbsp;&nbsp;Inventories | 38357 | 40760 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets, net | 1395 | 1699 |
| &nbsp;&nbsp;&nbsp;Amounts due to a related party | 17 |  |
| &nbsp;&nbsp;&nbsp;Battery lease receivables | 4645 | 4767 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total current assets** | **48315** | **52005** |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 2530 | 3784 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 886 | 1724 |
| &nbsp;&nbsp;&nbsp;Net investment in leases | 28 | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $**51759** | $**57577** |
| LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $4232 | $4265 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 7786 | 6685 |
| &nbsp;&nbsp;&nbsp;Advance from customers, current | 9268 | 4713 |
| &nbsp;&nbsp;&nbsp;Deferred income | 1129 | 1494 |
| &nbsp;&nbsp;&nbsp;Warranty reserve, current | 1986 | 4380 |
| &nbsp;&nbsp;&nbsp;Lease liabilities, current | 1393 | 1845 |
| &nbsp;&nbsp;&nbsp;Amounts due to a related party | 23 | 28 |
| &nbsp;&nbsp;&nbsp;Short-term borrowing | 514 | 1010 |
| &nbsp;&nbsp;&nbsp;Derivative liability |  | 33 |
| &nbsp;&nbsp;&nbsp;Warrant liability | 960 | 1278 |
| &nbsp;&nbsp;&nbsp;Convertible note, current | 4448 | 485 |
| &nbsp;&nbsp;&nbsp;Other payable | 509 |  |
| &nbsp;&nbsp;&nbsp;Long-term borrowing, current | 3 | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total current liabilities** | **32251** | **26219** |
| &nbsp;&nbsp;&nbsp;Lease liabilities, noncurrent | 265 | 1239 |
| &nbsp;&nbsp;&nbsp;Warranty reserve, noncurrent | 6060 | 9909 |
| &nbsp;&nbsp;&nbsp;Advance from customers, noncurrent |  | 2036 |
| &nbsp;&nbsp;&nbsp;Long-term borrowings | 138 | 138 |
| &nbsp;&nbsp;&nbsp;Deferred tax liabilities | 7716 | 7716 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | $**46430** | **47257** |
| Commitments and contingencies (Note 16) |  |  |
| Equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, par $0.0004, 450,000,000 shares authorized, 12,549,503\* and 8,534,973\* shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | 21 | 17 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 55001 | 51578 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (49693) | (41275) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | **5329** | **10320** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and stockholders' equity** | $**51759** | $**57577** |

---

\* The shares are presented on a retrospective base to reflect the Company's reverse stock split effected on July 31, 2025.

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.*

**PHOENIX MOTOR INC.**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except for share and per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30, 2025** | **September 30, 2024** | **September 30, 2025** | **September 30, 2024** |
| Revenues | $2491 | $4772 | $9644 | $26224 |
| Cost of revenues | 1822 | 3656 | 6695 | 20774 |
| &nbsp;&nbsp;&nbsp;Gross profit (loss) | 669 | 1116 | 2949 | 5450 |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 2631 | 9475 | 8536 | 27053 |
| Impairment of goodwill | - | - | - | 4271 |
| Operating loss | (1962) | (8359) | (5587) | (25874) |
| Other income (expense): |  |  |  |  |
| Interest expense, net | (1002) | (784) | (3193) | (4121) |
| Loss on warrants issued in private placement |  |  |  | (7432) |
| (Loss) gain on change in fair value of warrant liability | (742) | (216) | 318 | 14402 |
| Gain on change in fair value of derivative liability |  | 13 |  | 602 |
| Bargain purchase gain |  |  |  | 32072 |
| Others | 26 | - | 56 | - |
| &nbsp;&nbsp;&nbsp;Total other (expense) income, net | (1718) | (987) | (2819) | 35523 |
| (Loss) income before income taxes | (3680) | (9346) | (8406) | 9649 |
| Income tax (expenses) benefits | - | 3755 | (12) | 4487 |
| Net (loss) income | $(3680) | $(5591) | $(8418) | $14136 |
| (Loss) earnings per share of common stock: |  |  |  |  |
| Basic | $(0.33) | $(0.75) | $(0.84) | 2.10 |
| Diluted | $(0.30) | $(0.75) | $(0.74) | 1.85 |
| Weighted average shares outstanding\* |  |  |  |  |
| Basic | 11195462 | 7285501 | 10064966 | 6782178 |
| Diluted | 12432516 | 7285501 | 11302020 | 7470385 |

---

**\*** The shares are presented on a retrospective base to reflect the Company's reverse stock split effected on July 31, 2025.

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.*

**PHOENIX MOTOR INC.**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

**(In thousands, except for share and per share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | |
|  | **Shares\*** | **Amount** | **Additional<br> Paid-In**<br>**Capital** | **Accumulated**<br>**Deficit** | **Total<br> Stockholders'**<br>**Equity** |
| **Balance as of January 1, 2024** | 4380184 | $9 | $44359 | $(49207) | $(4839) |
| Net income |  |  |  | 16774 | 16774 |
| Stock-based compensation |  |  | 50 |  | 50 |
| Reclass of derivative liability upon conversion of related convertible notes |  |  | 144 |  | 144 |
| Issuance of common stock for convertible note conversion | 143056 |  | 451 |  | 451 |
| Issuance of common stock for settlement with vendors | 273052 | 1 | 1692 |  | 1693 |
| Issuance of restricted shares to Wisdom Financial to repay loan interest | 36040 |  | 270 |  | 270 |
| Issuance of common stock for private placements | 2058112 | 4 | 2027 |  | 2031 |
| **Balance as of March 31, 2024** | 6890444 | 14 | 48993 | (32433) | 16574 |
| Net income |  |  |  | 2953 | 2953 |
| Stock-based compensation |  |  | (67) |  | (67) |
| Reclass of derivative liability upon conversion of related convertible notes |  |  | 129 |  | 129 |
| Issuance of common stock for convertible note conversion | 189827 |  | 381 |  | 381 |
| **Balance as of June 30, 2024** | 7080271 | $14 | $49436 | $(29480) | $19970 |
| Net income |  |  |  | (5591) | (5591) |
| Stock-based compensation |  |  | 22 |  | 22 |
| Reclass of derivative liability upon conversion of related convertible notes |  |  | 44 |  | 44 |
| Issuance of common stock for convertible note conversion | 353613 | 1 | 460 |  | 461 |
| **Balance as of September 30, 2024** | **7433884** | $**15** | $**49962** | $**(35071)** | $**14906** |
| **Balance as of January 1, 2025** | **8534973** | $**17** | $**51578** | $**(41275)** | $**10320** |
| Net loss |  |  |  | (3586) | (3586) |
| Stock-based compensation |  |  | (39) |  | (39) |
| Reclass of derivative liability upon conversion of related convertible notes |  |  | 33 |  | 33 |
| Issuance of common stock for warrant exercise | 475729 | 1 | 241 |  | 242 |
| Issuance of senior convertible note |  |  | 1838 |  | 1838 |
| Issuance of common stock for convertible note conversion | 614321 | 2 | 575 |  | 577 |
| **Balance as of March 31, 2025** | **9625022** | **20** | **54226** | **(44861)** | **9385** |
| Net income |  |  |  | (1152) | (1152) |
| Stock-based compensation |  |  | 34 |  | 34 |
| Issuance of senior convertible note |  |  | 76 |  | 76 |
| Issuance of common stock for warrant exercise | 231064 |  | (536) |  | (536) |
| **Balance as of June 30, 2025** | **9856086** | $**20** | $**53800** | $**(46013)** | $**7807** |
| Net income |  |  |  | (3680) | (3680) |
| Issuance of common stock for private placements | 2020000 | 1 | 605 |  | 606 |
| Stock-based compensation | 673417 |  | 596 |  | 596 |
| **Balance as of September 30, 2025** | **12549503** | $**21** | $**55001** | $**(49693)** | $**5329** |

---

**\*** The shares are presented on a retrospective base to reflect the Company's reverse stock split effected on July 31, 2025.

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.*

**PHOENIX MOTOR INC.**

**UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

---

| | | |
|:---|:---|:---|
|  | **Nine Months ended September 30,** | **Nine Months ended September 30,** |
|  | **2025** | **2024** |
| **Changes in operating assets and liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Net (loss) income | (8418) | 14136 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net (loss) income to cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 1254 | 1356 |
| &nbsp;&nbsp;&nbsp;Amortization of convertible notes |  | 1490 |
| &nbsp;&nbsp;&nbsp;Provision for doubtful accounts |  | 292 |
| &nbsp;&nbsp;&nbsp;Gain on warrant exercise | (294) |  |
| &nbsp;&nbsp;&nbsp;Gain on change in fair value of derivative liability |  | (602) |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 591 | 5 |
| &nbsp;&nbsp;&nbsp;Impairment loss on goodwill |  | 4271 |
| &nbsp;&nbsp;&nbsp;Warranty reserve | (6243) | (935) |
| &nbsp;&nbsp;&nbsp;Amortization of right-of-use assets | 838 | 718 |
| &nbsp;&nbsp;&nbsp;Loss on warrants issued in private placement |  | 7432 |
| &nbsp;&nbsp;&nbsp;Gain on change in fair value of warrant liability | (318) | (14402) |
| &nbsp;&nbsp;&nbsp;Bargain purchase gain |  | (32072) |
| &nbsp;&nbsp;&nbsp;Deferred tax liability reversal |  | (5223) |
| &nbsp;&nbsp;&nbsp;*Changes in operating assets and liabilities:* |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable | 390 | (5433) |
| &nbsp;&nbsp;&nbsp;Inventories | 2403 | 15543 |
| &nbsp;&nbsp;&nbsp;Battery lease receivables | 122 | 545 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | 304 | (847) |
| &nbsp;&nbsp;&nbsp;Amount due from related party | (17) | 107 |
| &nbsp;&nbsp;&nbsp;Accounts payable | (33) | 1320 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities | 2360 | 4832 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | (365) | (15) |
| &nbsp;&nbsp;&nbsp;Advance from customers | 2519 | 4926 |
| &nbsp;&nbsp;&nbsp;Other payable | 509 |  |
| &nbsp;&nbsp;&nbsp;Lease liabilities | (1426) | (1148) |
| &nbsp;&nbsp;&nbsp;Net investment in leases | 36 | 154 |
| &nbsp;&nbsp;&nbsp;Amount due to related party | (5) |  |
| &nbsp;&nbsp;&nbsp;Income tax payable | - | 736 |
| **Net cash used in operating activities** | (5793) | (2814) |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of property and equipment |  | (113) |
| &nbsp;&nbsp;&nbsp;Loan lent to a related party |  | (2566) |
| &nbsp;&nbsp;&nbsp;Proceeds from repayment from a related party |  | 2566 |
| &nbsp;&nbsp;&nbsp;Acquisition of Proterra | - | (10000) |
| **Net cash used in investing activities** |  | (10113) |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Repayment of borrowings | (1588) | (4703) |
| &nbsp;&nbsp;&nbsp;Proceeds from borrowings | 6287 | 4982 |
| &nbsp;&nbsp;&nbsp;Repayment of related party borrowings |  | (1914) |
| &nbsp;&nbsp;&nbsp;Proceeds from related party borrowings |  | 1051 |
| &nbsp;&nbsp;&nbsp;Proceeds received from private placements | 606 | 11104 |
| &nbsp;&nbsp;&nbsp;Repayment of convertible notes | - | (597) |
| **Net cash generated from financing activities** | 5305 | 9923 |
| **Decrease in cash and cash equivalents** | (488) | (3004) |
| **Cash and cash equivalents at beginning of the period** | 764 | 3283 |
| **Cash and cash equivalents at end of the period** | 276 | 279 |
| **Supplemental cash flow information:** |  |  |
| &nbsp;&nbsp;&nbsp;Income tax paid |  |  |
| **Non-cash activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Derivative liabilities recorded as debt discount |  |  |
| &nbsp;&nbsp;&nbsp;Issuance of common stock per convertible note conversion | 577 | 1293 |
| &nbsp;&nbsp;&nbsp;Reclass of derivative liability upon conversion of related convertible notes | 33 | 317 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted shares to Wisdom Financial to repay the consulting fee |  | 270 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for settlement with vendors |  | 1693 |

---

*The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.*

**PHOENIX MOTOR INC.**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Amounts in US$ thousands except for shares and share prices)**

**1. Description of Business and Organization**

Phoenix Motor Inc. ("Phoenix Motor" or the "Company") and its subsidiaries (collectively, the "Group") is engaged in design, assembly, and integration of electric drive systems for medium duty electric vehicles ("EVs") and electric transit buses.

