Item 1. Interim Financial Statements
SPI ENERGY CO., LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share
data)
| | |
| | |
| |
| | |
June 30, 2022 | | |
December 31, 2021 | |
| | |
(Unaudited) | | |
| |
| ASSETS | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 13,624 | | |
$ | 9,765 | |
| Restricted cash | |
| 7,629 | | |
| 8,080 | |
| Accounts receivable, net | |
| 19,209 | | |
| 22,599 | |
| Contract asset | |
| 1,129 | | |
| 1,621 | |
| Inventories | |
| 23,707 | | |
| 23,242 | |
| Project assets held for sale | |
| 10,120 | | |
| 8,946 | |
| Prepaid expenses and other current assets, net | |
| 11,775 | | |
| 9,584 | |
| Amount due from related parties | |
| 412 | | |
| 230 | |
| Total current assets | |
| 87,605 | | |
| 84,067 | |
| Intangible assets, net | |
| 3,035 | | |
| 3,433 | |
| Goodwill | |
| 4,896 | | |
| 4,896 | |
| Other receivable, noncurrent | |
| 1,982 | | |
| 268 | |
| Property and equipment, net | |
| 31,400 | | |
| 35,750 | |
| Project assets, noncurrent | |
| 16,116 | | |
| 15,969 | |
| Investment in affiliates | |
| 69,606 | | |
| 69,606 | |
| Operating lease right-of-use assets | |
| 13,697 | | |
| 13,923 | |
| Deferred tax assets, net | |
| 130 | | |
| 168 | |
| Total assets | |
$ | 228,467 | | |
$ | 228,080 | |
| LIABILITIES AND EQUITY | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable | |
$ | 25,058 | | |
$ | 25,612 | |
| Accrued liabilities | |
| 11,583 | | |
| 10,094 | |
| Income taxes payable | |
| 2,440 | | |
| 1,684 | |
| Advance from customers | |
| 3,077 | | |
| 4,924 | |
| Short-term borrowings and current portion of long-term borrowings | |
| 9,537 | | |
| 9,120 | |
| Amount due to an affiliate | |
| 10,544 | | |
| 10,603 | |
| Convertible bonds | |
| 46,435 | | |
| 48,603 | |
| Accrued warranty reserve | |
| 829 | | |
| 628 | |
| Amount due to related parties | |
| 300 | | |
| – | |
| Operating lease liabilities, current | |
| 1,283 | | |
| 1,351 | |
| Consideration payable | |
| 59,120 | | |
| 61,219 | |
| Total current liabilities | |
| 170,206 | | |
| 173,838 | |
| Long-term borrowings, excluding current portion | |
| 6,913 | | |
| 12,800 | |
| Deferred tax liabilities, net | |
| 2,680 | | |
| 2,970 | |
| Operating lease liabilities, non-current | |
| 12,001 | | |
| 12,522 | |
| Total liabilities | |
| 191,800 | | |
| 202,130 | |
| Equity: | |
| | | |
| | |
| Ordinary shares, par $0.0001, 500,000,000 shares authorized, 27,992,567 and 25,352,060 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | |
| 3 | | |
| 3 | |
| Additional paid in capital | |
| 715,062 | | |
| 695,073 | |
| Accumulated other comprehensive loss | |
| (36,930 | ) | |
| (35,257 | ) |
| Accumulated deficit | |
| (646,548 | ) | |
| (637,390 | ) |
| Total equity attributable to the shareholders of SPI Energy Co.,Ltd. | |
| 31,587 | | |
| 22,429 | |
| Noncontrolling interests | |
| 5,080 | | |
| 3,521 | |
| Total equity | |
| 36,667 | | |
| 25,950 | |
| Total liabilities and equity | |
$ | 228,467 | | |
$ | 228,080 | |
The accompany notes are an integral part of
these condensed consolidated financial statements.
SPI ENERGY CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands, except for share and per share
data)
| | |
| | | |
| | | |
| | | |
| | |
| | |
For the Three Months Ended June 30, | | |
| | |
For the Six Months Ended June 30, | | |
| |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Net sales | |
$ | 48,584 | | |
$ | 45,818 | | |
$ | 87,119 | | |
$ | 79,440 | |
| Cost of revenue | |
| 44,712 | | |
| 40,589 | | |
| 80,538 | | |
| 72,073 | |
| Gross profit | |
| 3,872 | | |
| 5,229 | | |
| 6,581 | | |
| 7,367 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 7,625 | | |
| 7,674 | | |
| 16,753 | | |
| 17,269 | |
| Sales, marketing and customer service | |
| 1,368 | | |
| 1,209 | | |
| 2,611 | | |
| 2,246 | |
| Provision (reversal) for credit losses | |
| 474 | | |
| 319 | | |
| (209 | ) | |
| 319 | |
| Total operating expenses | |
| 9,467 | | |
| 9,202 | | |
| 19,155 | | |
| 19,834 | |
| Operating loss | |
| (5,595 | ) | |
| (3,973 | ) | |
| (12,574 | ) | |
| (12,467 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | |
| Interest expense, net | |
| (1,637 | ) | |
| (1,259 | ) | |
| (3,038 | ) | |
| (2,702 | ) |
| Net foreign exchange gain (loss) | |
| 2,262 | | |
| (792 | ) | |
| 3,324 | | |
| 710 | |
| Others | |
| 3,207 | | |
| 103 | | |
| 3,995 | | |
| 752 | |
| Total other income (expense), net | |
| 3,832 | | |
| (1,948 | ) | |
| 4,281 | | |
| (1,240 | ) |
| Income tax expense | |
| 455 | | |
| 546 | | |
| 711 | | |
| 860 | |
| Net loss | |
$ | (2,218 | ) | |
$ | (6,467 | ) | |
$ | (9,004 | ) | |
$ | (14,567 | ) |
| Less: Net income attributable to noncontrolling interests | |
| 95 | | |
| 103 | | |
| 154 | | |
| 342 | |
| Net loss attributable to shareholders of SPI Energy Co., Ltd. | |
$ | (2,313 | ) | |
$ | (6,570 | ) | |
$ | (9,158 | ) | |
$ | (14,909 | ) |
| Net loss per ordinary share: | |
| | | |
| | | |
| | | |
| | |
| Basic and Diluted | |
$ | (0.08 | ) | |
$ | (0.27 | ) | |
$ | (0.34 | ) | |
$ | (0.64 | ) |
| Weighted average shares outstanding | |
| | | |
| | | |
| | | |
| | |
| Basic and Diluted | |
| 27,428,544 | | |
| 23,989,039 | | |
| 26,604,944 | | |
| 23,434,015 | |
The accompany notes are an integral part of
these unaudited condensed consolidated financial statements.
SPI ENERGY CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE LOSS
(In thousands)
| | |
| | | |
| | | |
| | | |
| | |
| | |
For the Three Months Ended
June 30, | | |
For the Six Months Ended
June 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Net loss | |
$ | (2,218 | ) | |
$ | (6,467 | ) | |
$ | (9,004 | ) | |
$ | (14,567 | ) |
| Other comprehensive income (loss), net of tax of nil: | |
| | | |
| | | |
| | | |
| | |
| Foreign currency translation adjustments | |
| (2,427 | ) | |
| (72 | ) | |
| (2,362 | ) | |
| (286 | ) |
| Total comprehensive loss | |
| (4,645 | ) | |
| (6,539 | ) | |
| (11,366 | ) | |
| (14,853 | ) |
| Comprehensive loss attributable to
noncontrolling interests | |
| 69 | | |
| 98 | | |
| (535 | ) | |
| 89 | |
| Comprehensive loss attributable to shareholder of SPI Energy Co., Ltd. | |
$ | (4,714 | ) | |
$ | (6,637 | ) | |
$ | (10,831 | ) | |
$ | (14,942 | ) |
The accompany notes are an integral part of
these unaudited condensed consolidated financial statements.
