PEVM 10-K & 10-Q changes, risk factors and insider trading

We had accumulated deficit of $49.2$42.0 million as of December 31, 2023.2024. We have incurred a net income of $7.2 million and a net loss of $20.6 and $12.7 million for the years ended December 31, 20232024 and December 31, 2022,2023, respectively. We may incur significant losses in the future for a number of reasons, including the other risks described in this 10 - Kannual report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. Our management is developing plans to alleviate the negative trends and conditions described above and there is no guarantee that such plans will be successfully implemented. Our business plan is focused on providing sustainable and cost - effective solutions to the commercial transportation sector but is still unproven. There is no assurance that even if we successfully implement our business plan, that we will be able to curtail our losses or ever achieve profitable operations.

We have had negative cash flow from operating activities of $3.7$1.9 million and $14.9$3.7 million for years ended December 31, 2023,2024 and 2022.2023, respectively. We anticipate that we will continue to have negative cash flow from operating and investing activities through the remainder of 20242025 as we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to increase sales and ramp up operations. Our business also will at times require significant amounts of working capital to support our growth. An inability to generate positive cash flow for the near term may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our long-term viability. There can be no assurance that we will achieve positive cash flow in the near future or at all.

The design, manufacture and sale of electric vehicles is a capital-intensive business. Our business plan to design, produce, sell and service commercial electric buses, vans and trucks, including the Gen 4, Gen 5, EF-1 truck and EF-1 V van, and Transittransit Busesbuses is expected to require continued capital investment and incur substantial costs including research and development expenses, raw material procurement costs, sales and distribution expenses as we build our brand and market our vehicles, and general and administrative expenses as we scale our operations, identify and commit resources to investigate new areas of demand and incur costs as a public company. Our ability to become profitable in the future will not only depend on our ability to complete the design and development of our vehicles but also to control our capital expenditures and costs. As we expand our product portfolio, including the release of Gen 4 and the acquisition of the Proterra Transit Bus businessUnit in 2024, we will need to manage costs effectively to sell those products at our expected margins. If we are unable to cost efficiently design, manufacture, market, sell and distribute and service our vehicles and provide our services, our business, prospects, financial condition, results of operations, and cash flows would be materially and adversely affected. Unlike established EV automotive manufacturers that have greater financial resources than we do, there can be no assurance that we will have access to the capital we need on favorable terms when required or at all. In addition, future debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

We compete with a number of commercial EV manufacturers, including those such as Lightning eMotors and GreenPower Motor Company. In addition to Tesla &and Rivian, a number of traditional global automobile manufacturers, including Ford, General Motors, Mercedes Benz, and Nissan-Renault-Nissan-Renault-Mitsubishi, Mitsubishi-Toyota,Toyota, and Chinese based EV manufacturers have entered the consumer EV business, and a few, including BYD, Ford, General Motors, Tesla and Daimler have begun entry into the commercial EV market. These companies have far greater resources, brand recognition, and distribution channels than Phoenix or the Company does, which could make it difficult for Phoenix to gain widespread market acceptance. There can be no assurance that Phoenix will be able to compete successfully with other market participants, and, if Phoenix cannot, then its business could fail.

Costs of electric vehicles or transit buses are high in comparison with those of traditional vehicles powered by internal combustion engines or hybrids.

Phoenix’s EVs will not gain wide acceptance unless Phoenix can reduce manufacturing and selling costs. Prices of Phoenix EVs range from $165,000 to $225,000,$250,000, whereas prices of comparable traditional combustion engine vehicles range from approximately $90,000 to $140,000. Prices of the recently acquired Transittransit Busbus business, pricesbusiness range from $650,000 to $1,100,000. The cost difference is due to the incremental cost of electric drivetrain, including lithium-ion batteries, motors, inverter and control software, coupled with the relatively low volume of production, leading to higher overheads.

In addition, government subsidies and incentives, including those available in California, are important for the cost-competitiveness of Phoenix’s EVs,EVs and transit buses, and Phoenix’s growth and prospects depend in part on the availability and amounts of these subsidies and incentives. Any reduction, elimination or discriminatory application of government subsidies and incentives because of budgetary challenges, policy changes, the reduced need for such subsidies and incentives due to the perceived success of electric vehicles, or other reasons may impair the cost-competitiveness of Phoenix’s EVs.EVs and transit buses.