Phoenix Cars, LLC ("PCL"), a subsidiary of Phoenix Motor, designs and manufactures zero- emission electric drivetrain systems for integration in medium to heavy-duty commercial fleet vehicles in United States. PCL also sells a range of material handling products including all-electric lithium-ion forklifts and pallet jacks. Phoenix Motorcars Leasing, LLC ("PML"), a subsidiary of Phoenix Motor, serves as a sales and leasing dealership for PCL in United States.

Phoenix Motor was incorporated in the state of Delaware on October 20, 2020. EdisonFuture, Inc. ("EdisonFuture"), a subsidiary of SPI Energy Co., Ltd ("SPI"), was the parent company of Phoenix Motor. On November 12, 2020, EdisonFuture acquired 100% of the membership interests of PCL and PML. Simultaneously, EdisonFuture effected the transfer of 100% of the membership interests of PCL and PML to Phoenix Motor.

The Company's third operating subsidiary, EdisonFuture Motor, Inc., was established in July 2021 to focus on development of its pickup trucks and last mile utility vans business.

On September 26, 2023, EdisonFuture sold shares of the Company's common stock owned by it, representing 56.36% of the outstanding shares of the Company, to Palo Alto Clean Tech Holding Limited ("Palo Alto"), an entity owned and controlled by Mr. Xiaofeng Denton Peng, the Company's Chairman of the Board of Directors and CEO. After this transaction, SPI was no longer the Group's ultimate parent company but still considered as a related party of the Group as SPI owns over 20% of the Company's outstanding shares through EdisonFuture, and it is an affiliated company controlled by Mr. Peng.

On January 11, 2024, the Group completed the acquisition of the Proterra transit business unit and on February 7, 2024, the Group completed the acquisition of Proterra battery lease contracts. After the acquisition, the Group engages in the business that designs, develops and sells electric transit buses as an original equipment manufacturer for North American public transit agencies, airports, universities and other commercial transit fleets and the Group was assigned with the right to collect certain leasing receivables which Proterra was a party as the lessor thereunder, used in connection with deployed Proterra electric transit buses. On June 24, 2024, the Group entered into an asset purchase agreement with Zenobe Americas EV Assotco LLC ("Zenobe"). In the agreement, the Group sold the battery lease receivables to Zenobe in two batches while retaining the warranty liability associated with leased batteries. As of September 30, 2025, the Group has closed both batches of sale.

**2. Summary of Significant Accounting Policies**

**(a) Basis of Presentation**

The accompany unaudited condensed consolidated financial statements of the Group are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The unaudited condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's consolidated financial statements as of December 31, 2024 and accompanying notes in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the quarterly periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group's consolidated financial statements for the year ended December 31, 2024. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future periods.

**(b) Revenue Recognition**

*Sales of transit buses*

The Group recognizes revenue on sales of transit buses 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 when the Company can objectively demonstrate that the criteria specified in the contractual acceptance provisions are achieved prior to delivery. In cases where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue is recognized upon acceptance by the customer. The Group determined that the government grants should be considered as part of the transaction price because it is granted to the transit buses buyer and the buyer remains liable for such amount in the event the grants were not received by the Group or returned due to the buyer violates the government grant terms and conditions.

*Sales of EVs and kits*

The Group generates revenue from sales of EVs and kits, which are electric drive system kits that are integrated into shuttle buses sold to the customers. EV buyers in California are entitled to government grants when they purchase EVs that qualify for certain government grant project. The Group applies for and collects such government grants on behalf of the customers. Accordingly, customers only pay the amount after deducting government grants.

The Group recognizes revenue on sales 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. The Group determined that the government grants should be considered as part of the transaction price because it is granted to the EV buyer and the buyer remains liable for such amount in the event the grants were not received by the Group or returned due to the buyer violating the government grant terms and conditions.

*Lease of EVs*

EV leasing revenue includes revenue recognized under lease accounting guidance for direct leasing programs. The Group accounts for most of the leasing transactions as operating leases under ASC 842 Leases, and revenues are recognized on a straight-line basis over the contractual term.

*Sales of forklifts*

Revenue on sale of forklifts is recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon delivery or acceptance of the customer depending on the terms of the underlying contracts.

*Sales of parts*

Revenue on sale of parts for transit buses or EVs is recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon delivery or acceptance of the customer depending on the terms of the underlying contracts.

*Service revenue*

Service revenue consists of maintenance, warranty, training and other services. For maintenance and warranty services, revenues are recognized on a straight-line basis over the contractual term. For training and other service revenue, the Group recognizes revenue at a point in time following the transfer of control of such services to the customer, which typically occurs upon delivery of service to the customer.

*Other revenue*

Other revenue consists of shipping and delivery fees and others. For shipping and delivery fees and others, the Group recognizes revenue at a point in time following the transfer of control of such products or services to the customer, which typically occurs upon the delivery to the customer.

*Disaggregation of revenues*

The Group disaggregates its revenue by seven primary categories: sales of transit buses, sales of EVs, lease of EVs, sales of forklifts, sales of parts, service revenue and others.

The following is a summary of the Group's disaggregated revenues:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| Sales of transit buses | $1710 | $3690 | $6908 | $22806 |
| Sales of EVs | 347 | 324 | 584 | 806 |
| Sales of parts | 178 | 183 | 792 | 229 |
| Service revenue | 127 |  | 592 |  |
| Lease of EVs | 71 |  | 161 |  |
| Sales of forklifts |  | 6 |  | 45 |
| Others | 58 | 569 | 607 | 2338 |
|  | $2491 | $4772 | $9644 | $26224 |

---

The following is a summary of the Group's disaggregated revenues by timing of revenue recognition:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| Point in time | $2326 | $4439 | $9132 | $25333 |
| Over time | 165 | 333 | 512 | 891 |
|  | $2491 | $4772 | $9644 | $26224 |

---

A contract liability is the Group's obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The Group records contract liabilities as advance from customers and deferred income. As of September 30, 2025 and December 31, 2024, the balances of contract liabilities were $9,268 and $6,749, respectively. During the nine months ended September 30, 2025, the Group recognized $2,533 as revenue that was included in the balance of advance from customers at January 1, 2025.

**(c) Leases**

*Lessor Accounting*

During the year ended December 31, 2023, the Group amended agreements with the customers related to the leased EVs to renew the lease term. Since there was no grant of additional right-of-use assets, the Group did not account for the modified lease agreements as new leases but accounted for the original lease and the modified lease agreements as a combined lease. The Group reviewed the combined lease agreements and considered that (i) the lease term represents for the major part (greater than 75%) of the economic life of the underlying equipment; and (ii) the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments equals or exceeds substantially (greater than 90%) all of the fair value of the underlying asset.

The modified EV lease agreements are thus accounted for as sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease, and interest income from the lease is recognized over the lease term.

The net investment in leases was $76 as of September 30, 2025, in which current portion of $48 was included in prepaid expenses and other current assets, net on the balance sheet. During the three and nine months ended September 30, 2025 and 2024, there was no gain or loss on sales-type leases.

**(d) Business Combination**

Business combinations are recorded using the acquisition method of accounting and, accordingly, the acquired assets and liabilities are recorded at their fair market value at the date of acquisition. Any excess of acquisition cost over the fair value of the acquired assets and liabilities, including identifiable intangible assets, is recorded as goodwill. The Group charges acquisition-related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred. Those costs typically include transaction and integration costs, such as legal, accounting, and other professional fees.

According to Business Combination (Topic 805) the Group performs a screen test to evaluate whether a transaction should be accounted for as an acquisition and/or disposal of a business versus assets. In order for a purchase to be considered an acquisition of a business, and receive business combination accounting treatment, the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business.

**(e) Fair Value Measurement**

The Group measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

● Level 1 — Quoted market prices in active markets for identical assets or liabilities.

● Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs).

● Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions.

The Group uses quoted market prices to determine the fair value when available. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates.

The carrying values of the Group's financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payables, accrued liabilities and advance from customers, approximate their fair values due to the short-term nature of these instruments.

**(f) Product Warranties**

*Products Warranties on EVs and Kits*

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.

*Products Warranties on transit buses and batteries*

The Group provides a limited warranty to customers on vehicles, battery systems and components. The limited warranty ranges from one to 12 years depending on the components. Pursuant to these warranties, the Group will repair, replace, or adjust the parts on the products that are defective in factory supplied materials or workmanship. The Group records a warranty reserve for the products sold at the point of revenue recognition, which includes the best estimate of the projected costs to repair or replace items under the limited warranty. 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 relatively short history of sales. Changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within warranty reserve - short term liabilities while the remaining balance is included within warranty reservice - long term liabilities on the balance sheets.

Warranty expense is recorded as a component of cost of sales in the unaudited condensed consolidated statements of operations. The balance of warranty reserves was $8,046 and $14,289 as of September 30, 2025 and December 31, 2024, respectively.

**(g) Goodwill**

The Group assess goodwill for impairment on annual basis in accordance with ASC 350-20, Intangibles – Goodwill and Other: Goodwill, which permits the Group to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. If this is the case, the quantitative goodwill impairment test is required. If it is more likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the quantitative goodwill impairment test is not required.

Quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired. If the fair value of the reporting unit is less than its carrying amount, 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.

During the nine months ended September 30, 2024, the Group identified impairment indicator resulted from the Company's continuous decreasing stock price since January 2024 and performed interim goodwill impairment testing. The Group recorded an impairment on goodwill of $4,271 based on the difference between fair value and the carrying amount of the reporting unit.

**3. Going Concern**

The Group has net loss of $8,418 during the nine months ended September 30, 2025 and has incurred significant recurring losses before 2025. In addition, the cash flow used in operating activities was $5,793 during the nine months ended September 30, 2025 and the Group needs to raise additional funds to sustain its operations. These factors raise substantial doubt as to the Group's ability to continue as a going concern.

For the next 12 months from the issuance date of the condensed consolidated quarterly financial statements, the Group plans to continue pursuing strategies to improve liquidity and raise additional funds while implementing various measures to control costs and improve efficiency. Such strategies and measures include the following: 1) continue to drive for operation integration and efficiency under ONE Phoenix, re-alignment operating units under ONE Goal, right sizing workforce under ONE Team; 2) re-establish the cost structure and cost base to increase operation efficiency with the new integrated ERP and other operating systems; 3) 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; 4) implement working capital initiatives and negotiate better payment terms with customers and for some of the new orders, require down payments; 5) implement cash saving initiatives and tighter cash control, and calibrate capital allocation to manage liquidity; and 6) continue to proactively implement a robust capital market strategy to provide financing for the Group's operations through proceeds from 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.

There is no assurance that the plans will be successfully implemented. If the Group fails to achieve these goals, the Group may need additional financing to repay debt obligations and execute its business plan, and the Group may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that financing sources are not available, or that the Group is unsuccessful in increasing its gross profit margin and reducing operating losses, the Group may be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on the Group's business, financial condition and results of operations and may materially adversely affect its ability to continue as a going concern.

The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Group be unable to continue as a going concern.

**4. Business Combination**

In November 2023, the Group participated in two auctions conducted by the United States Bankruptcy Court and emerged as the highest bidder for two asset packages, one for Proterra transit business unit and one for the Proterra battery lease contracts, with total consideration of $10,000 in cash. On January 11, 2024, the Group completed the acquisition of the Proterra transit business unit and on February 7, 2024, the Group completed the acquisition of Proterra battery lease contracts. The transaction costs were $553 and the Group assumed estimated warranty liability of $14,994. In addition, the Group also assumed the responsibility to provide Proterra transit business unit employees job offers at closing date and keep those employees for at least one year. The cash consideration has been fully paid as of December 31, 2024.

The acquisition was accounted for as a business combination. Accordingly, the acquired assets and liabilities were recorded at their fair value at the date of acquisition. The purchase price allocation was based on a valuation analysis that utilized and considered generally accepted valuation methodologies such as the market and cost approach. The Group determines the fair value of the assets acquired and the liabilities assumed in this business combination with the assistance of a third-party valuation firm. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable judgment from management. The amount of the identifiable net assets acquired exceeds the fair value of the consideration transferred and the allocation of negative goodwill to reduce the tax bases of acquired net assets causes the book bases to exceed their respective tax bases, resulting in the recognition of deferred tax liabilities. The Group measures the bargain purchase gain from Proterra acquisition as follows:

---

| | |
|:---|:---|
| Inventories. | $56854 |
| Right-of-use assets | 2663 |
| Property and equipment | 4238 |
| Battery lease receivable | 6400 |
| Lease liabilities | (2663) |
| Warranty liabilities | (14994) |
| Deferred tax liabilities | (4227) |
| Identifiable net assets acquired (a) | 48271 |
| Less: Fair value of the consideration transferred (b) | 10000 |
| Gain on bargain purchase (b-a) | $38271 |

---

During the year ended December 31, 2024 measurement period since the acquisition date, the Group adjusted the fair value of the inventories acquired for an amount of $3,197 and deferred tax liabilities for an amount of $8,560, with the net offset recorded as a $5,363 increase to bargain purchase gain. These adjustments including impairment of such identifiable assets were made as the Group obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

The gain on bargain purchase from the Proterra acquisition was generated from the acquisition of a bankrupt company and the Group was the only bidder who would continue to run the transit business and keep all transit business employees for at least a one-year period. Other bidders would liquidate the transit assets and terminate the transit business employees. The Group's bidding was accepted by the Bankruptcy Court.

