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 interim report. Our
consolidated financial statements have been prepared in accordance with
Overview
The Company operates two primary brands, "Phoenix Motorcars" 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 delivered our first commercial EV in
2014. We develop and integrate our proprietary electric drivetrain into the Ford
Econoline Chassis (E-Series), specifically on the Ford E-450. The Ford E-Series
is the dominant chassis in the medium duty Class 4 market in the
Basis of presentation, management estimates and critical accounting policies
Our unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in
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.
COVID-19 and Global Economic Factors. The effect of the novel coronavirus
("COVID-19") has significantly impacted
? economy. COVID-19 and the measures taken by many countries in response have
adversely affected and could in the future materially adversely impact the
Group's business, results of operations, and financial
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condition. The ongoing worldwide economic situation, including the COVID-19
outbreak, economic sanctions, the outbreak of war in
the credit markets, and significant liquidity problems for the financial
services industry may impact our financial condition in a number of ways. For
example, our current or potential customers, may delay or decrease spending with
us, or may not pay us, or may delay paying us for previously purchased products
and services. Also, we may have difficulties in securing additional financing.
Public health efforts to mitigate the impact of COVID-19 have included government actions such as travel restrictions, limitations on public gatherings, shelter in place orders, and mandatory closures. These actions are being lifted to varying degrees. However, the associated impact of COVID-19 closures and mobility restrictions on the economy are expected to continue to unfold. Supply chain disruptions, inflation, high energy prices, and supply-demand imbalances are expected to continue in 2022. The Group closely monitors customer accounts and has not experienced significant delays in the collection of accounts receivable.
The ultimate impact of COVID-19 and the outbreak of war in
Product Development and Scaling. 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. We believe
continued reduction in costs, improvement in battery performance and increase
in production volumes will enable commercial vehicle customers to adopt
electrification more quickly. In order to sell additional products to new and
existing customers, we will require additional capital to develop our products
and services, ramp up production and support expansion. Until we can generate
sufficient revenue from vehicle sales, we expect to primarily finance our
? operations through proceeds from public or private stock offering, and/or debt
financings, 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
and our ability to successfully manage and control costs and scale our
operations. If we fail to make the right investment decisions in our technology
and electrification solutions, including electrification and charging
solutions, if customers do not adopt our technology or our products and
services, or if our competitors are able to develop technology or products and
services that are superior to ours, our business, prospects, financial
condition, and operating results could be adversely affected.
BOM and Supply Chain. 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 will allow us
to reduce our Bill of Materials ("BOM"), labor and overhead costs, as
a percentage of total revenue. By reducing material costs, increasing facility
utilization rates and improving overall economies of scale, we can reduce
prices while maintaining or growing gross margins of our products to improve
customers' total cost of ownership and help accelerate commercial electric
vehicle adoption. Our ability to achieve our cost-saving and
production-efficiency objectives could be negatively impacted by a variety of
factors including, among other things, lower-than-expected facility utilization
rates, manufacturing and production cost overruns, increased purchased material
? costs, and unexpected supply chain quality issues or interruptions. If we are
unable to achieve our goals, we may not be able to reduce price enough to
accelerate commercial vehicle electrification, and our cost of goods sold and
operating costs could be greater than anticipated, which would negatively
impact gross margin and profitability. 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 in logistics and supply chains. We often do not get informed of
delivery delays until or after the expected delivery dates, which does not
allow for adequate planning. We have also been experiencing shortages of
chassis and other components. While we increased our raw material inventories
and added new suppliers and 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, components and manufacturing equipment on a
timely basis for the foreseeable future.
On
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to stop taking additional purchase orders once they finish fulfilling our
current purchase orders, until the Transaction closes. During the three months
ended
Government Subsidies and Incentive Policies. With growing emphasis on improving
air quality around our communities, large states like
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
requiring all airport shuttles in
requiring at least 50% of all medium-duty trucks sold in
by 2030, requiring specific end user segments like drayage and yard trucks to
go electric. Other states like
expected to bring in regulatory requirements for key end user segments like,
transit agencies and school buses to switch to all electric transportation
options. Fifteen other states including
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
electric vehicles registered and operating in the state; the New York Truck
Voucher Incentive Program offering up to
funding from federal agencies like the
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. Federal and various state agencies have established
incentives for setting up both public and private charging infrastructure.
Notably, the
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
programs that cover the entire cost of setting up charging infrastructure.
Other states like
have also introduced programs to support fleets with their charging
infrastructure requirements.
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