The range of Phoenix’s existing EVs or transit buses is limited, compared with that of traditional vehicles.

Phoenix currently builds all its products on Ford’s E-450 chassis. Ford does not offer an electric version of this chassis, due to the relatively small market size for medium-duty electric vehicles. As volumes increase, there is a potential risk of Ford’s launching an electric version of Ford’s E-450 chassis directly from the factory, negating the need for Phoenix’s current range of products. Additionally, a shortage in the availability of this chassis would impact Phoenix’s capability to produce and fulfill customer’s orders in a timely manner.

Historically, we have experienced significant delivery delays and supply shortage with our BOM components, battery packs in particular. When encountered with supply disruption or shortage, our production plans and delivery schedules to our customers are to a large extent dictated by the timing of receiving these BOM components, or when a different supplier is fully qualified and customized into our product design. For example, COVID-19 has caused disruptions to and delays in our operations, including shortages and delays in the supply of certain parts, including batteries and chassis. Although we have worked diligently with our suppliers to mitigate the risks, we expect supply chain delays to continue to have a significantan impact on our 20232025 production and revenue and possibly thereafter. Any such supply interruption or shortage could materially adversely affect our business and operating results.

As previously reported, on January 11, 2024, the Company completed the acquisition of the Proterra transit business unit (the “Transit Business”) Unit pursuant to the asset purchase agreement with Proterra signed on November 13, 2023. Proterra. The Company believes that the acquisition of the Proterra Transit Business Unit will result in certain benefits, including revenue growth, certain cost synergies, drive product innovations, and operational efficiencies. However, to realize these anticipated benefits, the businesses of the Company and the Proterra Transit Business Unit must be successfully combined. The success of the asset acquisition will depend on the Company’s ability to realize these anticipated benefits from combining the businesses of the Company and the Proterra Transit Business Business.Unit. The Company may fail to realize the anticipated benefits of the asset acquisition for a variety of reasons, including the following:

The actual integration may result in additional and unforeseen expenses or delays. If the combined company is not able to successfully integrate the Proterra Transit Business’sBusiness Unit’s business and operations, or if there are delays in combining the businesses, the anticipated benefits of the asset acquisition may not be realized fully or at all or may take longer to realize than expected.

To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our Company’s internal control over financial reporting as of December 31, 20232024 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). The Company has identified the following material weaknesses,weaknesses in the design or operation of internal controls, which could adversely affect the Company’s ability to record, process, summarize and report financial data: (1) failure to maintain an effective control environment of internal control over financial reporting; (2) failure to develop an effective risk assessment process to identify and evaluate at a sufficient level of detail all relevant risks of material misstatement, including business, operational, and fraud risks; (3) ineffective monitoring activities to assess the operation of internal control over financial reporting; and (4) lack of sufficient controls designed and implemented for financial information processing and reporting and lacked resources with requisite skills for the financial reporting under U.S. GAAP.

Our Second Amended to the Amended Certificatecertificate of Incorporate incorporation authorizes us to issue up to 450,000,000 shares of our common stock and up to 50,000,000 shares of preferred stock. We may issue common stock or securities convertible into common stock from time to time in connection with a financing, acquisition, investment, our equity incentive plans or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our common stock to decline.

We are subject to laws, regulations and rules enacted by national, regional and local governments and the Nasdaq Stock Market on which we are applying for our securities to be listed.Nasdaq. In particular, we will be required to comply with certain SEC, Nasdaq and other legal and regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly.

Our EVs EVsand transit buses are sold with warranties, and as a result we need to maintain warranty reserves to cover any warranty-related claims. If our warranty reserves are inadequate to cover such future warranty claims, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

Uncertain global economic conditions, in particular in light of the COVID-19 pandemic,conditions could adversely affect our business. Negative global economic trends, such as decreased consumer and business spending, high unemployment levels and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability and cash flow. Although we continue to devote significant resources to support our brands, unfavorable economic conditions may negatively affect demand for our products.