As of September 30, 2025, the Group had not finalized the determination of fair values allocated to various assets and liabilities, including, but not limited to, property and equipment, inventories, tax uncertainties and liabilities assumed, due to an amendment to the Court order signed on October 17, 2025.

**5. Accounts Receivable, Net**

The accounts receivable, net as of September 30, 2025 and December 31, 2024 consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2025** | **December 31,**<br>**2024** |
|  | **(unaudited)** |  |
| Accounts receivable, customers | $2768 | 3014 |
| Accounts receivable, governmental incentive | 882 | 1026 |
| Less: Allowance for doubtful accounts | (25) | (25) |
| Accounts receivable, net | $3625 | $4015 |

---

For the nine months ended September 30, 2025 and 2024, there was no provision for credit loss for accounts receivables.

**6. Inventories**

Inventories as of September 30, 2025 and December 31, 2024 consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2025** | **December 31,**<br>**2024** |
|  | **(unaudited)** |  |
| Raw materials | $32989 | $35515 |
| Work in process | 4323 | 4735 |
| Finished goods | 1045 | 510 |
| Total inventories | $38357 | $40760 |

---

During the nine months ended September 30, 2025 and 2024, there was no write down to reflect the lower of cost or net realizable value.

**7. Prepaid Expenses and Other Current Assets**

Prepaid expenses and other current assets as of September 30, 2025 and December 31, 2024 consist of the following:

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2025** | **December 31,**<br>**2024** |
|  | **(unaudited)** |  |
| Prepaid expenses | $111 | $164 |
| Sales-type lease receivable | 48 | 166 |
| Vendor deposits | 1085 | 1349 |
| Others | 151 | 20 |
| Total prepaid and other current assets, net | $1395 | $1699 |

---

**8. Sales-type Lease Receivable**

The Group entered into a total of ten vehicle lease agreements with certain customers during the year ended December 31, 2023 and the Group delivered vehicles under sales-type leases.

Sales-type lease receivables-short term as of September 30, 2025 and December 31, 2024 was $48 and $166, respectively, and sales-type lease receivables-long term as of September 30, 2025 and December 31, 2024 was $28 and $64, respectively.

Interest income recognized for sales-type leases for the nine months ended September 30, 2025 was $6.

---

| | |
|:---|:---|
|  | As of September 30,<br>2025 |
| Lease receivables-long term | 28 |
| Lease receivables-short term | 48 |
| Total lease receivables | **76** |
| Unguaranteed residual assets |  |
| **Net investment in leases** | **76** |
| **Recorded in Prepaid expenses and other current assets** | **48** |
| **Recorded in Net investment in leases- non-current** | **28** |

---

Annual minimum undiscounted lease payments under the Group's leases were as follows as of September 30, 2025:

---

| | |
|:---|:---|
|  | **Sales-type** |
| Remaining of 2025 | 13 |
| Years Ending December 31, |  |
| 2026 | 54 |
| 2027 | 15 |
| 2028 and thereafter |  |
| Total lease receipt payments | 82 |
| Less: Imputed interest | (6) |
| Total lease receivables (1) | 76 |
| Unguaranteed residual assets |  |
| **Net investment in leases (1)** | **76** |

---

(1) Current
 portion of $48 of total lease receivables included in prepaid expenses and other current assets, net on the condensed consolidated balance sheets.

**9. Short-term Borrowings**

*<u>Financing with Core Funding Source LLC</u>*

On July 1, 2025, the Group entered into a Future Receivables Sale and Purchase Agreement with Core Funding Source LLC ("Core"). In the agreement, the Group irrevocably assigns, transfers and conveys onto Core all of the Group's right, title and interest in the specified percentage of the future receipts until the purchased amount shall have been delivered by the Group to Core ("Core Purchased Future Receipts"). This sale of the Core Purchased Future Receipts is made without express or implied warranty to Core of collectability of the Core Purchased Future Receipts and without recourse against the Group and/or guarantor, except as specifically set forth in the agreement. By virtue of the agreement, the Group transfers to Core full and complete ownership of the Core Purchased Future Receipts and the Group retains no legal or equitable interest therein.

The total purchase price is $316, including all initial costs and fees of $16. The net proceed to the Group is $300. The total amount of receivables sold is $461. Pursuant to the agreement, the Group will make estimated weekly payment of $23 for twenty weeks starting from July 11, 2025. As of September 30, 2025, the Group has paid $161 of estimated weekly payment, and the outstanding balance of Core Purchase Future Receipts was $236.

*<u>Financing with Vanquish Funding Group Inc.</u>*

On September 3, 2025, the Group entered into a Securities Purchase Agreement with Vanquish Funding Group Inc. ("Vanquish"). In the agreement, the Group received $250 after legal and other fees for a promissory note with principal amount of $303. Pursuant to the agreement, the Group will make the first mandatory monthly payment of $173 on February 28, 2026 and subsequently monthly payment of $43 for four consecutive months. As of September 30, 2025, the loan principal balance with unamortized debt discount to Vanquish was $278.

This note may not be prepaid in whole or in part except as otherwise explicitly set forth in the agreement. Any amount of principal or interest on the note which is not paid when due shall bear default interest at the rate of twenty-two percent (22%) per annum from the due date. At any time following an event of default, Vanquish shall have the right to convert all or any part of the outstanding and unpaid amount of the note into fully paid and non-assessable shares of the Company's common stock. The conversion price shall mean 61% multiplied by the lowest trading price for the common stock during the ten (10) trading days prior to the conversion date.

*<u>Financing with Agile Capital</u>*

On March 12, 2024, the Group entered into a Subordinated Business Loan and Security Agreement ("Term Loan") with Agile Capital Funding, LLC ("Agile Capital") as collateral agent, and Agile Lending, LLC, a Virginia limited liability company ("Lead Lender") and each assignee that becomes a party to this agreement (each individually with the Lead Lender, a "Lender" and collectively with the Lead Lender, the "Lenders").

The total principal amount of the Term Loan is $2,363, including the administrative agent fee remitted to Agile Capital of $113. The net proceeds to the Group is $2,250. The total repayment amount of the Term Loan, including all interest, lender fees, and third-party fees, assuming all payments are made on time is $3,402, including the interest charge of $1,039, assuming all payments are made on time weekly, and the default interest rate is otherwise applicable thereto plus five percentage points (5.00%).

The collateral of the Term Loan consists of all of the Group's right, title and interest in and to the following property:

All of the Group's goods, accounts, equipment, inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, general intangibles (including intellectual property), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other collateral accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all of the Group's books and records relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

If changes in business or management, ownership occur, or the Term Loan is accelerated following the occurrence of an event of default, the Group shall immediately pay to Lenders, payable to each Lender in accordance with its respective pro rata share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon accrued through the prepayment date, (ii) the prepayment fee (equal to the aggregate and actual amount of interest that would be paid through the maturity date), plus (iii) all other obligations that are due and payable, including, without limitation, interest at the default rate with respect to any past due amounts.

As of December 31, 2024, the loan principal balance to Agile Capital was $718. In March 2025, the Group paid $950 including $718 loan principal balance and $232 accrued interest and other fees to pay off the loan balance according to a settlement agreement made between the Group and Agile Capital.

*<u>Financing with Dynasty Capital 26, LLC</u>*

On July 25, 2024, the Group entered into a Future Receivables Sale and Purchase Agreement with Dynasty Capital 26, LLC ("Dynasty"). In the agreement, the Group irrevocably assigns, transfers and conveys onto Dynasty all of the Group's right, title and interest in the specified percentage of the future receipts until the purchased amount shall have been delivered by the Group to Dynasty ("Dynasty Purchased Future Receipts"). This sale of the Dynasty Purchased Future Receipts is made without express or implied warranty to Dynasty of collectability of the Dynasty Purchased Future Receipts and without recourse against the Group and/or guarantor, except as specifically set forth in the agreement. By virtue of the agreement, the Group transfers to Dynasty full and complete ownership of the Dynasty Purchased Future Receipts and the Group retains no legal or equitable interest therein.

The total purchase price is $500, including all initial costs and fees remitted to Dynasty of $50. The net proceeds to the Group is $450. The total amount of receivables sold is $750. On July 31, 2024, an addendum was made between the Group and Dynasty to specify that the payment in the first week would be $22 and weekly payment of $47 for every following week. The Group made the first weekly payment of $22 and two weekly payments of $47 in August 2024. On August 29, 2024, a settlement agreement was made between the Group and Dynasty to reduce the Group's obligation for payment to $600, with the first payment of $100 in August and twenty (20) consecutive weekly installments of $25. On December 4, 2024, another settlement agreement was made between the Group and Dynasty to reduce the Group's obligation for payment to $350, with the first two payments of $22 and $28, respectively, in December and twelve (12) consecutive weekly installments of $25.

As of December 31, 2024, the loan principal balance to Dynasty was $161. In March 2025, the Group paid $245 including $161 loan principal balance and $84 accrued interest and other fees to pay off the loan balance according to a settlement agreement made between the Group and Dynasty.

*<u>Financing with Parkview Advance LLC</u>*

On July 31, 2024, the Group entered into a Future Receivables Sale and Purchase Agreement with Parkview Advance LLC ("Parkview"). In the agreement, the Group irrevocably assigns, transfers and conveys onto Parkview all of the Group's right, title and interest in the specified percentage of the future receipts until the purchased amount shall have been delivered by the Group to Parkview ("Parkview Purchased Future Receipts"). This sale of the Parkview Purchased Future Receipts is made without express or implied warranty to Parkview of collectability of the Parkview Purchased Future Receipts and without recourse against the Group and/or guarantor, except as specifically set forth in the agreement. By virtue of the agreement, the Group transfers to Parkview full and complete ownership of the Parkview Purchased Future Receipts and the Group retains no legal or equitable interest therein.

The total purchase price is $400, including all initial costs and fees remitted to Parkview of $20. The net proceeds to the Group is $380. The total amount of receivables sold is $600. Pursuant to the original agreement, if the borrower fails to pay any principal or interest on its due date, or fails to pay any other obligation within three business days after it becomes due and payable, it constitutes a payment default. During the continuation of an event of default, the Group shall agree to pay reasonable damage which is 25% of the undelivered portion of the purchased amount. The entire sum due shall bear simple interest from the default date until it is paid in full, at a rate of 9% per annum, with interest accruing daily. The lender may declare the entire unpaid principal balance of the loan, together with all accrued interest thereon and any other charges or fees payable thereunder, immediately due and payable by providing written notice to the borrower.

As of December 31, 2024, the loan principal balance to Parkview was $131. On March 13, 2025, the Group paid $196 including $131 loan principal balance and $65 accrued interest and other fees to pay off the loan balance according to a settlement agreement made between the Group and Parkview.

*<u>Financing with Nations Bus</u>*

On February 27, 2024, the Group entered into a financing agreement with Nations Bus Corp. ("Nations Bus"). In the agreement, it stated that the Group had purchased certain assets of Proterra Transit, including 6 buses in inventory. Raleigh-Durham International Airport ("RDU") has inspected the buses and has executed a contract to purchase them for $652 each for a total consideration of $3,909. Nations Bus lent and wired $1,900 to the Group on February 28, 2024. The Group agrees to wire Nations Bus $2,800 ($467 per bus) within 24 hours of receipt of payment for each bus from RDU. If payment is made separately by bus, then the Group will wire $467 within 24 hours of receipt. If payment is received in one lump sum of $3,909, the Group will wire $2,800 within 24 hours of receipt. The Group received a total of $3,909 from RDU in March 2024. The Group will be entitled to keep the remaining $1,109 received from RDU after payment is made to Nations Bus. The Group has repaid $2,800 to Nations Bus in April and May 2024, including $900 accrued interests.