SPIENERGY CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF EQUITY
(In thousands, except for share and per share
data)
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
Ordinary Shares | | |
Additional Paid-In | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
Equity Attributable to Shareholders of SPI Energy | | |
Noncontrolling | | |
Total | |
| | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Loss | | |
Co., Ltd. | | |
Interests | | |
Equity | |
| Balances at December 31, 2021 | |
| 25,352,060 | | |
$ | 3 | | |
$ | 695,073 | | |
$ | (637,390 | ) | |
$ | (35,257 | ) | |
$ | 22,429 | | |
$ | 3,521 | | |
$ | 25,950 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| (6,845 | ) | |
| – | | |
| (6,845 | ) | |
| 59 | | |
| (6,786 | ) |
| Foreign currency translation adjustments | |
| – | | |
| – | | |
| – | | |
| – | | |
| 728 | | |
| 728 | | |
| (663 | ) | |
| 65 | |
| Issuance of restricted share units to employees | |
| 229,888 | | |
| – | | |
| 623 | | |
| – | | |
| – | | |
| 623 | | |
| – | | |
| 623 | |
| Settlement of convertible debt with ordinary shares | |
| 752,393 | | |
| – | | |
| 1,750 | | |
| – | | |
| – | | |
| 1,750 | | |
| – | | |
| 1,750 | |
| Issuance of ordinary shares for settlement of consideration related to Acquisition of Phoenix | |
| 42,442 | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | |
| Share-based compensation expense | |
| – | | |
| – | | |
| 595 | | |
| – | | |
| – | | |
| 595 | | |
| – | | |
| 595 | |
| Balances at March 31, 2022 | |
| 26,376,783 | | |
$ | 3 | | |
$ | 698,041 | | |
$ | (644,235 | ) | |
$ | (34,529 | ) | |
$ | 19,280 | | |
$ | 2,917 | | |
$ | 22,197 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| (2,313 | ) | |
| – | | |
| (2,313 | ) | |
| 95 | | |
| (2,218 | ) |
| Foreign currency translation adjustments | |
| – | | |
| – | | |
| – | | |
| – | | |
| (2,401 | ) | |
| (2,401 | ) | |
| (26 | ) | |
| (2,427 | ) |
| Settlement of convertible debt with ordinary shares | |
| 1,615,784 | | |
| – | | |
| 5,337 | | |
| – | | |
| – | | |
| 5,337 | | |
| – | | |
| 5,337 | |
| Issuance of ordinary shares of Phoenix in its IPO | |
| – | | |
| – | | |
| 11,344 | | |
| – | | |
| – | | |
| 11,344 | | |
| 2,094 | | |
| 13,438 | |
| Share-based compensation expense | |
| – | | |
| – | | |
| 340 | | |
| – | | |
| – | | |
| 340 | | |
| – | | |
| 340 | |
| Balances at June 30, 2022 | |
| 27,992,567 | | |
$ | 3 | | |
$ | 715,062 | | |
$ | (646,548 | ) | |
$ | (36,930 | ) | |
$ | 31,587 | | |
$ | 5,080 | | |
$ | 36,667 | |
| | |
Ordinary Shares | | |
Additional Paid-In | | |
Accumulated | | |
Accumulated Other Comprehensive | | |
Equity Attributable to Shareholders of SPI Energy | | |
Noncontrolling | | |
Total | |
| | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Loss | | |
Co., Ltd. | | |
Interests | | |
Equity | |
| Balances as of December 31, 2020 | |
| 22,340,689 | | |
$ | 2 | | |
$ | 670,101 | | |
$ | (591,899 | ) | |
$ | (32,947 | ) | |
$ | 45,257 | | |
$ | 3,129 | | |
$ | 48,386 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| (8,339 | ) | |
| – | | |
| (8,339 | ) | |
| 239 | | |
| (8,100 | ) |
| Foreign currency translation adjustments | |
| – | | |
| – | | |
| – | | |
| – | | |
| 34 | | |
| 34 | | |
| (248 | ) | |
| (214 | ) |
| Issuance of ordinary shares in offering | |
| 1,365,375 | | |
| – | | |
| 13,591 | | |
| – | | |
| – | | |
| 13,591 | | |
| – | | |
| 13,591 | |
| Share-based compensation | |
| – | | |
| – | | |
| 3,074 | | |
| – | | |
| – | | |
| 3,074 | | |
| – | | |
| 3,074 | |
| Exercise of share option | |
| 157,000 | | |
| – | | |
| 600 | | |
| – | | |
| – | | |
| 600 | | |
| – | | |
| 600 | |
| Balances as of March 31, 2021 | |
| 23,863,064 | | |
$ | 2 | | |
$ | 687,366 | | |
$ | (600,238 | ) | |
$ | (32,913 | ) | |
$ | 54,217 | | |
$ | 3,120 | | |
$ | 57,337 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| (6,570 | ) | |
| – | | |
| (6,570 | ) | |
| 103 | | |
| (6,467 | ) |
| Foreign currency translation adjustments | |
| – | | |
| – | | |
| – | | |
| – | | |
| (67 | ) | |
| (67 | ) | |
| (5 | ) | |
| (72 | ) |
| Settlement of convertible debt with ordinary shares | |
| 74,659 | | |
| – | | |
| 350 | | |
| – | | |
| – | | |
| 350 | | |
| – | | |
| 350 | |
| Share-based compensation | |
| – | | |
| – | | |
| (837 | ) | |
| – | | |
| – | | |
| (837 | ) | |
| – | | |
| (837 | ) |
| Exercise of share option | |
| 128,500 | | |
| – | | |
| 491 | | |
| – | | |
| – | | |
| 491 | | |
| – | | |
| 491 | |
| Issuance of ordinary shares for purchasing services | |
| 5,000 | | |
| – | | |
| 34 | | |
| – | | |
| – | | |
| 34 | | |
| – | | |
| 34 | |
| Balances at June 30, 2021 | |
| 24,071,223 | | |
$ | 2 | | |
$ | 687,404 | | |
$ | (606,808 | ) | |
$ | (32,980 | ) | |
$ | 47,618 | | |
$ | 3,218 | | |
$ | 50,836 | |
The accompany notes are an integral part of
these unaudited condensed consolidated financial statements.
SPI ENERGY CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In thousands)
| |
|
|
|
|
|
|
|
|
| |
|
For the Six Months Ended June 30, |
|
| |
|
2022 |
|
|
2021 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
| Net cash used in operating activities |
|
$ |
(11,539 |
) |
|
|
(17,097 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Acquisitions of property and equipment |
|
|
(2,022 |
) |
|
|
(930) |
|
| Acquisitions of PDI |
|
|
– |
|
|
|
(8,003 |
) |
| Proceeds from disposal of property and equipment |
|
|
1,635 |
|
|
|
102 |
|
| Net cash used in investing activities |
|
|
(387) |
|
|
|
(8,831 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from issuance of ordinary shares |
|
|
– |
|
|
|
13,591 |
|
| Repayment of borrowings |
|
|
(82,296) |
|
|
|
(78,383 |
) |
| Proceeds from borrowings |
|
|
82,714 |
|
|
|
80,786 |
|
| Proceeds from issuance of convertible bond |
|
|
2,000 |
|
|
|
8,000 |
|
| Repayment of convertible bonds |
|
|
– |
|
|
|
(13,750 |
) |
| Proceeds from exercise of options issued to Lighting Charm Limited during disposition of SPI China |
|
|
– |
|
|
|
1,091 |
|
| Proceeds from IPO of a subsidiary |
|
|
13,438 |
|
|
|
– |
|
| Net cash generated from financing activities |
|
|
15,856 |
|
|
|
11,335 |
|
| |
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
|
(522) |
|
|
|
(105 |
) |
| |
|
|
|
|
|
|
|
|
| Increase (decrease) in cash, cash equivalents and restricted cash |
|
|
3,408 |
|
|
|
(14,698 |
) |
| Cash, cash equivalents and restricted cash at beginning of period |
|
|
17,845 |
|
|
|
39,782 |
|
| Cash, cash equivalents and restricted cash at end of period |
|
$ |
21,253 |
|
|
$ |
25,084 |
|
| |
|
|
|
|
|
|
|
|
| Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
13,624 |
|
|
|
22,846 |
|
| Restricted cash |
|
|
7,629 |
|
|
|
2,238 |
|
| Total cash, cash equivalents, and restricted cash |
|
$ |
21,253 |
|
|
$ |
25,084 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental cash flow information: |
|
|
|
|
|
|
|
|
| Interest paid |
|
$ |
1,458 |
|
|
$ |
1,338 |
|
| Non-cash activities: |
|
|
|
|
|
|
|
|
| Right of use assets obtained in exchange for operating lease obligations |
|
$ |
428 |
|
|
$ |
2,834 |
|
| Settlement of convertible debt with ordinary shares |
|
$ |
7,087 |
|
|
$ |
350 |
|
The accompany notes are an integral part of
these unaudited condensed consolidated financial statements.