Other states like New York, New Jersey and Massachusetts are also expected to bring in regulatory requirements for key end user segmentssegments, such like,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:

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

We receive grants from government agencies related to sales of transit buses, and sales and leases of EVs, and sales of chargers.EVs. For the years ended December 31, 20232024 and 2022,2023, the amount of governmental grant recognized as revenue from transit buses sales of EVs and chargersEV sales was $0.5$1.5 million and $0.9 $0.5 million, respectively. For the years ended December 31, 20232024 and 2022,2023, the amount of governmental grant recognized as reductions of the cost of sales for EV leasing was $47$38 thousands and $0.2$47 million,thousands, respectivelyrespectively, and the amount of governmental grant recognized as reduction of carrying amount of sales - typesales-type leased vehicles was $0.2$72 millionthousands and nil,$0.2 million, respectively. As of December 31, 20232024 and 2022,2023, the balances of government grants received were included in deferred income with amount of $0.4 million and $0.5$0.4 million, respectively.

For the years ended December 31, 20232024 and 2022,2023, our costs of revenue were $3.4$24.1 million and $3.5$3.4 million, respectively. DespiteThe decreasedincrease revenue,in the cost costs of revenues remained stable as the prior year,was primarily due to obsoletethe inventoryincrease write-offin costs of $0.3transit million for generation 3.5 as well as the $0.4 million reduction of revenuebuses due to changethe increase in estimatedtransit transactionbus price mentioned in the net revenues above during the year ended December 31, 2023.sales.

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

Operating expenses consist of selling, general, and administrative expenses,expenses provisionas forwell credit loss, andas impairment ofon long-lived assets.goodwill.

The provision for credit loss was nil and $0.4 million and nil for the years ended December 31, 20232024 and 2022.2023, respectively. The provision for credit loss for 2023 was mainly due to the provision for security deposit of our previous lease of $0.2 million due to our early termination of the lease as well as provision for prepaid expenses for certain R&D projects of $0.2 million, which were suspended due to our severe cash shortage.

For the years ended December 31, 20232024 and 2022,2023, impairment loss recorded for property and equipment was $0.5 millionnil and nil,$0.5 million, respectively. The impairment in 2023 was due to the retirement of the vehicles in 2023.vehicles.

For the years ended December 31, 20232024 and 2022,2023, impairment loss recorded for intangible assets was $1.1nil million and nil,$1.1 million, respectively, and impairment loss recorded for our right - of - useright-of-use assets was $3.4 millionnil and nil,$3.4 million, respectively. The impairment in 2023 was due to uncertainty to bring future economic benefit to our business.

Net income Loss(loss)

As a result of the above factors, our net lossincome for the yearsyear ended December 31, 20232024, andwas 2022,$7.9 million. Our net loss for the year ended December 31, 2023, was $20.6 million, and $12.7 million, respectively.million.

The critical accounting policies, judgments and estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this prospectus.annual report. When reviewing our financial statements, you should consider:

The Company grants open credit terms to credit-worthy customers. Accounts receivable are primarily related to sales of EV, EV components, and forklifts. The Company maintains allowances for doubtful accounts. The Company adopted ASC 326 Financial Instruments — Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1, 2020. Management used an expected credit loss model for the impairment of trading receivables as of period ends. Management believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. Management measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts receivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery is considered remote. Provision for credit loss was $0.5 million for the year ended December 31, 2024. There was a reversal of credit loss for accounts receivable of $0.2 $10 thousandsmillion during the year ended December 31, 2023. Provision for credit loss was nil for the year ended December 31, 2022.2024.

We recorded recordednil and $5.0 million and nil impairment of long-lived assets for the years ended December 31, 20232024 and 2022,2023, respectively.

We performed the annual goodwill impairment assessment on December 31, 20232024 by considering all qualitative factors including the comparison of market cap and the carrying amount of the reporting unit (after the impairment of long-lived assets). We recorded $4.3 million and nil impairment of goodwill for the years ended December 31, 20232024 and 2022,2023, respectively.

Derivative liability as of December 31, 20232024 and 20222023 was $1.2$33 millionthousands and nil,$1.2 million, respectively, with $641 thousands of gain on change in fair value and $319 thousands and nil loss on change in fair value recorded in the consolidated statements of operations for the years ended December 31, 20232024 and 2022,2023, respectively.