*<u>Financing with Wisdom</u>*

The Group entered into a short-term loan agreement with total principal amount of $961 on December 11, 2023 with Wisdom Financial holdings Company Ltd ("Wisdom"). The short-term loan was used to pay deposit to purchase Proterra assets (see Note 4). The principal amount of the loan was fully paid off on January 8, 2024 by cash. Total interest expense of the loan was $279, in which $9 was paid off in January 2024 by cash, and $270 was settled by issuance of 180,202 shares of common stock of the Company in January 2024.

**10. Private Placements**

On January 4, 2024, the Company entered into a Securities Purchase Agreement with an accredited investor, relating to a private placement by the Company pursuant to which the Company issued 600,000 shares of the Company's common stock at a purchase price of $1.13 per share, and a common stock purchase warrant to purchase up to 600,000 shares of common stock of the Company, exercisable at $1.13 per share. The warrant is immediately exercisable, in whole or in part, for a term of one year following issuance and may be exercised on a cashless basis if a registration statement is not then effective and available for the resale of the warrant shares. The exercise price and number of warrant shares issuable upon exercise of the warrant are subject to adjustment upon the occurrence of certain events, such as stock splits, stock dividends, split-ups, recapitalizations, reclassifications or the like. The private placement closed on January 25, 2024 and the Company received gross proceeds from the private placement of $678, before deducting offering expenses payable by the Company. The Group determined that the warrant met the definition of liability instrument and estimated a fair value of the warrants using the Black-Scholes pricing model at the date of issuance at $464. During the nine months ended September 30, 2024, the Group noted that it actually issued a total of 1,200,000 shares of common stock of the Company to this investor and the Group is current in negotiation with the investor to cancel the 600,000 shares that were incorrectly issued.

On January 11, 2024, the Company entered into separate Securities Purchase Agreements with four accredited investors, relating to a private placement by the Company of an aggregate of 3,478,260 shares of the Company's common stock at a purchase price of $1.15 per share, and common stock purchase warrants to purchase up to 13,913,043 shares of common stock of the Company, exercisable at $2.00 per share. The Company received gross proceeds from the private placement of $4,000, before deducting offering expenses payable by the Company. The Group determined that the warrant met the definition of liability instrument and estimated a fair value of the warrants using the Black-Scholes pricing model at the date of issuance at $11,432. The Group recorded a loss on warrants issued of $7,432 on the date of issuance, which is the excess amount of fair value of the warrants issued over the net proceeds received.

On January 29, 2024, the Company entered into a Securities Purchase Agreement with certain accredited investors, to issue and sell in a registered direct offering an aggregate of 4,196,370 shares of the Company's common stock. The purchase agreement also provides that the Company will issue to the investors warrants to purchase up to 4,196,370 shares of common stock of the Company in a concurrent private placement. The common stock and accompanying warrants were offered at a combined offering price of $1.15 per share. Each warrant is exercisable for one share of common stock. The warrants have an initial exercise price of $2.00 per share and are exercisable at any time on or after the date of issuance and will expire on the fifth anniversary of the date on which the warrants were issued. The offering closed on February 2, 2024 and the proceeds from the offering were $4,826, before offering expenses. The Group determined that the warrants met the definition of liability instrument and estimated a fair value of the warrants using the Black-Scholes pricing model at the date of issuance at $3,519.

On February 7, 2024, the Company entered into another Securities Purchase Agreement with certain accredited investors, to issue and sell in a registered direct offering an aggregate of 1,415,929 shares of the Company's common stock. The purchase agreement also provides that the Company will issue to the investors warrants to purchase up to 1,415,929 shares of common stock of the Company in a concurrent private placement. The common stock and accompanying warrants were offered at a combined offering price of $1.13 per share. The warrants have an initial exercise price of $2.00 per share, are exercisable at any time on or after the date of issuance and will expire on the fifth anniversary of the date on which the warrants were issued. The offering closed on February 9, 2024, and the proceeds from the offering were $1,600, before offering expenses. The Group determined that the warrant met the definition of liability instrument and estimated a fair value of the warrants using the Black-Scholes pricing model at the date of issuance at $1,090.

On August 3, 2025, the Company entered into separate securities purchase agreements with one unaffiliated and accredited investor and three affiliated and accredited investors, relating to a private placement by the Company of an aggregate of 2,020,000 shares of common stock at a purchase price of $0.30 per share, and common stock purchase warrants to purchase up to an aggregate of 2,020,000 shares of common stock, exercisable at $0.30 per share. Palo Alto Clean Tech Holding Limited, an entity owned and controlled by the Company's Chief Executive Officer and Chairman of the Board, invested $480 in the private placement and received 1,600,000 shares of common stock and a warrant to purchase 1,600,000 shares of common stock. The warrants are immediately exercisable, in whole or in part, for a term of two years following issuance and may be exercised on a cashless basis if a registration statement is not then effective and available for the resale of the warrant shares. The exercise price and number of warrant shares issuable upon exercise of the warrant are subject to adjustment upon the occurrence of certain events, such as stock splits, stock dividends, split-ups, recapitalizations, reclassifications or the like. The private placement closed in August 2025 and the Company received gross proceeds from the private placement of $606. The Group determined that the warrant met the definition of equity instrument.

During the three and nine months ended September 30, 2025, the Group recorded a loss on change in fair value of warrant liability of $742 and gain on change in fair value of warrant liability of $318, respectively. During the three and nine months ended September 30, 2024, the Group recorded gain on change in fair value of warrant liability of $5,211 and $14,618, respectively.

**11. Equity**

*Reverse Stock Split*

As of July 31, 2025, the Company effected a reverse stock split at a ratio of 1-for-5 shares.

*Share Issued for convertible note conversion and warrant exercise*

During the nine months ended September 30, 2025, the Group issued a total of 3,071,603 shares of common stock of the Company to the investor to convert a total principal amount of $485 of the October 2023 Note. On March 31, 2025 and April 3, 2025, the Group issued 2,378,644 and 1,155,321 shares of common stock, respectively, due to cashless exercise of warrants (see Note 14).

*Share Issued to Settle Vendor Payable*

During the nine months ended September 30, 2024, the Group issued 769,099 shares of the Company's common stock, to a vendor for settlement of payables of $953, and issued 596,162 shares of the Company's common stock, to another vendor for settlement of payables of $739.

*Share Issued in private placement*

During the nine months ended September 30, 2025, the Group issued a total of 2,020,000 shares of common stock of the Company to a group of investors in a private placement (see Note 11).

**12. Stock-based Compensation**

On August 1, 2025, options to purchase 837,593 shares of the Company's common stock were granted to a group of management and employees with the Company, which are subject to an annual vesting schedule that vests 25% of granted options over the next four years. The exercise price was $0.30 per share. The fair value of the options as of the grant date is $0.30 per share, with a total fair value of the options granted amounting to $251. On September 2, 2025, options to purchase 100,000 shares of the Company's common stock were granted to one employee of the Company, which are subject to an annual vesting schedule that vests 25% of granted options over the next four years. The exercise price was $0.80 per share. The fair value of the options as of the grant date is $0.85 per share, with a total fair value of the options granted amounting to $30. On September 6, 2025, 673,400 restricted stock units of the Company were granted to a group of management and employees with the Company. The fair value of the restricted stock units as of the grant date is $0.80 per share, with a total fair value of the restricted stock units granted amounting to $539.

During the nine months ended September 30, 2025 and 2024, the stock-based compensation was $591 and $5, respectively.

During the three months ended September 30, 2025 and 2024, the stock-based compensation was $596 and $22, respectively.

There were no changes to the contractual life of any fully vested options during the nine months ended September 30, 2025 and 2024. As of September 30, 2025, unrecognized share-based compensation expenses related to the share options granted were $669. The expenses are expected to be recognized over a weighted - average period of 2.03 years.

**13. Related Party Transactions**

During the nine months ended September 30, 2025, SPI billed the Group $104 for legal, human resources and IT services provided by SPI employees and $86 was paid. As of September 30, 2025, $18 of consulting fee was outstanding to SPI and $5 of loan was outstanding to Mr. Xiaofeng Peng, the Company's Chairman of the Board of Directors and CEO.

During the nine months ended September 30, 2025, the Group billed SPI $17 for legal, human resources and IT services provided by the Group's employees. As of September 30, 2025, $17 of consulting fee was outstanding from SPI.

On August 3, 2025, the Company entered into a Securities Purchase Agreement with Palo Alto, an entity owned and controlled by Mr. Xiaofeng Denton Peng, the Company's Chairman of the Board of Directors and CEO, relating to a private placement by the Company pursuant to which the Company issued 1,600,000 shares of the Company's common stock at a purchase price of $0.30 per share, and a common stock purchase warrant to purchase up to 1,600,000 shares of common stock of the Company, exercisable at $0.30 per share. Concurrently, the Company entered into Securities Purchase Agreements with two officers relating to the private placement by the Company pursuant to which the Company issued an aggregate of 85,000 shares of the Company's common stock at a purchase price of $0.30 per share, and a common stock purchase warrant to purchase an aggregate 85,000 shares of common stock of the Company, exercisable at $0.30 per share (see Note 10).

**14. Convertible Notes Payable**

On June 23, 2023, the Company entered into a Securities Purchase Agreement (the "Original SPA") with an accredited investor named therein, to issue and sell, subject to the satisfaction of certain closing conditions, up to $5,100 aggregate principal amount of the Company's unsecured senior convertible promissory notes (the "June 2023 Notes"). The June 2023 Notes are subject to an original issue discount of 8.5%, and each June 2023 Note matures on the date that is 18 months after the date of issuance at each applicable closing. The June 2023 Notes accrue interest at the prime rate plus 4.75% per annum in cash, or the prime rate plus 7.75% per annum if interest is paid in shares of common stock. The Company may, from time to time, prepay the principal amount owing under the June 2023 Notes, subject to a 30% prepayment premium, so long as the Company provides at least 30 business days' prior written notice to the holder of such prepayment.

The June 2023 Notes are convertible into shares of common stock of the Company, at a conversion price equal to the greater of (x) $0.60 (the "Floor Price") and (y) 87.5% of the lowest daily VWAP (as defined in the SPA) in the seven (7) trading days prior to the applicable conversion date (the "Variable Price"), subject to certain adjustments including full ratchet anti-dilution price protection, as set forth in the June 2023 Notes. Notwithstanding the foregoing, automatically following an event of default, without the requirement of the holder to provide notice to the Company, and subject to the provisions relating to the stockholder approval requirements under Nasdaq rules for the issuance of shares in a private placement at a price above the market price (the "Nasdaq 19.99% Cap"), the conversion price is equal to the lesser of the (x) Floor Price and (y) the Variable Price. In respect of any conversion where the Variable Price is less than the Floor Price (the "Alternative Conversion"), the Company will pay to the holder either in cash, or subject to the Nasdaq 19.99% Cap, in shares of common stock equal to such conversion amount or interests, divided by the applicable Variable Price. So in essence, there is no floor price for the conversion and Alternative Conversion together.

Thus, the Group determined that the conversion feature and the alternative conversion features embedded within the June 2023 Notes met the definition of embedded derivatives and the Group estimated a fair value of the derivative liability using the Monte Carlo Simulation Model at the date of issuance. As the fair value of the derivative liability is less than the face value of the June 2023 Notes, the fair value of the derivative liability of $294 was recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The original issue discount of the June 2023 Notes of $136 was recorded as a debt discount as well.

On October 26, 2023, the Company entered into the First Amendment (the "Amendment") to the Original SPA, with the same accredited investor. Pursuant to the Amendment, the "Funding Amount" under the Original SPA was increased to an aggregate principal amount equal to no greater than $9,667 while other terms remain unchanged. On October 26, 2023, the Company agreed to issue and sell, in a private placement, an additional $1,750 of principal amount (the "October 2023 Notes") of the Company's unsecured senior convertible promissory note.

In connection with the Amendment, the Company issued a warrant (the "October Warrant") to the investor to purchase up to 1,500,000 shares of the Company's common stock, with an exercise price equal to $1.30 per share, subject to full ratchet anti-dilution protection and other adjustments as stated in the warrant, which warrant is exercisable for six years on a cash basis or, if the shares of common stock issuable upon exercise of the warrant are not registered within 12 months after the closing, on a cashless basis. The Group determined that the October Warrant met the definition of liability instrument and estimated a fair value of the October Warrant using the Black Scholes pricing model at the date of issuance. On March 31, 2025, the investor cashless exercised 3,000,000 warrant shares and received a net of 2,378,644 shares of the Company's common stock; however, the cashless exercise is based on incorrect calculation and information. The Company is currently in legal proceedings with the investor trying to recover the excessive shares issued to the investor from the cashless exercise.