SPI ENERGY CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Amounts in US$ thousands, except share and
per share data)
| 1. |
Description of Business and Organization |
Description of Business
SPI Energy Co., Ltd. (“SPI Energy”
or the “Company”) and its subsidiaries (collectively the “Group”) is engaged in the provision of photovoltaic
(“PV”), roofing and solar energy systems installation, and electric vehicle (“EV”) solutions for business, residential,
government and utility customers and investors.
Organization
The major subsidiaries of the Group
as of June 30, 2022 are summarized as below:
| Schedule of major subsidiaries |
|
|
|
|
| Major Subsidiaries |
|
Abbreviation |
|
Location |
| SolarJuice Co., Ltd |
|
SJ Cayman |
|
Cayman |
| Solar Juice Pty Ltd. |
|
SJ Australia |
|
Australia |
| Solarjuice American Inc. |
|
SJ US |
|
United States |
| Solarjuice Technology Inc. |
|
SJT |
|
United States |
| Italsolar S.r.l. |
|
SPI Italy |
|
Italy |
| SPI Solar Japan G.K. |
|
SPI Japan |
|
Japan |
| Solar Power Inc UK Service Limited |
|
SPI UK |
|
United Kingdom |
| SPI Solar Inc. |
|
SPI US |
|
United States |
| Heliostixio S.A. |
|
Heliostixio |
|
Greece |
| Heliohrisi S.A. |
|
Heliohrisi |
|
Greece |
| Thermi Sun S.A. |
|
Thermi Sun |
|
Greece |
| Knight Holding Corporation |
|
Knight |
|
United States |
| Edisonfuture Inc. |
|
Edisonfuture |
|
United States |
| Phoenix Motor Inc. |
|
Phoenix |
|
United States |
| Phoenix Motorcars Leasing LLC |
|
PML |
|
United States |
On January 1, 2017, the Group deconsolidated
one of the major subsidiaries, Sinsin Renewable Investment Limited (“Sinsin”) due to loss of control and recognized the investment
in Sinsin on the carrying amount of $69,606. Both the Group and the former shareholders of Sinsin, Sinsin Europe Solar Asset Limited Partnership
and Sinsin Solar Capital Limited Partnership (collectively, the “Sinsin Group”), failed to fulfill the obligation under the
share sale and purchase agreement of Sinsin, which led to that both parties filed petitions to each other (see Note 8(b)). The petitions
directly affected the Group’s ability to effectively control Sinsin and make any direct management decisions or have any direct
impact on Sinsin’s polices, operations or assets without the agreement of Sinsin Group.
On June 10, 2022, Phoenix
completed its initial public offering (“IPO”) and Phoenix’s shares have been listed on NASDAQ under the stock code
“PEV” (“Phoenix IPO”). Phoenix issued 2,100,000 ordinary
shares at $7.5 per share. Net proceeds from the
Phoenix IPO after deducting underwriting commissions, share issuance costs and offering expenses approximately amounted to $13,438.
The Group’s condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of the business. The Group had recurring losses from operations. The Group has incurred a net loss of
$9,004 during the six months ended June 30, 2022, and the cash flow used in operating activities was $11,539. As of June 30, 2022, there
is net working capital deficit of $82,601 and accumulated deficit of $646,548. These factors raise substantial doubt as to the Group’s
ability to continue as a going concern. The Group intends to continue implementing various measures to boost revenue and control the cost
and expenses within an acceptable level and other measures including: 1) negotiate with potential buyers on PV solar projects; 2) negotiate
for postponing of convertible bond payments; 3) improve the profitability of the business in US; 4) strictly
control and reduce business, marketing and advertising expenses; 5) obtain equity financing from certain
subsidiaries’ initial public offerings; and 6) seek for certain credit facilities. While the Group believes that it will be successful
in meeting its liquidity and cash flow requirements, there is no assurance to that effect. The Group’s condensed consolidated financial
statements do not include any adjustments that may result from the outcome of these uncertainties.
| 3. |
Summary of Significant Accounting Policies |
| |
(a) |
Basis of Presentation |
The unaudited condensed consolidated
financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”)
and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.
In the opinion of management, the information
reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All
such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for the full year. The condensed
consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but
does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated
financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2021.
The preparation of the unaudited condensed
consolidated financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated
financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements
include the allowance made for credit losses, inventory write-downs, the estimated useful lives of long-lived assets, the impairment of
goodwill, long-lived assets and project assets, valuation allowance of deferred tax assets, accrued warranty expenses, the grant-date
fair value of share-based compensation awards and related forfeiture rates, the lease discount rate, the purchase price allocation in
acquisition, and fair value of financial instruments. Changes in facts and circumstances may result in revised estimates. The current
economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
The Group’s accounting practices
under Accounting Standards Codification (“ASC”) No. 606 are as followings:
The Group generates revenue from sales
of PV components, roofing and solar energy systems installation, electricity revenue with Power Purchase Agreements (“PPAs”),
sales and leasing of EV, and others for the six months ended June 30, 2022 and 2021.
Sale of PV components
Revenue on sale of PV components is
recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment
or acceptance of the customer depending on the terms of the underlying contracts.
Revenue from roofing and solar energy systems installation
Revenue from roofing and solar energy
system installation is recognized over time.
For revenue from solar energy system
installation, the Company’s principal performance obligation is to design and install a customize solar energy system, sometimes,
reinstall the customer’s existing solar energy system that is interconnected to the local power grid and for which permission to
operate has been granted by a utility company to the customer. For roofing the Company’s principal performance obligation is to
design and build roof system per customer selection.
All costs to obtain and fulfill contracts
associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized.
The Company recognizes revenue using
a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs
incurred compared to the total estimated cost of the contract. In applying cost-based input method, the Company uses the actual costs
incurred to the total estimated cost, to determine the Company’s progress towards contract completion and to calculate the corresponding
amount of revenue and gross profit to recognize.
Electricity revenue with PPAs
The Group sells energy generated by
PV solar power systems under PPAs. For energy sold under PPAs, the Group recognizes revenue each period based on the volume of energy
delivered to the customer (i.e., the PPAs off-taker) and the price stated in the PPAs. The Group has determined that none of the PPAs
contains a lease since (i) the purchaser does not have the rights to operate the PV solar power systems, (ii) the purchaser does not have
the rights to control physical access to the PV solar power systems, and (iii) the price that the purchaser pays is at a fixed price per
unit of output.
Revenue from sales and leasing of EV
The Group recognizes revenue from sales
of EV 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 for EV sales. The Group determined that the government grants related to sales of EV 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 violates the government grant terms and conditions.
EV leasing revenue includes revenue
recognized under lease accounting guidance for direct leasing programs. The Group accounts for these leasing transactions as operating
leases under ASC 840 Leases, and revenues are recognized on a straight-line basis over the contractual term.
Other revenue
Other revenue mainly consisted of revenue
generated from sales of component and charging stations, sales of forklifts, engineering and maintenance service, shipping and delivery
service, and other.