The balance of warranty reserve was $289$14.3 thousandsmillion and $325$289 thousands as of December 31, 20232024 and 2022,2023, respectively.

We had recurring losses from operations. We have incurred a net lossincome of $20.6 million and the net cash used in operating activities was $3.7$7.9 million during the year ended December 31, 2023,2024, andmainly asdue to acquisition of Proterra Transit Business Unit. Excluding the one-time bargain purchase gain from acquisition of Proterra Transit Business Unit, we incurred a net loss of $30.3 million during the year ended December 31, 2023,2024 working capital deficit was $4.9 million. We haveand incurred significant recurring losses andbefore negative2024. The cash flow fromused in operating activities was $1.9 million and we need to raise additional funds to sustain itsour operations. These factors raise substantial doubt as to our ability to continue as a going concern.

For the next 12 months from the issuance date of the consolidated financial statements, we We plan to continue pursuing strategies to improve liquidity and raise additional funds while implementing various measures to boostcut revenuecosts. Such strategies and controlmeasures 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 expensescost within an acceptable level. Such measures include: 1) align capacitybase with demandthe new integrated ERP and prioritizeother productionoperating for high margin products in our order backlogsystems; 23) 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; 34) implement working capital initiatives and negotiate better payment terms with customers and for some of the new orders, require down payments; 4 5) implement comprehensivecash budgetsaving controlinitiatives and reducetighter operatingcash expenses;control, and 5) calibrate capital allocation to manage liquidity; and drive near-term goals without compromising long-term growth; 6) continue to proactively implement a robust capital market strategy to provide financing for ourthe 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.

Net cash used in operating activities was $3.7 million for the year ended December 31, 2023, primarily as a result of (i) net loss of $20.6 million, adjusted by non-cash items of depreciation and amortization of $1.2 million mainly in relation to equipment, furniture vehicles, trademark and technology, provision for credit loss of $0.4 million related to security deposit due to our early termination of lease as well as prepaid expenses to certain R&D expenses due to project suspension resulted from our cash shortage, amortization of right-of-use assets of $0.8 million, warrants issued in connection with unclosed convertible note offering of $0.9 million, impairment of long-lived assets of $5.0 million in relation to property and equipment, intangible assets, and right-of-use assets due to uncertainty to bring future economic benefit to our business, write-down of inventories of $0.3 million to adjust our forklifts to net realizable value, loss on sales-type leases of $0.1 million and changes in operating assets and liabilities including (i) a decrease in inventories of $1.7 million due to decrease of purchase due to our cash shortage, (ii) a decrease in prepaid expenses and other assets of $1.1 million due to the receipt of previous R&D project deliveries and no additional prepaid expenses on R&D projects due to cash shortage, (iii) a decrease in accounts receivable of $1.2 million due to collection and less sales near the year end, (iv) a decrease in lease liability of $0.3 million, and (v) an increase in accounts payable of $2.3 million due to our severe cash shortage; andshortage, (vi) an increase in advance from customer of $1.2 million in relation to additional backlog orders with down-payments received; and (vii) and increase of accrued liabilities and other liabilities of $0.4 million due to our cash shortage;shortage, and (viii) a decrease of net investment in leases of $0.3 million in relation to lease payments received from sales-type leases.

Our operating results substantially depend on revenues derived from our sales and leasing of EVs. Other than as disclosed elsewhere in this annual prospectus,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:

In addition,Additionally, on April 30, 2025, we received a notice from the Staff indicating that we were no longernot 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 servesserved 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 will remainremains delisted and continuecontinues to trade on the OTC Pink Limited Market.

We havehad 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.

Notwithstanding the Panel’s decision, weWe 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 has implemented a 1-for-5 reverse stock split of its common stock effective as of July 31, 2025, which iswas intended to restore compliance with Rule 5550(a)(2).

WhileThere there can be no assurance that these actions will result in the relisting on NasdaqNasdaq. or that the review by the Council will be successful, weWe remain committed to pursuing all reasonable and strategic options to regain compliance and restore our listing on a national securities securities exchange.