The October 2023 Notes are convertible into shares of common stock of the Company, at a conversion price equal to the greater of (x) $0.60 (the "Fixed Price") and (y) 87.5% of the lowest daily VWAP (as defined in the SPA) in the seven (7) trading days prior to the applicable conversion date (the "Variable Price"), subject to certain adjustments including full ratchet anti-dilution price protection, as set forth in the October 2023 Notes. Notwithstanding the foregoing, automatically following an event of default, without the requirement of the holder to provide notice to the Company, and subject to the provisions relating to the Nasdaq 19.99% Cap, the conversion price is equal to the lesser of the (x) Fixed Price and (y) the Variable Price. In respect of any conversion where the Variable Price is less than the Fixed Price (the "Alternative Conversion"), the Company will pay to the holder either in cash, or subject to the Nasdaq 19.99% Cap, in shares of common stock equal to such conversion amount or interests, divided by the applicable Variable Price. So in essence, there is no floor price for the conversion and Alternative Conversion together.

The Group determined that the conversion feature and alternate conversion feature within the October 2023 Notes met the definition of embedded derivatives and the Group estimated a fair value of the derivative liability using the Binominal Tree Model at the date of issuance. In addition, the Group considered that the October Warrants were issued in a bundled transaction with the October 2023 Notes, and the proceeds received from the transaction should be first allocated to the warrants as debt discounts based on the fair value of the warrants on the issuance date.

On November 10, 2023, the Company entered into Second Securities Purchase Agreement (the "Second SPA") with the same accredited investor, which the Company agreed to issue and sell, in a private placement, subject to the satisfaction of certain closing conditions, a $12,000 of principal amount of the Company's secured senior convertible promissory notes. As of December 31, 2023, the closing conditions have not been met and Company has not issued any convertible notes pursuant to the Second SPA. Upon execution of the Second SPA, the Company also issued a warrant (the "Execution Warrant") to the investor to purchase up to 1,000,000 shares of the Company's common stock, with an exercise price equal to $1.30 per share, subject to full ratchet anti-dilution protection and other adjustments as stated in the warrant, which warrant is exercisable for six years on a cash basis or, if the shares of common stock issuable upon exercise of the warrant are not registered within 12 months after the closing, on a cashless basis. The Execution Warrants can be exercisable no matter whether the Second SPA would be closed or not in the future. On April 3, 2025, the investor cashless exercised 1,700,000 warrant shares and received a net of 1,155,322 shares of the Company's common stock; however, the cashless exercise is based on incorrect calculation and information. The Company is currently in legal proceedings with the investor trying to recover the excessive shares issued to the investor from the cashless exercise.

The Group determined that the Execution Warrant met the definition of liability instrument, and the Group estimated a fair value of Execution Warrant using the Black Scholes pricing model at the date of issuance. The Group considered that the Execution Warrant was issued in a bundled transaction with a future convertible note offering, and the Execution Warrant was considered as issuance costs associated with the future convertible note offering and should be deferred and charged against the gross proceeds of the future offering as debt discount based on the fair value of the warrants. However, this future convertible note offering (Second SPA) is to be closed subject to certain closing conditions. On April 5, 2024, the Group entered into a waiver letter by and between the Company and the above investor to which the investor waived its right to require the Company to sell $12,000 principal amount of the Company's secured senior convertible promissory note as previously agreed under Second SPA. However, the Execution Warrant survived the cancellation and is effective.

On March 29, 2024, the Group noted that an event of default has occurred under the June 2023 Notes and October 2023 Notes, due to a failure to observe or perform in a material respect the following covenants: 1) under the Registration Rights Agreement dated on November 10, 2023, the Company agreed to use all commercially reasonable efforts to cause a registration statement relating to the registrable securities to become effective and to keep such registration statement effective until the earlier to occur of the date on which (A) the investor shall have sold all the registrable securities; or (B) the investor has no right to acquire any additional shares of common stock under the purchase agreement or the warrants; and 2) under the Securities Purchase Agreement dated as of June 23, 2023 and a covenant under the notes, as determined on the first of every calendar month, the Company agreed at all times to keep on hand unencumbered, unrestricted cash in an amount greater than or equal to $200,000. The default was not fully cured within five (5) business days of such failure. As a result, the interest rate of the June 2023 Notes and October 2023 Notes was automatically increased to 18% per annum, starting from the date of occurrence of the event of default. In addition, the Group is obligated to pay to the holder of the June 2023 Note and October 2023 Note all of the outstanding principal amount and accrued interest on the date of occurrence of the event of default. As of the date of issuance of the condensed consolidated financial statements, the noteholder has not declared that an event of default has occurred and that the notes are due and payable. As a result of the default, the carrying amount of both June 2023 Note and October 2023 Note were classified as convertible notes, current and all the remaining unamortized debt discounts were amortized into interest expense immediately.

During the nine months ended September 30, 2025, the Group issued a total of 3,071,603 shares of common stock of the Company to the investor to convert a total principal amount of $485 of the October 2023 Note. The total fair value of the common stock issued for conversion was $609. As a result of the conversion, the Group reclassified $33 derivative liability into equity upon each conversion of the corresponding convertible notes.

On March 14, 2025, the Company entered into a loan agreement with J.J. Astor & Co. (the "J.J. Astor") pursuant to which J.J. Astor agreed to loan the Company the sum of up to $6,000, in two tranches of $4,000 and $2,000, in consideration for a senior secured convertible promissory note in the original principal amount of $5,300, and an additional senior secured convertible promissory note in the original principal amount of $2,650. The net proceeds of the loan are to be used to repay existing senior debt in the aggregate principal amount of approximately $1,200 and for general working capital purposes. On March 14, 2025, the Company closed the first tranche of notes (March 2025 Note) and received net proceeds of $2,680 after paying off existing senior debts and fees. On May 23, 2025, the Company closed the second tranche of notes (the "May 2025 Note," and together with the March 2025 Note, the "Notes") and received net proceeds of $1,910. There was no warrant issued to the lender for the Notes.

The March 2025 Note is payable in 26 bi-weekly installments of $204 through the maturity date of March 13, 2026, in cash or shares of the Company's common stock, at the Company's election. The May 2025 Note is payable in 26 bi-weekly installments of $102 through the maturity date of May 22, 2026 in cash or shares of the Company's common stock, at the Company's election. The Notes will not accrue interest (unless there is an event of default) and are subject to an exit fee of $150 upon maturity. Upon an event of default, the outstanding principal amount will increase to 120% of the outstanding principal amount, plus interest thereon at the rate of 19% per annum. The Notes will be convertible into shares of common stock by J.J. Astor following an event of default.

The conversion price of the Notes is the lower of (i) 85% of the closing price of the common stock on the trading day immediately prior to the applicable funding date and issuance of the March 2025 Note, or (ii) 85% of the average of the four lowest VWAP prices for the 20 trading days prior to the applicable funding date. If J.J. Astor or any other holder of the Notes elects to voluntarily convert the Notes, the conversion price will be the lower of (a) 100% of the closing price of the common stock on the trading day immediately prior to the applicable funding date and issuance of the March 2025 Note, or (b) 100% of the average of the four lowest VWAP prices of the common stock for the 20 trading days prior to the applicable funding date. Upon an event of default, the conversion price of the Notes will be 80% of the closing price of the common stock on the initial funding date. The Notes are subject to a limitation that prohibits ownership of more than 19.9% the Company's outstanding share capital at any time, without stockholder approval.

The Group has determined that the Notes do not contain a separate conversion option liability and allow the Group to fully or partially settle a conversion in cash. The Group elected the fair value option for the convertible notes liability and estimated a fair value of the March 2025 Note of $2,163 using the Binomial Model at the date of issuance, and recorded the remaining proceeds of $1,837 in additional paid capital. The Group estimated a fair value of the May 2025 Note of $1,924 using the Binomial Model at the date of issuance and recorded the remaining proceeds of $76 in additional paid capital

On April 15, 2025, the Group noted that an event of default occurred under both Notes, when the common stock ceased trading on Nasdaq. As a result, the outstanding principal amount will increase to 120% of the outstanding principal amount, plus interest thereon at the rate of 19% per annum. As of the date of issuance of the condensed consolidated financial statements, the noteholder has not declared that the entire default amount is due and payable. As a result of the default, an additional $1,029 interest expense was accrued to reflect the default principal amount.

The Group recorded interest expenses from debt discount amortization in interest expense, net in the statements of operations of nil and $1,490 for the nine months ended September 30, 2025 and 2024, respectively.

The Group recorded accrued interest of convertible notes in interest expense, net in the statements of operations of $2,693 and $93 for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025 and December 31, 2024, the carrying amounts of the Group's convertible bonds are $4,448 and $485, respectively.

**15. Earnings (Loss) Per Share**

The following is a reconciliation of the numerator and denominator used to calculate basic earnings (loss) per share and diluted earnings (loss) per share for the three and nine months ended September 30, 2025 and 2024:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine months Ended** | **Nine months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| **Basic earnings (loss):** |  |  |  |  |
| Net (loss) income | $(3680) | $(5591) | $(8418) | $14136 |
| **Diluted earnings (loss):** |  |  |  |  |
| Net (loss) income | $(3680) | $(5591) | $(8418) | $14136 |
| Chang in fair value of derivative liability |  |  |  | (602) |
| Interest expense from Convertible Notes | - | - | - | 295 |
| Adjusted net (loss) income | $(3680) | $(5591) | $(8418) | $13829 |
| Weighted average number of shares-basic \* | 11195462 | 7285501 | 10064966 | 6782178 |
| Potentially dilutive shares | 1237054 | - | 1237054 | 688207 |
| Weighted average number of shares-Diluted | 12432516 | 7285501 | 11302020 | 7470385 |
| Earnings per share |  |  |  |  |
| Basic | $(0.33) | $(0.75) | $(0.84) | $2.10 |
| Diluted | $(0.30) | $(0.75) | $(0.74) | $1.85 |

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**\*** The shares are presented on a retrospective base to reflect the Company's reverse stock split effected on July 31, 2025.

During the three and nine months ended September 30, 2025 and 2024, stock options to purchase 348,596 and 417,450 shares of common stock and warrants to purchase 4,525,068 shares of common stock were not considered in calculating diluted earnings (loss) per share because the options and warrants are considered out-of-money.

There were no other potential shares excluded from the computation of diluted net income (loss) per share during the three and nine months ended September 30, 2025 and 2024, respectively.

**16. Commitments and Contingencies**

*Commitments —* As of September 30, 2025, the Group had other commitments of approximately $265. These commitments were solely related to contracts signed with vendors by the Group and are expected to be paid in one year.

 

 

*Contingency —* In the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably estimable. In April 2024, there was a dispute with the landlord of Folsom warehouse in which the landlord seeks to recover damages in excess of $250. However, the lawsuit is in its early stage and the final outcome, including the potential amount of any losses, is uncertain. As a result, no reasonable estimate on the loss can be made as of September 30, 2025 and the Group is currently negotiating on settlement with the landlord. In December 2024, there was a breach of contract regarding payment to a formal employee. However, the lawsuit is in its early stage and the final outcome, including the potential amount of any losses, is uncertain. In March 2025, there was a dispute with Agile Lending, LLC, a lender, in which the Group seeks to recover $180 of accounts receivable held back by the lender. However, the lawsuit is in its early stage and the final outcome, including the potential number of recovery, is uncertain.

In the opinion of management, there were no other material pending or threatened claims and litigation as of September 30, 2025 and through the issuance date of these unaudited condensed consolidated financial statements.

**17. Concentration Risk**

*Concentration of Credit Risk*

Assets that potentially subject the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents, and accounts receivable. As of September 30, 2025 and December 31, 2024, the cash and cash equivalents are deposited within federally insured banks, which are typically below the insured limits. There is one customer representing 21.7% of total accounts receivable as of September 30, 2025. As of December 31, 2024, there was no customer of which the accounts receivable accounted for 10% or more of total accounts receivable.

*Concentration of Customers and Suppliers*

For the nine months ended September 30, 2025, there were two customers representing 27.0% and 17.8% of total net revenues, respectively.

For the nine months ended September 30, 2024, there were three customers representing 29.0%, 16.7% and 17.7% of total net revenues, respectively.

During the nine months ended September 30, 2025 and 2024, there were no vendors representing 10% or more of total purchases.

**18. Subsequent Events**

The Company is continuing to take actions to regain full compliance with Nasdaq's listing requirements. In particular, the board of directors has implemented a 1-for-5 reverse stock split of its common stock effective as of July 31, 2025, which is intended to restore compliance with Rule 5550(a)(2).

While there can be no assurance that these actions will result in relisting on Nasdaq or that the review by the Council will be successful, the Company remains committed to pursuing all reasonable and strategic options to regain compliance and restore its listing on a national securities exchange.