Disaggregation of revenues
The following table illustrates the
disaggregation of revenue by revenue stream and by geographical location for the three and six months ended June 30, 2022 and 2021:
| Schedule of disaggregation of revenues | |
| | |
| | |
| | |
| | |
| | |
| |
| By revenue stream | |
For the six months ended June 30, 2022 (Unaudited) | |
| | |
Sales of PV components | | |
Revenue from roofing and solar systems installation | | |
Electricity revenue with PPAs | | |
Automotive sales & leasing | | |
Others | | |
Total | |
| Australia | |
$ | 59,554 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 442 | | |
$ | 59,996 | |
| Italy | |
| – | | |
| – | | |
| 468 | | |
| – | | |
| – | | |
| 468 | |
| United States | |
| 1,303 | | |
| 20,153 | | |
| – | | |
| 1,063 | | |
| 1,853 | | |
| 24,372 | |
| United Kingdom | |
| – | | |
| – | | |
| 932 | | |
| – | | |
| – | | |
| 932 | |
| Greece | |
| – | | |
| – | | |
| 1,351 | | |
| – | | |
| – | | |
| 1,351 | |
| Total | |
$ | 60,857 | | |
$ | 20,153 | | |
$ | 2,751 | | |
$ | 1,063 | | |
$ | 2,295 | | |
$ | 87,119 | |
| By revenue stream | |
For the three months ended June 30, 2022 (Unaudited) | |
| | |
Sales of PV components | | |
Revenue from roofing and solar systems installation | | |
Electricity revenue with PPAs | | |
Automotive sales & leasing | | |
Others | | |
Total | |
| Australia | |
$ | 31,530 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 300 | | |
$ | 31,830 | |
| Italy | |
| – | | |
| – | | |
| 212 | | |
| – | | |
| – | | |
| 212 | |
| United States | |
| 1,303 | | |
| 11,364 | | |
| – | | |
| 538 | | |
| 1,712 | | |
| 14,917 | |
| United Kingdom | |
| – | | |
| – | | |
| 781 | | |
| – | | |
| – | | |
| 781 | |
| Greece | |
| – | | |
| – | | |
| 844 | | |
| – | | |
| – | | |
| 844 | |
| Total | |
$ | 32,833 | | |
$ | 11,364 | | |
$ | 1,837 | | |
$ | 538 | | |
$ | 2,012 | | |
$ | 48,584 | |
| By revenue stream | |
For the six months ended June 30, 2021 (Unaudited) | |
| | |
Sales of PV components | | |
Revenue from roofing and solar systems installation | | |
Electricity revenue with PPAs | | |
Automotive sales & leasing | | |
Others | | |
Total | |
| Australia | |
$ | 60,803 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 632 | | |
$ | 61,435 | |
| Italy | |
| – | | |
| – | | |
| 321 | | |
| – | | |
| – | | |
| 321 | |
| United States | |
| – | | |
| 14,363 | | |
| – | | |
| 913 | | |
| 358 | | |
| 15,634 | |
| United Kingdom | |
| – | | |
| – | | |
| 671 | | |
| – | | |
| – | | |
| 671 | |
| Greece | |
| – | | |
| – | | |
| 1,379 | | |
| – | | |
| – | | |
| 1,379 | |
| Total | |
$ | 60,803 | | |
$ | 14,363 | | |
$ | 2,371 | | |
$ | 913 | | |
$ | 990 | | |
$ | 79,440 | |
| By revenue stream | |
For the three months ended June 30, 2021 (Unaudited) | |
| | |
Sales of PV components | | |
Revenue from roofing and solar systems installation | | |
Electricity revenue with PPAs | | |
Automotive sales & leasing | | |
Others | | |
Total | |
| Australia | |
$ | 31,894 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | 416 | | |
$ | 32,310 | |
| Italy | |
| – | | |
| – | | |
| 160 | | |
| – | | |
| – | | |
| 160 | |
| United States | |
| – | | |
| 11,333 | | |
| – | | |
| 529 | | |
| 115 | | |
| 11,977 | |
| United Kingdom | |
| – | | |
| – | | |
| 506 | | |
| – | | |
| – | | |
| 506 | |
| Greece | |
| – | | |
| – | | |
| 865 | | |
| – | | |
| – | | |
| 865 | |
| Total | |
$ | 31,894 | | |
$ | 11,333 | | |
$ | 1,531 | | |
$ | 529 | | |
$ | 531 | | |
$ | 45,818 | |
Contract balance
The following table provides information
about contract assets and contract liabilities from contracts with customers:
| Schedule of accounts receivables and contract liabilities | |
| | |
| |
| | |
June 30, 2022 (Unaudited) | | |
December 31, 2021 | |
| Contract assets | |
$ | 1,129 | | |
$ | 1,621 | |
| Advance from customers | |
$ | 3,077 | | |
$ | 4,924 | |
The contract assets primarily relate
to the Group’s rights to consideration for work completed but not billed at the reporting date, primarily for the revenue from roofing
and solar energy systems installation in the United States. The contract assets are transferred to receivables when the rights become
unconditional after billing is issued.
Advance from customers, which representing
a contract liability, represents mostly unrecognized revenue amount received from customers. Advance from customers is recognized as (or
when) the Group performs under the contract. During the six months ended June 30, 2022 and 2021, the Group recognized $4,924 and $1,377
as revenue that was included in the balance of advance from customers at January 1, 2022 and 2021, respectively.
| |
(d) |
Recent Accounting Pronouncements |
In August 2020, the FASB issued ASU
No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance eliminates
the beneficial conversion feature and cash conversion models in Accounting Standards Codification (ASC or Codification) 470-20 that require
separate accounting for embedded conversion features in convertible instruments. This guidance also eliminates some of the conditions
that must be met for equity classification under ASC 815-40-25. The new guidance also requires entities to use the if-converted method
to calculate earnings per share (EPS) for all convertible instruments in the diluted EPS calculation and include the effect of potential
share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for liability-classified
share-based payment awards. ASU No. 2020-06 is effective for annual periods beginning after December 15, 2021 and interim periods therein.
The Group adopted ASU No. 2020-06 on January 1, 2022. The adoption did not have a material impact on the Group’s consolidated financial
statements.
Other significant accounting policies
are detailed in “Note 3 - Summary of Significant Accounting Policies” of the Company’s consolidated financial statements
for the year ended December 31, 2021.
| 4. |
Accounts Receivable, Net |
The accounts receivable, net as of
June 30, 2022 and December 31, 2021 consisted of the following:
| Schedule of accounts receivable | |
| | |
| |
| | |
June 30, | | |
December 31, | |
| | |
2022 (Unaudited) | | |
2021 | |
| Accounts receivable | |
$ | 21,805 | | |
$ | 25,419 | |
| Less: Allowance for credit losses | |
| (2,596 | ) | |
| (2,820 | ) |
| Accounts receivable, net | |
$ | 19,209 | | |
$ | 22,599 | |
Inventories as of June 30, 2022 and
December 31, 2021 consisted of the following:
| Schedule of inventories | |
| | |
| |
| | |
June 30, | | |
December 31, | |
| | |
2022 (Unaudited) | | |
2021 | |
| Finished goods | |
$ | 17,076 | | |
$ | 17,108 | |
| Goods in transit | |
| 2,566 | | |
| 2,846 | |
| Work in process | |
| 1,019 | | |
| 582 | |
| Raw materials | |
| 3,046 | | |
| 2,706 | |
| Total inventories | |
$ | 23,707 | | |
$ | 23,242 | |
| 6. |
Share-based Compensation |
The following table summarizes the
consolidated share-based compensation expense, by type of awards:
| Summary of consolidated stock-based compensation expense, by type of awards | |
| | |
| | |
| | |
| |
| | |
For the three months Ended | | |
For the six months Ended | |
| | |
June 30, | | |
June 30, | | |
June 30, | | |
June 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Employee stock options | |
$ | 340 | | |
$ | (837 | ) | |
$ | 935 | | |
$ | 2,237 | |
| Restricted share grants | |
| – | | |
| – | | |
| 623 | | |
| – | |
| Total share-based compensation expense | |
| 340 | | |
| (837 | ) | |
| 1,558 | | |
| 2,237 | |
The following table summarizes the
consolidated share-based compensation by line items:
| Summary of consolidated stock-based compensation by line items | |
| | |
| | |
| | |
| |
| | |
For the three months Ended | | |
For the six months Ended | |
| | |
June 30, | | |
June 30, | | |
June 30, | | |
June 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| General and administrative | |
$ | 343 | | |
$ | (843 | ) | |
$ | 1,554 | | |
$ | 2,231 | |
| Sales, marketing and customer service | |
| (3 | ) | |
| 6 | | |
| 4 | | |
| 6 | |
| Total share-based compensation expense, net of nil income taxes | |
$ | 340 | | |
$ | (837 | ) | |
$ | 1,558 | | |
$ | 2,237 | |
As a result of the net loss for the
three and six months ended June 31, 2022 and 2021, there is no dilutive impact to the net loss per share calculation for the period.