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 JuneSeptember 30, 2025, we have delivered a total of 140141 EVs to more than 48 customers, representing what we believe is the largest number 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 E-Series chassis. With over four million zero-emission miles accumulatively driven by the vehicles we delivered, we have gained significant industry 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 JuneSeptember 30, 2025, we have delivered a total of 3638 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.customers.

For the three months ended JuneSeptember 30, 2025 and 2024, our revenues were $2.7$2.5 million and $12.0$4.8 million, respectively. Our total revenue decreased decreased by $9.3$2.3 million, or 77%,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 June 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 sixnine months ended JuneSeptember 30, 2025 and 2024, our revenues were $7.2$9.6 million and $21.5$26.2 million, respectively. Our total revenue decreased decreased by $14.2$16.6 million, or 66.7%,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 sixnine months ended June 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 sixnine months ended JuneSeptember 30, 2025 and 2024, our revenue breakdown by major categories for relevant periods was as follows:

For the three months ended JuneSeptember 30, 2025 and 2024, our costs of revenues were $1.8 million and $$10.2$3.7 million, respectively. The decrease in costs of revenues was primarily due to the decrease in transit bus and other sales.

For the sixnine months ended JuneSeptember 30, 2025 and 2024, our costs of revenues were $4.9$6.7 million and $17.1$20.8 million, respectively. The decrease in in costs of revenues was primarily due to the decrease in transit bus and other sales.

For the three months ended JuneSeptember 30, 2025 and 2024, our combined gross margin was 33.4%26.9% and 15.2%23.4% respectively. The increase in margin for for transit bus sales was mainly because there was only two transit buses sold during the three months ended JuneSeptember 30, 2025 with a relatively high selling price.

For the sixnine months ended JuneSeptember 30, 2025 and 2024, our combined gross margin was 31.9%30.6% and 20.2%,20.8%, respectively. The increase of gross margin 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 mainly because there was only a limited number of transit buses sold during the sixnine months ended JuneSeptember 30, 2025 with a relatively high selling price. The increase in margin for EV sales was mainly because there waswere only onethree EVEVs sold during the sixnine months ended June September 30, 2025 with a relatively high selling price.

For the three months ended JuneSeptember 30, 2025 and 2024, our selling, general and administrative expenses were $2.6 million and $8.9$9.5 million, respectively. 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 sixnine months ended JuneSeptember 30, 2025 and 2024, our selling, general and administrative expenses were $5.9$8.5 million and $17.6$27.1 million, respectively. 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 sixnine months ended JuneSeptember 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.

Our other incomeexpense for the three months ended JuneSeptember 30, 2025, was $0.5$1.7 million, primarily due to the gainloss on change in fair value of warrant liability of $1.3$0.7 million,million partially offset byand interest expense of $0.8$1.0 million.

Our other incomeexpenses for the three months ended JuneSeptember 30, 2024, was $4.4$1.0 million, primarily due to the gain on change in fair value of derivative liability of $0.6 million and gainloss on change in fair value of warrant liability of $5.2 million, partially offset by an adjustment on gain on bargain purchase of Proterra transit business unit of $0.8$0.2 million and interest expense of $0.6$0.8 million, from short-term loan and debt discount amortization of convertible note.

Our other expenses for the sixnine months ended JuneSeptember 30, 2025, was $1.1$2.8 million, primarily due to interest expense of $2.2$3.2 million, partially offset by the gain on change in fair value of warrant liability of $1.1$0.3 million.

Our other income for the sixnine months ended JuneSeptember 30, 2024, was $36.5$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 warrantderivative liability of $14.6$0.6 million, and gain of change in fair value of derivativewarrant liability of $0.6$14.4 million, partially offset by the interest expense of $3.3$4.1 million resulted from short-term loan and debt discount amortization of convertible note, and loss on warrants issued duringin a private placement of $7.4 million.

As a result of the above factors, the net loss for the sixthree months ended JuneSeptember 30, 2025 and 2024, was $4.7$3.7 million,million and the$5.6 net income for the six monthsmillion, ended June 30, 2024 was $19.7 million.respectively.