On October 7, 2025, a stipulation and settlement agreement was entered by the Company, PTRA Distribution Trust, and Broward County. Pursuit to the agreement, the Company agreed to purchase 11 buses from PTRA Distribution and Broward County for a purchase price of $110. The Company closed the sale in October 2025. This stipulation and settlement agreement is considered as an amendment to the court order for acquisition of Proterra Transit Business Unit.

**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

**Forward-Looking Statements**

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this quarterly report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "expect," "anticipate," "intend," "believe," or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on May 30, 2025 and in our subsequent filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements.

**Overview**

Phoenix Motor Inc., doing business as "Phoenix Motorcars" through its wholly owned subsidiaries, Phoenix Cars LLC, Phoenix Motorcars Leasing LLC, and EdisonFuture Motor, Inc., is a leading electrification solutions provider for the commercial vehicle industry as well as other industries. Phoenix designs, develops, manufactures, assembles, and integrates electric drive systems and light and medium duty electric vehicles ("EVs"), with an aim to reduce carbon intensity and greenhouse gas ("GHG") emissions. The Company operates two primary brands, "Phoenix Motorcars" which is focused on commercial products including medium duty electric vehicles, chargers and electric forklifts, and "EdisonFuture" which intends to offer light-duty electric vehicles.

As an EV pioneer, we launched our first medium-duty electric drivetrain in 2009 and delivered our first commercial EV in 2014. In 2019, we launched our second generation ("Gen 2") High Power Drive System for the Ford E450 chassis, the E-200. Since April 2021, we have been in production of our third generation ("Gen 3") drivetrain (E-300). We released our fourth generation ("Gen 4") drivetrain in 2024, which has allowed for substantially higher production volumes and achieve significant cost reduction.

Over the last six years we have developed and deployed for our customers all-electric shuttle buses, utility trucks, service trucks, cargo trucks and flatbed trucks. This differentiates us in the market where most commercial EV manufacturers are still in the prototype phase. As of September 30, 2025, we have delivered a total of 141 EVs to more than 48 customers, representing what we believe 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 the vehicles we delivered, we have gained significant industry experience, distinct expertise and extensive knowledge in R&D, production, commercialization, customer engagement and validation of light and medium duty EVs, enabling us to drive continued design enhancements and innovations in our current and future generations drivetrain systems and other products.

On January 11, 2024, we completed the acquisition of the Proterra transit business unit, which is the business unit of Proterra that designs, develops and sells electric transit buses as an original equipment manufacturer for North American public transit agencies, airports, universities and other commercial transit fleets, and on February 7, 2024, we completed the acquisition of Proterra battery lease contracts. After the acquisition, we engage in the business that designs, develops and sells electric transit buses as an original equipment manufacturer for North American public transit agencies, airports, universities and other commercial transit fleets and we were assigned with the right to collect certain leasing receivables which Proterra was a party as the lessor thereunder, used in connection with deployed Proterra electric transit buses. As of September 30, 2025, we have delivered a total of 38 transit buses to various customers.

Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") and include the accounts of our company and all of our subsidiaries. We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. In order to understand the significant accounting policies that we adopted for the preparation of our condensed consolidated financial statements; readers should refer to the information set forth in Note 3 "Summary of Significant Accounting Policies" to our audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on May 30, 2025.

**Principal Factors Affecting Our Results of Operations**

We believe that the following factors have had, and we expect that they will continue to have, a significant effect on the development of our business, financial condition, and results of operations.

●  ***BOM and Supply Chain Challenges.*** 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 as well as long term and strengthened supply chain partnerships will allow us to continue to reduce our Bill of Materials ("BOM"), labor and overhead costs, as a percentage of total revenue. By reducing material costs, driving improvement in battery performance, increasing facility utilization rates and achieving better economies of scale, we can reduce prices while maintaining or growing gross margins of our products to further lower customers' total cost of ownership ("TCO") and help accelerate commercial electric vehicle adoption. Because we rely on third party suppliers for the development, manufacture, and development of many of the key components and materials used in our vehicles, we have been affected by industry-wide challenges such as significant delivery delays and supply shortages of certain BOM components. 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 and components on a timely basis for the foreseeable future, having a significant impact on our business and results of operations in 2023 and possibly thereafter.

●  ***Availability of Funding to Develop Products and Scale Production.*** 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. 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. Although we pursue an asset light strategy, 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 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. 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 , the lead time for various components in our supply chain, and our ability to successfully manage and control costs and scale our operations.

●  ***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; and

● 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, such as 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; and

● Federal and various state agencies have established incentives for setting up both public and private charging infrastructure. Notably, the California Energy Commission and the California Public Utilities Commission have approved funding up to 100% of the cost of setting up chargers and related infrastructure. Large utilities like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric have 'Charge Ready' programs that cover the entire cost of setting up charging infrastructure. Other states like New York, Chicago, North Carolina, Tennessee, Texas and Ohio have also introduced programs to support fleets with their charging infrastructure requirements.

**Results of Operations**

**(In thousands, except for share and per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| Revenues | $2491 | $4772 | $9644 | $26224 |
| Cost of revenues | 1822 | 3656 | 6695 | 20774 |
| &nbsp;&nbsp;&nbsp;Gross profit (loss) | 669 | 1116 | 2949 | 5450 |
| Operating expenses: |  |  |  |  |
| Selling, general and administrative | 2631 | 9475 | 8536 | 27053 |
| Impairment of goodwill | - | - | - | 4271 |
| Operating loss | (1962) | (8359) | (5587) | (25874) |
| Other income (expense): |  |  |  |  |
| Interest expense, net | (1002) | (784) | (3193) | (4121) |
| Loss on warrants issued in private placement |  |  |  | (7432) |
| Gain (loss) on change in fair value of warrant liability | (742) | (216) | 318 | 14402 |
| Gain on change in fair value of derivative liability |  | 13 |  | 602 |
| Bargain purchase gain |  |  |  | 32072 |
| Others | 26 | - | 56 | - |
| &nbsp;&nbsp;&nbsp;Total other income, net | (1718) | (987) | (2819) | 35523 |
| (Loss) income before income taxes | (3680) | (9346) | (8406) | 9649 |
| Income tax (expenses) benefits | - | 3755 | (12) | 4487 |
| Net (loss) income | $(3680) | $(5591) | $(8418) | $14136 |
| (Loss) earnings per share of common stock: |  |  |  |  |
| Basic | $(0.33) | $(0.75) | $(0.84) | 2.10 |
| Diluted | $(0.30) | $(0.75) | $(0.74) | 1.85 |
| Weighted average shares outstanding\* |  |  |  |  |
| Basic | 11195462 | 7285501 | 10064966 | 6782178 |
| Diluted | 12432516 | 7285501 | 11302020 | 7470385 |

---

**\*** The shares are presented on a retrospective base to reflect the Company's reverse stock split effected on July 31, 2025.

**Net Revenues**

For the three months ended September 30, 2025 and 2024, our revenues were $2.5 million and $4.8 million, respectively. Our total revenue decreased by $2.3 million, or 47.9%, primarily because we completed the acquisition of Proterra transit business unit in January 2024. With the acquisition, we were able to quickly fulfill existing sales order and turn inventory into sales in the three months ended September 30, 2024. Such a decrease was also because we incurred cash shortage issues starting from late 2024 which caused slow production of transit buses.

For the nine months ended September 30, 2025 and 2024, our revenues were $9.6 million and $26.2 million, respectively. Our total revenue decreased by $16.6 million, or 63.2%, primarily because we completed the acquisition of Proterra transit business unit in January 2024. With the acquisition, we were able to quickly fulfill existing sales order and turn inventory into sales in the nine months ended September 30, 2024. Such a decrease was also because we incurred cash shortage issues starting from late 2024 which caused slow production of transit buses.

For the three and nine months ended September 30, 2025 and 2024, our revenue breakdown by major categories for relevant periods was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| Sales of transit buses | $1710 | $3690 | $6908 | $22806 |
| Sales of EVs | 347 | 324 | 584 | 806 |
| Sales of parts | 178 | 183 | 792 | 229 |
| Service revenue | 127 |  | 592 |  |
| Lease of EVs | 71 |  | 161 |  |
| Sales of forklifts |  | 6 |  | 45 |
| Others | 58 | 569 | 607 | 2338 |
|  | $2491 | $4772 | $9644 | $26224 |

---

The following is a summary of the Group's disaggregated revenues by timing of revenue recognition:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Nine Months Ended** | **Nine Months Ended** |
|  | **September 30,<br> 2025** | **September 30,<br> 2024** | **September 30,<br> 2025** | **September 30,<br> 2024** |
| Point in time | $2326 | $4439 | $9132 | $25333 |
| Over time | 165 | 333 | 512 | 891 |
|  | $2491 | $4772 | $9644 | $26224 |

---

**Cost of Revenues**

Cost of revenues for transit buses sales and EV sales includes direct parts, material and labor costs, manufacturing overheads, and shipping and logistics costs. Cost of revenues for EV leasing primarily includes the depreciation of operating lease vehicles over the lease term and other leasing related charges including vehicle insurance and batteries service cost. Cost of other revenue includes direct parts, material and labor costs, as well as shipping and delivery and other costs.

For the three months ended September 30, 2025 and 2024, our costs of revenues were $1.8 million and $3.7 million, respectively. The decrease in costs of revenues was primarily due to the decrease in transit bus and other sales.

For the nine months ended September 30, 2025 and 2024, our costs of revenues were $6.7 million and $20.8 million, respectively. The decrease in costs of revenues was primarily due to the decrease in transit bus and other sales.

**Gross Margin**

Gross profit is defined as revenues minus cost of revenues. Gross margin, stated as a percentage, is defined as gross profit divided by revenues.

For the three months ended September 30, 2025 and 2024, our combined gross margin was 26.9% and 23.4% respectively. The increase in margin for transit bus sales was mainly because there was only two transit buses sold during the three months ended September 30, 2025 with a relatively high selling price.

For the nine months ended September 30, 2025 and 2024, our combined gross margin was 30.6% and 20.8%, respectively. The increase of gross margin was primarily due to higher margins for both EV sales and transit buses sales. The increase in margin for transit bus sales was mainly because there was only a limited number of transit buses sold during the nine months ended September 30, 2025 with a relatively high selling price. The increase in margin for EV sales was mainly because there were only three EVs sold during the nine months ended September 30, 2025 with a relatively high selling price.

**Operating Expenses**

Operating expenses consist of selling, general, and administrative expenses as well as impairment on goodwill.

Our selling, general and administrative expenses consist primarily of salaries, research and development, professional service fees, rent expense, and office supplies expenses.

For the three months ended September 30, 2025 and 2024, our selling, general and administrative expenses were $2.6 million and $9.5 million, respectively. The decrease in selling, general and administrative expenses was largely due to a decrease in salary expenses because of decreased heads-count.

For the nine months ended September 30, 2025 and 2024, our selling, general and administrative expenses were $8.5 million and $27.1 million, respectively. The decrease in selling, general and administrative expenses was largely due to a decrease in salary expenses because of decreased heads-count.

During the nine months ended September 30, 2024, we identified impairment indicator resulted from the Company's continuous decreasing stock price since January 2024 and performed interim goodwill impairment testing. We recorded an impairment on goodwill of $4.3 million based on the difference between fair value and the carrying amount of the reporting unit.

Other Income (expense), net

Other income (expense), net includes gain on bargain purchase, interest expense, gain on sales-type leases and other income.

Our other expense for the three months ended September 30, 2025, was $1.7 million, primarily due to the loss on change in fair value of warrant liability of $0.7 million and interest expense of $1.0 million.

Our other expenses for the three months ended September 30, 2024, was $1.0 million, primarily due to loss on change in fair value of warrant liability of $0.2 million and interest expense of $0.8 million, from short-term loan and debt discount amortization of convertible note.

Our other expenses for the nine months ended September 30, 2025, was $2.8 million, primarily due to interest expense of $3.2 million, partially offset by the gain on change in fair value of warrant liability of $0.3 million.

Our other income for the nine months ended September 30, 2024, was $35.5 million, primarily due to gain on bargain purchase of Proterra transit business unit of $32.1 million, gain on change in fair value of derivative liability of $0.6 million, and gain of change in fair value of warrant liability of $14.4 million, partially offset by the interest expense of $4.1 million resulted from short-term loan and debt discount amortization of convertible note, and loss on warrants issued in a private placement of $7.4 million.

**Net Income (loss)**

As a result of the above factors, the net loss for the three months ended September 30, 2025 and 2024, was $3.7 million and $5.6 million, respectively.

As a result of the above factors, the net loss for the nine months ended September 30, 2025 was $8.4 million, and the net income for the nine months ended September 30, 2024 was $14.1 million.