For the three months and six months
ended June 30, 2022 and 2021, the following securities were excluded from the computation of diluted net loss per share as inclusion
would have been anti-dilutive.
| Schedule securities excluded from the computation of diluted net loss per share | |
| | | |
| | | |
| | | |
| | |
| | |
For the three months Ended
(Unaudited) | | |
For the six months Ended
(Unaudited) | |
| | |
June 30, | | |
June 30, | | |
June 30, | | |
June 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Share options and non-vested restricted stock | |
| 10,000 | | |
| 38,350 | | |
| 10,000 | | |
| 38,350 | |
| Convertible bonds | |
| 582,000 | | |
| 491,500 | | |
| 582,000 | | |
| 491,500 | |
| Committed shares | |
| – | | |
| 114,770 | | |
| – | | |
| 114,770 | |
| Total | |
| 592,000 | | |
| 644,620 | | |
| 592,000 | | |
| 644,620 | |
| 8. |
Commitments and Contingencies |
As of June 30, 2022, the Group had capital
commitments of approximately $7,249. These capital commitments were solely related to contracts signed with vendors automation production
line, equipment or PV related products used for the construction of solar PV systems being developed by the Group.
The Group has entered into a contract
with a supplier for show car model development which the Group made commitments of payments amounted to approximately $2,350 as of June
30, 2022.
On January 26, 2018, Sinsin Group filed
a complaint against the Group requesting the payment of outstanding purchase price and related interest of $43,595 (EUR 38,054). On June
25, 2018, an interim measures judgment was made which appointed an interim management of Sinsin, consisting of two members elected by
Sinsin Group and one member elected by the Group. The interim management would manage the bank accounts of Sinsin and collect the proceeds
of electric energy revenue. On October 29, 2020, an arbitration decision was made that the Group will need to pay the outstanding purchase
price of $43,595 (EUR 38,054), together with interest at 6% accruing from November 20, 2015 on half of the outstanding purchase and from
June 30, 2016 on the remaining half of the outstanding purchase price to the date of eventual payment. The Group filed an application
for appeals in the court of Malta but was turned down by the court in November 2021. The Group furtherly filed an application of retrial
and suspension of the enforcement of the awards. The application of retrial was rejected by the court on March 30, 2022. No further appeal
or right of retrial exists in Malta, and the management is in progress of negotiation with Sinsin to achieve a settlement to suspend the
enforcement of the arbitration decision.
From time to time, the Group is involved
in various other legal and regulatory proceedings arising in the normal course of business. While the Group cannot predict the occurrence
or outcome of these proceedings with certainty, it does not believe that an adverse result in any pending legal or regulatory proceeding,
individually or in the aggregate, would be material to the Group’s consolidated financial condition or cash flows; however, an unfavorable
outcome could have a material adverse effect on the Group’s results of operations.
A substantial percentage of the Group’s
net revenue comes from sales made to a large number of customers at a small transaction amount, to whom sales are typically made on an
open account basis.
There was no customer of which the
revenue accounted for 10% or more of total net revenue for the three months and six months ended June 30, 2022 and 2021.
As of June 30, 2022, there was no customer
of which the accounts receivable accounted for 10% or more of total accounts receivable. As of December, 2021, there was one customer
of which the accounts receivable accounted for 21% of total accounts receivable.
| 10. |
Related Party Transactions |
The amount due from related parties
were $412 and $230 as of June 30, 2022 and December 31, 2021, respectively, represented the advance payment to management and another
related party for business operation.
The amount due to related parties
were $300
and nil 0 as of June 30, 2022 and December 31, 2021, respectively, represented the short term loan from a shareholder with no
interest.
For the three months and six months
ended June 30, 2022 and 2021, there are three operating segments: (1) EV business, (2) renewable energy solutions business and (3) solar
projects development business. The Group’s CODM assess the performance of each segment based on revenue, cost of sales and total
assets. Other than the information provided below, the CODM does not use any other measures by segments.
Summarized information by segments
for the three months and six months ended June 30, 2022 and 2021 is as follows:
| Schedule of Segment information | |
| | |
| | |
| | |
| | |
| |
| | |
For the three months ended June 30, 2022 (Unaudited) | |
| | |
Renewable energy solutions | | |
PV stations constructions and operations | | |
Electric vehicles | | |
Others | | |
Total | |
| | |
USD | | |
USD | | |
USD | | |
USD | | |
USD | |
| Revenues from external customers | |
| 44,498 | | |
| 2,479 | | |
| 1,490 | | |
| 117 | | |
| 48,584 | |
| Cost of sales | |
| 43,137 | | |
| 573 | | |
| 1,174 | | |
| (172 | ) | |
| 44,712 | |
| Gross profit (loss) | |
| 1,361 | | |
| 1,906 | | |
| 316 | | |
| 289 | | |
| 3,872 | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
For the three months ended June 30, 2021 (Unaudited) | |
| | |
Renewable energy solutions | | |
PV stations constructions and operations | | |
Electric vehicles | | |
Others | | |
Total | |
| | |
USD | | |
USD | | |
USD | | |
USD | | |
USD | |
| Revenues from external customers | |
| 43,011 | | |
| 1,734 | | |
| 653 | | |
| 420 | | |
| 45,818 | |
| Cost of sales | |
| 38,373 | | |
| 711 | | |
| 1,232 | | |
| 273 | | |
| 40,589 | |
| Gross profit (loss) | |
| 4,638 | | |
| 1,023 | | |
| (579 | ) | |
| 147 | | |
| 5,229 | |
| | |
For the six months ended June 30, 2022 (Unaudited) | |
| | |
Renewable energy solutions | | |
PV stations constructions and operations | | |
Electric vehicles | | |
Others | | |
Total | |
| | |
USD | | |
USD | | |
USD | | |
USD | | |
USD | |
| Revenues from external customers | |
| 81,453 | | |
| 3,388 | | |
| 2,161 | | |
| 117 | | |
| 87,119 | |
| Cost of sales | |
| 77,625 | | |
| 1,000 | | |
| 1,725 | | |
| 188 | | |
| 80,538 | |
| Gross profit (loss) | |
| 3,828 | | |
| 2,388 | | |
| 436 | | |
| (71 | ) | |
| 6,581 | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
For the six months ended June 30, 2021 (Unaudited) | |
| | |
Renewable energy solutions | | |
PV stations constructions and operations | | |
Electric vehicles | | |
Others | | |
Total | |
| | |
USD | | |
USD | | |
USD | | |
USD | | |
USD | |
| Revenues from external customers | |
| 75,165 | | |
| 2,443 | | |
| 1,126 | | |
| 706 | | |
| 79,440 | |
| Cost of sales | |
| 68,568 | | |
| 1,114 | | |
| 1,653 | | |
| 738 | | |
| 72,073 | |
| Gross profit (loss) | |
| 6,597 | | |
| 1,329 | | |
| (527 | ) | |
| (32 | ) | |
| 7,367 | |
Summarized information by segments
as of June 30, 2022 and December 31, 2021 is as follows:
| Schedule of Segment assets | |
| | |
| |
| | |
As of June 30, 2022 (Unaudited) | | |
As of December 31, 2021 | |
| | |
USD | | |
USD | |
| Segment assets | |
| | | |
| | |
| Renewable energy solutions | |
| 56,879 | | |
| 52,946 | |
| Solar projects development | |
| 135,155 | | |
| 144,852 | |
| Electric vehicles | |
| 26,698 | | |
| 17,738 | |
| Others | |
| 9,735 | | |
| 12,544 | |
| Total segment assets | |
| 228,467 | | |
| 228,080 | |
Total long-lived assets excluding financial
instruments, intangible assets, long-term investment and goodwill by country were as follows:
| Schedule of intangible assets, long-term investment and goodwill | |
| | |
| |
| | |
As of June 30, 2022 Unaudited | | |
As of December 31, 2021 | |
| | |
USD | | |
USD | |
| Australia | |
| 744 | | |
| 577 | |
| United States | |
| 37,224 | | |
| 37,021 | |
| Japan | |
| 1,449 | | |
| 1,414 | |
| Italy | |
| 1,592 | | |
| 1,749 | |
| United Kingdom | |
| 8,248 | | |
| 9,477 | |
| Greece | |
| 13,938 | | |
| 15,404 | |
| Total long-lived assets | |
| 63,195 | | |
| 65,642 | |
The Group has evaluated subsequent
events through the date of issuance of the unaudited condensed consolidated financial statements, there were no other subsequent events
occurred that would require recognition or disclosure in the consolidated financial statements.