Warranty expense is recorded as a component of cost of sales in the condensed consolidated statements of operations. The balance of warranty reserves was $11,497$8.1 million and $14,698$14.3 million as of JuneSeptember 30, 2025 and December 31, 2024, respectively.

We incurred a net loss of $4.7$8.4 million during the sixnine months ended JuneSeptember 30, 2025 and has incurred significant recurring losses before 2025. 2025. In addition, the cash flow used in operating activities was $5.0$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.

As of JuneSeptember 30, 2025, we had $0.1$0.3 million in cash and cash equivalents. Our primary sources of liquidity were from equity financing (through public or private offerings) as well as various types of debt financings.

Net cash used in operating activities was $5.0$5.8 million for the sixnine months ended JuneSeptember 30, 2025, primarily as a result of (i) a net loss of of $4.7$8.4 million, adjusted by non-cash items of depreciation and amortization of $0.8$1.3 million, gain on change in fair value of warrant liability liability of $1.0$0.3 million, gain on warrant exercise of $0.3 million, reversal of warranty reserve of $2.8$6.2 million, and amortization of right of use of assets of $0.5$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 $1.2$2.4 million due to certain inventories have been sold, (iiiii) increasedecrease in prepaid expenses and other assets of $0.4 $0.3 million; (iiiiv) decrease in accountsbattery payablelease receivable of $0.4$0.1 million, (ivv) increase in accrued liabilities of $1.9$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, (vvi) increase in advance from customers of $1.4$2.5 million mainly due to new customer orders received, and(vii) decrease in deferred revenue of $0.4 million mainly due to warranty revenue amortization, (viviii) increase in other payable of $0.4 million and (ix) decrease in lease liabilities $1.0$1.4 million.

Net cash used in operating activities was $1.6$2.8 million for the sixnine months ended JuneSeptember 30, 2024, primarily as a result of (i) a net income of $19.7$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 $0.8$1.4 million, amortization of debt discount of convertible notes of $1.5 million, deferred tax liability reversal of $3.0 million, loss on change in market value of derivative liability, loss on warrants issued during in a private placement of $7.4 million, gain on change in marketfair value of warrant liability of $14.6$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 $0.6$0.9 million and amortization of right of use of assets of $0.5$0.7 million, and changes in operating assets and liabilities including (i) increase in accounts receivable of $3.2$5.4 million due to uncollected accounts receivable from sales of transit buses, (ii) decrease in inventories of $12.9$15.5 million due to certain inventories purchase from Proterra have been sold; (iii) increase in accrued liabilities of $0.5$4.8 million due to collection of partial proceeds from Zenobe as well as interest accrued for Nationsseveral Busshort term loans, (iv) increase in accounts payable of $1.1million$1.3 million mainly due to additional inventories purchased for upcoming manufacturing of transit buses, (v) increase in income tax payable of $ 2.30.7 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 (viix) increase in advance from customers of $2.3 $4.9 million mainly due to collection of downpayments from transit bus sales.

No investing activity occurred for the sixnine months ended JuneSeptember 30, 2025.

Net cash used in investing activities was $10.9$10.1 million for the sixnine months ended JuneSeptember 30, 2024, primarily because of acquisition of Proterra Proterra for a total consideration of $10 million and $0.8 million of loan lent to a related party.million.

Net cash generated from financing activities was $2.6$5.3 million for the sixnine months ended JuneSeptember 30, 2025, primarily as a result of net proceeds proceeds from convertible senior noteborrowing of $5.8$6.3 million, net proceeds from private placement of $0.6 million, partially offset by repayment to borrowings of $1.5$1.6 million.

Net cash generated from financing activities was $10.6$9.9 million for the sixnine months ended JuneSeptember 30, 2024, primarily as a result of (i) net proceeds from private placements of $11.1 million, (ii) proceeds from borrowing of $2.4$5.0 million, and (iii) proceeds of borrowings from a related party of $1.4$1.1 million. The increase was partially offset by repayment to borrowings of $2.0$4.7 million and repayment of borrowings to a related party of $2.3$1.9 million.

We incurred capital expenditures of nil and $10.1 million for the sixnine months ended JuneSeptember 30, 2025 and 2024, respectively. Our capital expenditures 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.

As of JuneSeptember 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.