***Critical Accounting Policies and Estimates***

*Products Warranties on transit buses and batteries*

The Group provides a limited warranty to customers on vehicles, battery systems and components. The limited warranty ranges from one to 12 years depending on the components. Pursuant to these warranties, the Group will repair, replace, or adjust the parts on the products that are defective in factory supplied materials or workmanship. The Group records a warranty reserve for the products sold at the point of revenue recognition, which includes the best estimate of the projected costs to repair or replace items under the limited warranty. 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 relatively short history of sales. Changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within warranty reserve - short term liabilities while the remaining balance is included within warranty reservice - long term liabilities on the balance sheets.

Warranty expense is recorded as a component of cost of sales in the condensed consolidated statements of operations. The balance of warranty reserves was $8.1 million and $14.3 million as of September 30, 2025 and December 31, 2024, respectively.

**Recent Accounting Pronouncements**

See Note 3 "Summary of Significant Accounting Policies" to our consolidated financial statements in our Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on May 30, 2025 for a description of recently issued or adopted accounting pronouncements that may potentially impact our financial position, results of operations or cash flows.

The Group does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

**Liquidity and Capital Resources**

We incurred a net loss of $8.4 million during the nine months ended September 30, 2025 and has incurred significant recurring losses before 2025. In addition, the cash flow used in operating activities was $5.8 million and we need to raise additional funds to sustain our operations. These factors raise substantial doubt as to our ability to continue as a going concern.

We plan to continue pursuing strategies to improve liquidity and raise additional funds while implementing various measures to cut costs. Such strategies and measures include the following: 1) continue to drive for operation integration under ONE Phoenix, re-alignment operating units under ONE Goal, right sizing workforce under ONE Team; 2) re-establish the cost structure and cost base with the new integrated ERP and other operating systems; 3) 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; 4) implement working capital initiatives and negotiate better payment terms with customers and for some of the new orders, require down payments; 5) implement cash saving initiatives and tighter cash control, and calibrate capital allocation to manage liquidity; and 6) continue to proactively implement a robust capital market strategy to provide financing for the Group's 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. There is no assurance that the plans will be successfully implemented. If we fail to achieve these goals, we may need additional financing to execute our business plan, and we may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that financing sources are not available, or that we are unsuccessful in increasing our gross profit margin and reducing operating losses, we may be unable to implement our current plans for expansion, or respond to competitive pressures, any of which would have a material adverse effect on our business, financial condition and results of operations and may materially adversely affect our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

A summary of the cash flow activities is as follows:

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| | | |
|:---|:---|:---|
| <br>**In thousands** | **Nine months Ended**<br>**September 30,**<br> **2025** | **Nine months Ended**<br>**September 30,**<br> **2024** |
| Net cash used in operating activities: | $(5793) | $(2814) |
| Net cash used in investing activities |  | (10113) |
| Net cash generated from financing activities | 5305 | 9923 |
| Net decrease in cash and cash equivalents | (488) | (3004) |

---

As of September 30, 2025, we had $0.3 million in cash and cash equivalents. Our primary sources of liquidity were from equity financing (through private offerings) as well as various types of debt financings.

**Operating Activities**

Net cash used in operating activities was $5.8 million for the nine months ended September 30, 2025, primarily as a result of a net loss of $8.4 million, adjusted by non-cash items of depreciation and amortization of $1.3 million, gain on change in fair value of warrant liability of $0.3 million, gain on warrant exercise of $0.3 million, reversal of warranty reserve of $6.2 million, amortization of right of use of assets of $0.8 million, and stock-based compensation of $0.6 million, and changes in operating assets and liabilities including (i) decrease in accounts receivable of $0.4 million due to collection of accounts receivable from sales of transit buses, (ii) decrease in inventories of $2.4 million due to certain inventories have been sold, (iii) decrease in prepaid expenses and other assets of $0.3 million; (iv) decrease in battery lease receivable of $0.1 million, (v) increase in accrued liabilities of $2.4 million mainly due to $0.8 million received from sale of battery leases, which is classified as a liability and $1.0 million of interest accrual on defaulted convertible note, (vi) increase in advance from customers of $2.5 million mainly due to new customer orders received, (vii) decrease in deferred revenue of $0.4 million mainly due to warranty revenue amortization, (viii) increase in other payable of $0.4 million and (ix) decrease in lease liabilities $1.4 million.

Net cash used in operating activities was $2.8 million for the nine months ended September 30, 2024, primarily as a result of (i) a net income of $14.1 million, adjusted by non-cash items of bargain purchase gain of $32.1 million from acquisition of Proterra, impairment loss of goodwill of $4.3 million, depreciation and amortization of $1.4 million, amortization of debt discount of convertible notes of $1.5 million, loss on warrants issued in a private placement of $7.4 million, gain on change in fair value of warrant liability of $14.4 million, deferred tax liability reversal of $5.2 million, gain on change in market value of derivative liability of $0.6 million, an accrual on warranty reserve of $0.9 million and amortization of right of use of assets of $0.7 million, and changes in operating assets and liabilities including (i) increase in accounts receivable of $5.4 million due to uncollected accounts receivable from sales of transit buses, (ii) decrease in inventories of $15.5 million due to certain inventories purchase from Proterra have been sold; (iii) increase in accrued liabilities of $4.8 million due to collection of partial proceeds from Zenobe as well as interest accrued for several short term loans, (iv) increase in accounts payable of $1.3 million mainly due to additional inventories purchased for upcoming manufacturing of transit buses, (v) increase in income tax payable of $0.7 million due to taxable bargain purchase gain from acquisition of Proterra, (vi) decrease in battery lease receivables of $0.5 million due to collection of receivables from customers, (vii) increase in prepaid expenses and other assets of $0.8 million, (viii) decrease in lease liabilities of $1.1 million, and (ix) increase in advance from customers of $4.9 million mainly due to collection of downpayments from transit bus sales.

**Investing Activities**

No investing activity occurred for the nine months ended September 30, 2025.

Net cash used in investing activities was $10.1 million for the nine months ended September 30, 2024, primarily because of acquisition of Proterra for a total consideration of $10 million.

**Financing Activities**

Net cash generated from financing activities was $5.3 million for the nine months ended September 30, 2025, primarily as a result of net proceeds from borrowing of $6.3 million, net proceeds from private placement of $0.6 million, partially offset by repayment to borrowings of $1.6 million.

Net cash generated from financing activities was $9.9 million for the nine months ended September 30, 2024, primarily as a result of (i) net proceeds from private placements of $11.1 million, (ii) proceeds from borrowing of $5.0 million, and (iii) proceeds of borrowings from a related party of $1.1 million. The increase was partially offset by repayment to borrowings of $4.7 million and repayment of borrowings to a related party of $1.9 million.

***Capital Expenditures***

We incurred capital expenditures of nil and $10.1 million for the nine months ended September 30, 2025 and 2024, respectively. Our capital expenditures have historically been comprised of purchase of Proterra assets, equipment for our offices and production infrastructure. Our capital expenditures may increase in the future as we continue to invest in production and technology infrastructure.

***Trend Information***

Our operating results substantially depend on revenues derived from our sales and leasing of EVs. Other than as disclosed elsewhere in this report, the following trends, uncertainties, demands, commitments, or events for 2023 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:

● Inflation Reduction Act. The Inflation Reduction Act of 2023, or IRA, was signed into law on August 16, 2023. The $370 billion allocated to climate and clean energy investments dramatically expands tax credits and incentives to deploy more clean vehicles, including commercial vehicles, while supporting a domestic EV supply chain and charging infrastructure buildout. IRA transportation sector provisions will accelerate the shift to zero-emission vehicles (ZEVs) by combining consumer and manufacturing policies. The IRA extends the existing tax credit for electric vehicles and establishes a new tax credit for used electric vehicles, as well as establishes a new tax credit for commercial ZEVs. Under the IRA, commercial ZEVs will be eligible for a federal tax credit of up to the lesser of 30% of the sales price or the incremental cost of a comparable ICE-engine vehicle, capped at $7,500 for vehicles under 14,000 pounds and $40,000 for all others. In addition, governmental entities may also be eligible to claim these credits. Vehicles' final assembly must be in North America to be eligible for the federal tax credit, but commercial vehicles are exempt from the battery or mineral sourcing requirements that apply to consumer electric vehicles. The federal tax credit on charging equipment has been extended through 2032. For commercial uses, the tax credit is 6% with a maximum credit of $100,000 per unit. The equipment must be placed in a low-income community or non-urban area. The IRS has yet to release further guidance on specific aspects of the aforementioned credits. The announcement of the IRA and the delay in receiving IRS guidance as to the roll-out of the new tax credits has reduced the number of customer orders during the fourth quarter of 2023 and the first quarter of 2024, as many existing or potential customers are waiting to place orders until they are certain of the amount of tax credits available per ZEV. In addition, many customers are evaluating the size and type of ZEV they intend to purchase because the amount of the tax credit depends on the weight of the vehicle, among other factors. Furthermore, other government programs, such as the FTA's Low- and No-Emission Vehicle Program or certain state programs, recently announced new funding and are in the process of making these funds available for eligible purchases. Until these processes are established, we believe customer orders may be delayed.

● Supply-chain challenges. From the beginning of the COVID-19 pandemic, we started to experience chassis and raw material shortages from suppliers. The challenge continues with the current development of our new generation electric vehicles. We need to source new components from various vendors which lead to longer lead times. In addition, because of the generation advancement, large capital spending is necessary to fund the project. Lack of cash flow on hand will also trigger the supply-chain challenges. As a result of these challenges, we have engaged with vendors to negotiate better terms and lower down-payment alternatives. We contracted with new suppliers to optimize costs, minimize supply chain issues, and prepare for an increase in future production. However, adding new suppliers, especially for chassis, increases requirements for working capital and places us at the mercy of price volatility. We expect supply chain challenges will continue for the foreseeable future.

● Inflation and interest rates. We are experiencing cost increases due to inflation resulting from various supply chain disruptions and other disruptions caused by the general global economic conditions. The cost of raw materials, manufacturing equipment, labor and shipping and transportation has increased considerably. We expect higher than recent years' levels of inflation to persist for the foreseeable future. If we are unable to fully offset higher costs through price increases or other measures, we could experience an adverse impact to our business, prospects, financial condition, results of operations and cash flows. Interest rates have also increased considerably. The increase in inflation and interest rates impacts the demand for our EVs, as customers may delay purchasing and/or have difficulty financing their purchases.

***Off-Balance Sheet Arrangements***

As of September 30, 2025, we had no off-balance sheet arrangements that are or have been reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. We have not entered into any derivative contracts that are indexed to our own shares and classified as shareholder's equity, or that are not reflected in our unaudited condensed consolidated financial statements. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

For more information on our contractual obligations, commitments and contingencies, see Note 16 to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

Not applicable to smaller reporting companies.

**Item 4. Controls and Procedures**

**Evaluation of Disclosure Controls and Procedures**

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2025, as such term is defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were ineffective as of such date to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In connection with the audit of our consolidated financial statements for the year ended December 31, 2024, we identified following material weaknesses, in the design or operation of internal controls.

&nbsp;&nbsp;&nbsp;&nbsp;(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;

(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 the Company's 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.

**Changes in Internal Control over Financial Reporting**

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2025 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

**PART II - OTHER INFORMATION**

**Item 1. Legal Proceedings**

From time to time, we are involved in various legal proceedings arising in the normal course of business. While we cannot predict the occurrence or outcome of these proceedings with certainty, we do not believe that an adverse result in any pending legal proceeding, individually or in aggregate, would be material to our financial condition.

For more information on our legal proceedings, see Note 16 to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

**Item 1A. Risk Factors**

Risk factors that may affect our business and financial results are discussed within Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on May 30, 2025, and our subsequent filings with the SEC. In addition to the those in our prior filings, the following are more risk factors to consider:

***Holders of our Notes are entitled to certain payments that may be paid in cash or in shares of our common stock depending on the circumstances. If we make these payments in cash, we may be required to expend a substantial portion of our cash resources. If we make these payments in common stock, it may result in substantial dilution to the holders of our common stock.***

On March 14, 2025, the Company entered into a loan agreement with J.J. Astor & Co. ("J.J. Astor") pursuant to which J.J. Astor agreed to loan the Company the sum of up to $6 million, in two tranches of $4 million and $2 million, in consideration for a senior secured convertible promissory note in the original principal amount of $5.3 million, and an additional senior secured convertible promissory note in the original principal amount of $2.7 million. The net proceeds of the loan are to be used to repay existing senior debt in the aggregate principal amount of approximately $1.2 million and for general working capital purposes. On March 14, 2025, the Company closed the first tranche of notes (the "March 2025 Note") and received net proceeds of $2.7 million after paying off existing senior debts. On May 23, 2025, the Company closed the second tranche of notes (the "May 2025 Note," and together with the March 2025 Note, the "Notes") and received net proceeds of $1.9 million.