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 interim 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, 2021. Readers are cautioned not to
place undue reliance on these forward-looking statements.
Overview
We
are a global provider of photovoltaic (PV) and electric vehicle (EV) solutions for business, residential, government and utility customers
and investors. We develop solar PV projects which are either sold to third party operators or owned and operated by us for selling of
electricity to the grid in multiple countries in Asia, North America and Europe. In Australia, we primarily sell solar PV components to
retail customers and solar project developers. We started to engage in sales and leasing of new zero-emission EVs in U.S. from 2020 and
engage in roofing and solar energy systems installation in U.S. from 2021 and commenced pilot production of “Made-in-America”
solar modules in US in the second quarter of 2022.
[Our
liquidity position has deteriorated since 2015. We suffered a net loss of $9.0 million during the six months ended June 30, 2022, and
the cash flow used in operating activities was $11.5 million. For a detailed discussion, please see “Item 2 - Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.]
On
June 10, 2022, our wholly owned subsidiary, Phoenix Motor Inc., a Delaware corporation, closed its initial public offering of 2,100,000
shares of common stock at a public offering price of $7.50 per share, for aggregate gross proceeds of $15.75 million before deducting
underwriting discounts and commissions and offering expenses. The offering closed on June 10, 2022 and the common stock of Phoenix Motor
Inc. began trading on June 8, 2022 on The Nasdaq Capital Market under the ticker symbol “PEV.”
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 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 interim 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 2021 Form 10-K.
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
The
pandemic of a novel coronavirus (COVID-19) has resulted in a widespread health crisis that has adversely affected the economies and financial
markets worldwide. Governmental authorities have recommended or ordered the limitation or cessation of certain business or commercial
activities in jurisdictions in which we do business or have operations. While some of these orders permit the continuation of essential
business operations, or permit the performance of minimum business activities, these orders are subject to continuous revision or may
be revoked or superseded, or our understanding of the applicability of these orders and exemptions may change at any time. In response
to these orders, we have reduced the risk of exposure to infection, including reduced travel, cancellation of meetings and events, and
implementation of work-at- home policies.
Our
operating results substantially depend on revenues derived from sales of PV project assets, provision of electricity, our Australian subsidiary’s
trading of PV components, and our U.S. subsidiary’s business on roofing and solar energy systems installation, sales and leasing
of EVs, sales of forklift and sales of solar modules, respectively. As the COVID-19 spread continues, the measures implemented to curb
the spread of the virus have resulted in supply chain disruptions, insufficient work force and suspended manufacturing and construction
works for solar industry. One or more of our customers, partners, service providers or suppliers may experience financial distress, delayed
or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to
the outbreak. These preventative measures have also impacted our daily operations. The efforts enacted to control COVID-19 have placed
heavy pressure on our marketing and sales activities. We continue to assess the related risks and impacts COVID-19 pandemic may have on
our business and our financial performance. In light of the rapidly changing situation across different countries and regions, it remains
difficult to estimate the duration and magnitude of COVID-19 impact. Until such time as the COVID-19 pandemic is contained or eradicated
and global business return to more customary levels, our business and financial results may be materially adversely affected.
Market Demand
Our
revenue and profitability depend substantially on the demand for our PV solutions, which is driven by the economics of PV systems, including
the availability and size of government subsidies and other incentives, government support, cost improvements in solar power, as well
as environmental concerns and energy demand. The world PV market in terms of new annual installations is expected to grow significantly
in the next five years, providing engineering procurement construction (“EPC”) service providers and solar project developers
like us with significant opportunities to grow our business.
In
the long term, as PV technology advances and the average system costs of solar projects decrease, we expect the market for electricity
in a growing number of countries to achieve grid parity. As the PV industry becomes more competitive against other energy industries and
widespread grid parity strengthens demand for solar projects, we expect our costs of sales to decrease and our revenue and profitability
to increase.
In
addition, the medium-duty EV market is expected to grow significantly over the next decade. While the market has been too slow to expand
over the last many years, many key factors are shaping the industry for accelerated growth over the next few years. Key factors driving
this growth include government regulations requiring fleets to go electric, incentives and grant funding supporting commercial zero emission
vehicle deployments, infrastructure deployments and corporate electrification mandates. Many large fleets who operate large truck and
bus fleets have committed to go 100% electric over the next few years. This includes large delivery truck fleets like Amazon, FedEx, UPS,
DHL, IKEA; also shuttle bus operators like transit agencies in Los Angeles, Orange County, and New York; and large corporate fleet owners
like Genentech, Microsoft and Salesforce. All of the above factors, together with key technology catalysts, are expected to spur demand
for medium-duty electric vehicles significantly over the next few years. Key technology drivers include reduction in battery costs and
costs of other key components, making electric vehicles cheaper, and advances in EV drivetrain technology, including motor improvements
that enable better performance and higher efficiencies; and refinements in high-voltage battery technology. The anticipated sales growth
in this segment of the EV market is attributed both to new companies that started as electric vehicle manufacturers, as well as and conventional
OEMs who are expected to start offering complete EV over the next few years.
As
PV and energy storage technology advances and the average system costs decrease, in many cases the residential or small business owners
of solar systems have effectively achieved grid parity for their systems. Aided by smart meter and virtual power plant technologies such
systems can be an attractive alternative to electricity grid in many localities. We expect traditionally strong residential solar markets
such as California and Australia to continue to grow, while we expect new growth from markets to emerge such as Florida, Texas and US
Northeast. As the overall market grows we expect our costs of sales to decrease and our revenue and profitability to increase.
Government Subsidies
and Incentive Policies
We
believe that the growth of the solar power industry in the short term will continue to depend largely on the availability and effectiveness
of government incentives for solar power products and the competitiveness of solar power in relation to conventional and other renewable
energy resources in terms of cost. Countries in Europe, notably Italy, Germany, France, Belgium and Spain, certain countries in Asia,
including Japan, India and South Korea, as well as Australia and the United States have adopted favorable renewable energy policies. Examples
of government sponsored financial incentives to promote solar power include capital cost rebates, tax credits, net metering and other
incentives to end users, distributors, project developers, system integrators and manufacturers of solar power products.
Governments
may reduce or eliminate existing incentive programs for political, financial or other reasons, which will be difficult for us to predict.
Electric utility companies or generators of electricity from fossil fuels or other renewable energy sources could also lobby for a change
in the relevant legislation in their markets to protect their revenue streams. Government economic incentives could be reduced or eliminated
altogether.
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, in California,
requiring all transit buses to be zero emissions by 2040, requiring all airport shuttles to be electric by 2035, requiring at least 50%
of all medium-duty trucks sold in the state to be electric by 2030, and 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 like
transit agencies and school buses to switch to all electric vehicles. 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 Clean Truck Regulation.
Various
state and federal agencies are also supporting the switch to zero emission transportation by providing a host of funding and incentive
support to develop, demonstrate and deploy zero emission transportation solutions. This is primarily driven by the urgent need to meet
carbon and greenhouse gas emission reduction targets. Some of the key funding / incentives driving adoption of electric medium duty vehicles
include: the California HVIP program offering 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 $66,000 per Class 4 electric vehicle, funding from
federal agencies like the FTA, 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.