The March 2025 Note is payable in 26 bi-weekly installments of $204,000 through the maturity date of March 13, 2026 in cash or shares of the Company's common stock, at the Company's election. The Notes will not accrue interest (unless there is an event of default) and are subject to an exit fee of $150,000 upon maturity. Upon an event of default, the outstanding principal amount will increase to 120% of the outstanding principal amount, plus interest thereon at the rate of 19% per annum. The Notes will be convertible into shares of common stock by J.J. Astor following an event of default.

The May 2025 Note is payable commencing on June 6, 2025 in 26 bi-weekly installments of $102,000 through the maturity date of May 22, 2026 in cash or shares of the Company's common stock, at the Company's election. The Notes will not accrue interest (unless there is an event of default) and are subject to an exit fee of $100,000 upon maturity. Upon an event of default, the outstanding principal amount will increase to 120% of the outstanding principal amount, plus interest thereon at the rate of 19% per annum. The Notes shall become, at J.J. Astor's election, immediately due and payable in the default amount or be convertible into shares of common stock by J.J. Astor following an event of default.

The conversion price of the Notes is the lower of (i) 85% of the closing price of the common stock on the trading day immediately prior to the applicable funding date and issuance of the March 2025 Note or May 2025 Note, or (ii) 85% of the average of the four lowest VWAP prices for the 20 trading days prior to the applicable funding date. If J.J. Astor or any other holder of the Notes elects to voluntarily convert the Notes, the conversion price will be the lower of (a) 100% of the closing price of the common stock on the trading day immediately prior to the applicable funding date and issuance of the March 2025 Note or May 2025 Note, or (b) 100% of the average of the four lowest VWAP prices of the common stock for the 20 trading days prior to the applicable funding date. Upon an event of default, the conversion price of the Notes will be 80% of the closing price of the common stock on the initial funding date. The Notes are subject to a limitation that prohibits ownership of more than 19.9% our outstanding share capital at any time, without stockholder approval.

On April 15, 2025, we noted that an event of default occurred under the March 2025 Note, when the common stock ceased trading on Nasdaq. As a result, the outstanding principal amount will increase to 120% of the outstanding principal amount, plus interest thereon at the rate of 19% per annum. As of the date of issuance of the condensed consolidated financial statements, the noteholder has not declared that the entire default amount is due and payable. As a result of the default, an additional $1,029 interest expense was accrued to reflect the default principal amount.

Our ability to make payments due to the holders of the Notes using shares of common stock is subject to certain limitations set forth in the Notes, including a limit on the number of shares that may be issued until our receipt of stockholder approval to issue 20% or more of our outstanding shares of common stock to the holders of the Notes . If we are unable to make payments in shares of common stock, we may be forced to make such payments in cash. If we do not have sufficient cash resources to make these payments, we may need to raise additional equity or debt capital, and we cannot provide any assurance that we will be successful in doing so. If are unable to raise sufficient capital to meet our payment obligations, we may need to delay, reduce or eliminate certain of our operations, sell some or all of our assets or merge with another entity.

Our ability to make payments due to the holders of the Notes using cash is also limited by the amount of cash we have on hand at the time such payments are due, as well as certain provisions of the Delaware General Corporation Law. Further, we intend to make the installment payments due to holders of Notes in the form of common stock to the extent allowed under the Notes and applicable law in order to preserve our cash resources. The issuance of shares of common stock to the holders of our Notes will increase the number of shares of common stock outstanding and could result in substantial dilution to the existing holders of our common stock.

***The Notes contain anti-dilution provisions that may result in the reduction of the conversion price of the Notes in the future. These features may increase the number of shares of common stock being issuable upon conversion of the Notes.***

The Notes contain anti-dilution provisions, which provisions require the lowering of the applicable conversion price or exercise, as then in effect, to the purchase price of equity or equity-linked securities issued in any subsequent offerings. If in the future, while any of the Notes are outstanding, we issue securities for a consideration per share of common stock (the "New Issuance Price") that is less than the conversion price of the Notes, as then in effect, we will be required, subject to certain limitations and adjustments as provided in the Notes, to reduce the conversion price to be equal to the New Issuance Price, which will result in a greater number of shares of common stock being issuable upon conversion of the Notes, which in turn will increase the dilutive effect of such conversions or exercises on existing holders of our common stock. The potential for such additional issuances may depress the price of our common stock regardless of our business performance and may make it difficult for us to raise additional equity capital while any of the Notes are outstanding.

***If we do not receive approval from our stockholders, we will be unable to pay amounts due to the holders of the Notes in shares of common stock and we will be required to pay such amounts in cash, which may force us to divert cash from other uses.***

Under the Notes agreement, we are required to hold a meeting of our stockholders to seek approval under Nasdaq Rule 5635(d) for the sale, issuance or potential issuance by us of our common stock (or securities convertible into or exercisable for our common stock) in excess of 1,924,042 shares, which is 19.99% of the shares of common stock outstanding immediately prior to the execution of the Notes agreement. If our stockholders do not approve this proposal, we will not be able to issue 20% or more of our outstanding shares of common stock to the Notes holders. As a result, we may be unable to make some of the interest payments due to the holders of the Notes in shares of our common stock or issue sufficient shares upon conversion of the Notes, which will, in lieu of those shares, require that we pay substantial cash amounts to the Notes holders. If we do not have sufficient cash resources to make these payments, we may need to delay, reduce or eliminate certain of our operations, sell some or all of our assets or merge with another entity.

***Trading of our common stock has been suspended on Nasdaq, which may adversely affect the liquidity and trading price of our shares, and we may be unable to regain or maintain listing on a national securities exchange.***

On April 8, 2025, we received a determination letter from the Nasdaq Listing Qualifications Department (the "Staff") stating that the Staff had determined to delist our securities due to continued non-compliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share, and Listing Rule 5620(a), which requires listed companies to hold an annual meeting of shareholders within one year of the end of the fiscal year. Trading of our common stock on Nasdaq was suspended at the opening of business on April 15, 2025, and our common stock is currently quoted on the OTC Pink Limited Market under the symbol "PEVM".

Additionally, on April 30, 2025, we received a notice from the Staff indicating that we were not in compliance with Listing Rule 5250(c)(1) due to our failure to file our Annual Report on Form 10-K for the year ended December 31, 2024. This matter served as an additional basis for delisting.

We appealed the delisting determination to a Nasdaq Hearings Panel (the "Panel") on May 20, 2025. On June 9, 2025, the Company received a written decision from Nasdaq stating that the Panel had denied the Company's request for continued listing. Accordingly, the Company's common stock remains delisted and continues to trade on the OTC Pink Limited Market.

We had the right to request a review of the Panel's decision by the Nasdaq Listing and Hearing Review Council (the "Council") within 15 calendar days. The Council may also, on its own motion, initiate a review within 45 calendar days of the decision's issuance. On June 24, 2025, we submitted a request for a review of the Panel's decision by the Council.

On November 3, 2025, we received a letter from the Council indicating that it has deemed the appeal abandoned due to our failure to submit to the Council any arguments in support of our appeal and that the Staff will proceed to delist the Company's securities in accordance with the June 9, 2025 Panel decision.

We have taken steps to address the identified deficiencies. On April 18, 2025, we held our 2024 annual meeting of stockholders and believe we have regained compliance with Listing Rule 5620(a). On May 30, 2025, we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and believe we have regained compliance with Listing Rule 5250(c)(1).

We are continuing to take actions to regain full compliance with Nasdaq's listing requirements. In particular, our board of directors implemented a 1-for-5 reverse stock split of its common stock effective as of July 31, 2025, which was intended to restore compliance with Rule 5550(a)(2).

There can be no assurance that these actions will result in the relisting on Nasdaq. We remain committed to pursuing all reasonable and strategic options to regain compliance and restore our listing on a national securities exchange.

The OTC markets, particularly the Pink Limited Market, are generally considered to be less efficient and transparent than national securities exchanges. Securities quoted on the OTC markets tend to have lower trading volumes and wider bid-ask spreads, which can result in limited liquidity and increased price volatility. As a result, the trading price of our common stock may be adversely affected, and investors may experience significant difficulty buying or selling shares or may face delays in the execution of transactions. Some investors may also be restricted from investing in our securities due to difficulty in accessing the OTC markets, policies preventing them from investing in securities not listed on a national exchange or other reasons.

Suspension of trading or delisting from Nasdaq may also have other adverse effects, including a potential loss of confidence among customers, strategic partners, vendors and employees. It may also reduce investor interest, limit our ability to raise capital on favorable terms, and diminish our capacity to engage in strategic transactions or growth opportunities and may also materially and adversely impact our credit terms with our vendors. Furthermore, our ability to attract and retain qualified personnel may be diminished, particularly where equity compensation is a key component of our employment packages.

There can be no assurance that we will be able to regain or maintain compliance with the continued listing requirements of Nasdaq or meet the standards of any other national securities exchange. If we are unable to regain or maintain a listing, our Company and stockholders could face significant material adverse consequences, including limited access to capital markets, decreased analyst coverage, reduced liquidity, increased volatility, reduced investor interest and confidence, and other material adverse effects.

**Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.**

All sales of unregistered securities have been previously included in a Current Report on Form 8-K.

**Item 3. Defaults Upon Senior Securities**

None.

**Item 4. Mine Safety Disclosures**

Not applicable.

**Item 5. Other Information**

None.

**Item 6. Exhibits**

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| 31.1\* | [Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.](ex31-1.htm) |
| 31.2\* | [Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.](ex31-2.htm) |
| 32\*\* | [Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](ex32.htm) |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104. | Cover Page Interactive Data File - The cover page iXBRL tags are embedded within the inline XBRL document. |

---

\* Filed herewith.

\*\* Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | |
|:---|:---|
| **Phoenix Motor Inc.** | **Phoenix Motor Inc.** |
| By: | /s/ Xiaofeng Denton Peng |
|  | Xiaofeng Denton Peng |
|  | Chairman and Chief Executive Officer<br> (Principal executive officer) |

---

---

| | |
|:---|:---|
| By: | /s/ Xiaotong Tony Shen |
|  | Xiaotong Tony Chen |
|  | Chief Financial Officer<br> (Principal financial and accounting officer) |

---

Date: November 12, 2025

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Xiaofeng Denton Peng, certify that:

1. I
 have reviewed this quarterly report on Form 10-Q of Phoenix Motor Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined
 in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to
 ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during
 the period in which this report is being prepared; and

b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

d) Disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarters that has materially affected, or is reasonably likely to materially affect, the registrant's internal
 control over financial reporting; and

5. The
 registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
 financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
 persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;a) All
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

Date: November 12, 2025

---

| |
|:---|
| */s/ Xiaofeng Denton Peng* |
| Xiaofeng Denton Peng |
| Chief Executive Officer |
| (Principal executive officer) |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

**PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Tony Shen, certify that:

1. I
 have reviewed this quarterly report on Form 10-Q of Phoenix Motor Inc.;

2. Based
 on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
 to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
 the period covered by this report;

3. Based
 on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
 respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
 this report;

4. The
 registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined
 in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed
 such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to
 ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during
 the period in which this report is being prepared; and

b) Designed
 such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my
 supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
 for external purposes in accordance with generally accepted accounting principles; and

c) Evaluated
 the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about
 the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
 and

d) Disclosed
 in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
 most recent fiscal quarters that has materially affected, or is reasonably likely to materially affect, the registrant's internal
 control over financial reporting; and

5. The
 registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
 financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
 persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;a) All
 significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
 and

b) Any
 fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
 internal control over financial reporting.

Date: November 12, 2025

---

| |
|:---|
| */s/ Xiaotong Tony Shen* |
| Xiaotong Tony Shen |
| Chief Financial Officer |
| (Principal financial and accounting officer) |

---

## Ex-32

**Exhibit 32**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Phoenix Motor Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2025 as filed with the Securities and Exchange Commission (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The
 Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The
 information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of
 the Company.

Date: November 12, 2025

---

| |
|:---|
| */s/ Xiaofeng Denton Peng* |
| Xiaofeng Denton Peng |
| Chairman and Chief Executive Officer |
| (Principal executive officer) |

---

Date: November 12, 2025

---

| |
|:---|
| */s/ Xiaotong Tony Shen* |
| Xiaotong Tony Shen |
| Chief Financial Officer |
| (Principal financial and accounting officer) |

---