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.
Our Solar Power
Generation and Operations Capabilities
Our
financial condition and results of operations depend on our ability to successfully continue to develop new solar projects and operate
our existing solar projects. We expect to build and manage a greater number of solar projects, which we expect to present additional challenges
to our internal processes, external construction management, working capital management and financing capabilities. Our financial condition,
results of operations and future success depend, to a significant extent, on our ability to continue to identify suitable sites, expand
our pipeline of projects with attractive returns, obtain required regulatory approvals, arrange necessary financing, manage the construction
of our solar projects on time and within budget, and successfully operate solar projects.
Outbreak of war
in Ukraine
On
February 24, 2022, the Russian Federation launched an invasion of Ukraine that has had an immediate impact on the global economy resulting
in higher energy prices and higher prices for certain raw materials and goods and services which in turn is contributing to higher inflation
in the United States and other countries across the globe with significant disruption to financial markets. We do not have any operation
or business in Russia or Ukraine, however, we may be potentially indirectly adversely impacted any significant disruption it has caused
and may continue to escalate. In addition, the United States and other countries have imposed sanctions on Russia which increases the
risk that Russia may resort to retaliatory actions, including the launching of cyberattacks. It is possible that these attacks could have
collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations.
It is difficult to assess the likelihood of such threat and any potential impact at this time. Any one or more of these events may impede
our operation and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially
and adversely affect our business, financial condition, and results of operations.
Results of Operations
for the Three Months Ended June 30, 2022 and 2021
The
following table sets forth a summary, for the periods indicated, of our consolidated results of operations (in thousands) and each item
expressed as a percentage of our total net sales. Our historical results presented below are not necessarily indicative of the results
that may be expected for any future period.
| | |
For the Three Months Ended June 30, | |
| | |
| | |
| |
| Net sales | |
$ | 48,584 | | |
| 100.0% | | |
$ | 45,818 | | |
| 100.0% | |
| Cost of revenues | |
| 44,712 | | |
| 92.0% | | |
| 40,589 | | |
| 88.6% | |
| Gross profit | |
| 3,872 | | |
| 8.0% | | |
| 5,229 | | |
| 11.4% | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 7,625 | | |
| 15.7% | | |
| 7,674 | | |
| 16.7% | |
| Sales, marketing and customer service | |
| 1,368 | | |
| 2.8% | | |
| 1,209 | | |
| 2.6% | |
| Provision for credit losses | |
| 474 | | |
| 1.0% | | |
| 319 | | |
| 0.7% | |
| Total operating expenses | |
| 9,467 | | |
| 19.5% | | |
| 9,202 | | |
| 20.0% | |
| Operating loss | |
| (5,595 | ) | |
| -11.5% | | |
| (3,973 | ) | |
| -8.6% | |
| Other (expense) income: | |
| | | |
| | | |
| | | |
| | |
| Interest expenses, net | |
| (1,637 | ) | |
| -3.4% | | |
| (1,259 | ) | |
| -2.7% | |
| Net foreign exchange gain (loss) | |
| 2,262 | | |
| 4.7% | | |
| (792 | ) | |
| -1.7% | |
| Others | |
| 3,207 | | |
| 6.6% | | |
| 103 | | |
| 0.2% | |
| Total other income (expenses), net | |
| 3,832 | | |
| 7.9% | | |
| (1,948 | ) | |
| -4.2% | |
| Loss before income taxes | |
| (1,763 | ) | |
| -3.6% | | |
| (5,921 | ) | |
| -12.8% | |
| Income taxes expense | |
| 455 | | |
| 0.9% | | |
| 546 | | |
| 1.2% | |
| Net loss | |
$ | (2,218 | ) | |
| -4.6% | | |
$ | (6,467 | ) | |
| -14.0% | |
Net
sales — Net sales were $48.6 million and $45.8 million for the three months ended June 30, 2022 and 2021, respectively,
representing an increase of $2.8 million or 6.0%. The increase in net sales for the three months ended June 30, 2022 over the comparative
period was primarily due to the increase of revenue from sales of PV components of 0.9 million, forklift sales of 0.7 million and revenue
of pre-development solar project of 0.6 million.
Cost
of revenues — Cost of revenues was $44.7 million (92.0% of net sales) and $40.6 million (88.6% of net sales) for the three
months ended June 30, 2022 and 2021, respectively, representing an increase of $4.1 million or 10.2%. The increase in cost of goods sold
was consistent with the increase of net sales.
Gross
profit — Our gross profit decreased from $5.2 million in the three months ended June 30, 2021 to $3.9 million in the three
months ended June 30, 2022. Gross margins were 8.0% and 11.4% for the three months ended June 30, 2022 and 2021, respectively. The decrease
in gross margin was primarily due to the temporary decrease in the unit selling price of PV solar components as impacted by the installed
capacity of the entire solar PV market in Australia.
General
and administrative expenses — General and administrative expenses were $7.6 million (15.7% of net sale) and $7.7 million
(16.7% of net sale) for the three months ended June 30, 2022 and 2021, respectively, representing a decrease of $0.1 million, or 0.6%.
The general and administrative expenses kept stable as there was no significant change in operation.
Sales,
marketing and customer service expenses — Sales, marketing and customer service expenses were $1.4 million (2.8% of net
sales) and $1.2 million (2.6% of net sales) for the three months ended June 30, 2022 and 2021, respectively, representing an increase
of $0.2 million, or 13.2%. The increase was mainly due to the increase of marketing expenses for more trade shows and exhibitions participated
to raise the brand awareness.
Provision
for credit loss — In the three months ended June 30, 2022, we made credit loss provision of $0.5 million and $0.3 million
for the three months ended June 30, 2022 and 2021, respectively, which is mainly due to additional provision made for the accounts receivable
from the business of roofing and solar energy systems installation in U.S..
Interest
expense, net — Interest expense net was $1.6 million (3.4% of net sales) and $1.3 million (2.7% of net sales) for the three
months ended June 30, 2022 and 2021, respectively. The increase in interest expense was primarily due to interest accrued from new convertible
bonds.
Net
foreign exchange gain (loss) — We had a net foreign exchange gain of $2.3 million (4.6% of net sales) and a net foreign
exchange loss of $0.8 million (1.7% of net sales) for the three months ended June 30, 2022 and 2021, respectively. The variance is mainly
due the fluctuation of exchange rate for EUR/USD.
Others — We generated other income of $3.2 million (6.6%
of net sales) and $0.1 million (0.2% of net sales) in the three months ended June 30, 2022 and 2021. The other income in the three months
ended June 30, 2022 mainly represents the gain on PPP loan forgiveness of $5.1 million and a loss on extinguishment of convertible bonds
of $2.2 million.
Income
tax expense — We had a provision for income taxes of $0.5 million (0.9% of net sales) and $0.5 million (1.2% of net sales)
for the three months ended June 30, 2022 and 2021, respectively. The income tax expense kept stable as there was no significant change
in profit before tax of our subsidiary in Australia.
Net
loss — For the foregoing reasons, we incurred a net loss of $2.2 million (4.6% of net sales), for the three months ended
June 30, 2022, representing a decrease of net loss of $4.2 million compared to a net loss of $6.5 million (14.0% of net sales) for the
three months ended June 30, 2021.
Results of Operations
for the Six Months Ended June 30, 2022 and 2021
The
following table sets forth a summary, for the periods indicated, of our consolidated results of operations (in thousands) and each item
expressed as a percentage of our total net sales. Our historical results presented below are not necessarily indicative of the results
that may be expected for any future period.
| | |
For the Six Months Ended June 30, | |
| | |
2022 (Unaudited) | | |
2021 (Unaudited) | |
| Net sales | |
$ | 87,119 | | |
| 100.0% | | |
$ | 79,440 | | |
| 100.0% | |
| Cost of revenues | |
| 80,538 | | |
| 92.4% | | |
| 72,073 | | |
| 90.7% | |
| Gross profit | |
| 6,581 | | |
| 7.6% | | |
| 7,367 | | |
| 9.3% | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| General and administrative | |
| 16,753 | | |
| 19.2% | | |
| 17,269 | | |
| 21.7% | |
| Sales, marketing and customer service | |
| 2,611 | | |
| 3.0% | | |
| 2,246 | | |
| 2.8% | |
| (Reversal) provision for credit losses | |
| (209 | ) | |
| -0.2% | | |
| 319 | | |
| 0.4% | |
| Total operating expenses | |
| 19,155 | | |
| 22.0% | | |
| 19,834 | | |
| 24.9% | |
| Operating loss | |
| (12,574 | ) | |
| -14.4% | | |
| (12,467 | ) | |
| -15.6% | |
| Other (expenses) income: | |
| | | |
| | | |
| | | |
| | |
| Interest expenses, net | |
| (3,038 | ) | |
| -3.5% | | |
| (2,702 | ) | |
| -3.4% | |
| Net foreign exchange gain | |
| 3,324 | | |
| 3.8% | | |
| 710 | | |
| 0.9% | |
| Others | |
| 3,995 | | |
| 4.6% | | |
| 752 | | |
| 0.9% | |
| Total other income (expenses), net | |
| 4,281 | | |
| 4.9% | | |
| (1,240 | ) | |
| -1.6% | |
| Loss before income taxes | |
| (8,293 | ) | |
| -9.5% | | |
| (13,707 | ) | |
| -17.2% | |
| Income taxes expense | |
| 711 | | |
| 0.8% | | |
| 860 | | |
| 1.1% | |
| Net loss | |
$ | (9,004 | ) | |
| -10.3% | | |
$ | (14,567 | ) | |
| -18.3% | |
Net
sales — Net sales were $87.1 million and $79.4 million for the six months ended June 30, 2022 and 2021, respectively, representing
an increase of $7.7 million or 9.7%. The increase in net sales for the six months ended June 30, 2022 over the comparative period was
primarily due to the increase of revenue from sales of roofing and solar installation of $5.8 million, forklift sales of 0.7 million and
revenue from pre-development solar project of 0.6 million.
Cost
of revenues — Cost of revenues was $80.5 million (92.4% of net sales) and $72.1 million (90.7% of net sales) for the six
months ended June 30, 2022 and 2021, respectively, representing an increase of $8.5million or 11.7%. The increase in cost of goods sold
was consistent with the increase of net sales.
Gross
profit — Our gross profit decreased from $7.4 million in the six months ended June 30, 2021 to $6.6 million in the six
months ended June 30, 2022. Gross margins were 7.6% and 9.3% for the six months ended June 30, 2022 and 2021, respectively. The decrease
in gross margin was primarily due to the temporary decrease in the unit selling price of PV solar components as impacted by the installed
capacity of the entire solar PV market in Australia.
General
and administrative expenses — General and administrative expenses were $16.8 million (19.2% of net sale) and $17.3 million
(21.7% of net sale) for the six months ended June 30, 2022 and 2021, respectively, representing a decrease of $0.5 million, or 3.0%. The
decrease was mainly because there was one-off expense from U.S. subsidiary’s business on roofing and solar energy systems installation
that started in 2021, and was partially net off by the increase of the salaries expense in Phoenix due to the new mid and top level managerial
staffs hired with higher salaries and more employees as Phoenix planned to get listed through IPO.
Sales,
marketing and customer service expenses — Sales, marketing and customer service expenses were $2.6 million (3.0% of net
sales) and $2.2 million (2.8% of net sales) for the six months ended June 30, 2022 and 2021, respectively, representing an increase of
$0.4 million, or 16.3%. The increase in our sales, marketing and customer service expenses was mainly due to the increase of employees’
salaries and marketing expense.
(Reversal)
provision for credit loss — In the six months ended June 30, 2022, we reversed credit loss provision of $0.2 million, primarily
due to the strengthening monitoring on accounts receivable collection. In the six months ended June 30, 2021, we made a credit loss provision
of $0.3 million, primarily due to the increase in account receivables in SJ US.
Interest
expense, net — Interest expense net was $3.0 million (3.5% of net sales) and $2.7 million (3.4% of net sales) for the six
months ended June 30, 2022 and 2021, respectively. The increase in interest expense was primarily due to interest accrued from new convertible
bonds.
Net
foreign exchange gain — We had a net foreign exchange gain of $3.3 million (3.8% of net sales) and $0.7 million (0.9% of
net sales) for the six months ended June 30, 2022 and 2021, respectively.
Others —
We generated other income of $4.0 million (4.6% of net sales) and $0.8
million (0.9% of net sales) in the six months ended June 30, 2022 and 2021. The other income in the six months ended June 30, 2022 mainly
represents the gain on PPP loan forgiveness of $5.1 million and a loss on extinguishment of convertible bonds of $2.2 million.. The other
income in the six months ended June 30, 2021 mainly represents the gain on forward contracts of $0.6 million.
Income
tax expense — We had a provision for income taxes of $0.7 million (0.8% of net sales) and $0.9 million (1.1% of net sales)
for the six months ended June 30, 2022 and 2021, respectively. The income tax expense kept stable as there was no significant change in
profit before tax of our subsidiary in Australia.
Net
loss — For the foregoing reasons, we incurred a net loss of $9.0 million (10.3% of net sales) for the six months ended
June 30, 2022, representing a decrease of net loss of $5.6 million compared to a net loss of $14.6 million (18.3% of net sales) for the
six months ended June 30, 2021.
Liquidity and Capital
Resources
Historically,
we have financed our operations primarily through cash flows from bank borrowings, financing from issuance of convertible bonds, operating
activities, and the proceeds from private placements and registered offerings.
As
of June 30, 2022, we had $21.3 million in cash and cash equivalents, and restricted cash.
We
suffered a net loss of $9.0 million during the six months ended June 30, 2022, and the cash flow used in operating activities was $11.5
million. As of June 30, 2022, there is net working capital deficit of $82.6 million and accumulated deficit of $646.5 million. These factors
raise substantial doubt as to the Group’s ability to continue as a going concern. We intend to continue implementing various measures
to boost revenue and control the cost and expenses within an acceptable level and other measures including: 1) negotiate with potential
buyers on PV solar projects; 2) negotiate for postponing of convertible bond payments; 3) improve the profitability of the business in
US; 4) strictly control and reduce business, marketing and advertising expenses; 5) obtain equity financing from certain subsidiaries’
initial public offerings; and 6) seek for certain credit facilities. While we believe that it will be successful in meeting its liquidity
and cash flow requirements, there is no assurance to that effect. Our condensed consolidated financial statements do not include any adjustments
that may result from the outcome of these uncertainties.
A
summary of the sources and uses of cash and cash equivalents is as follows (in thousands):
| | |
For the Six Months Ended June 30, | |
| | |
2022 (Unaudited) | | |
2021 (Unaudited) | |
| Net cash used in operating activities | |
$ | (11,539 | ) | |
$ | (17,097 | ) |
| Net cash used in investing activities | |
| (387 | ) | |
| (8,831 | ) |
| Net cash generated from financing activities | |
| 15,856 | | |
| 11,335 | |
| Effect of exchange rate changes on cash | |
| (522 | ) | |
| (105 | ) |
| Net decrease in cash, cash equivalents and restricted cash | |
$ | 3,408 | | |
$ | (14,698 | ) |
Operating Activities
Net
cash used in operating activities was $11.5 million for the six months ended June 30, 2022, primarily as a result of (i) net loss of $9.0
million, (ii) gain on forgiveness of PPP loan of $5.1 million and (iii) increase in prepaid expenses and other assets of $2.2 million,
and (iv) decrease in advances from customers of $1.8 million; was partially offset by (i) decrease in accounts receivable of $3.7 million,
(ii) loss on extinguishment of convertible bonds of $2.2 million, and (iii) stock-based compensation expense of $1.6 million.
Net
cash used in operating activities was $17.1 million for the six months ended June 30, 2021, primarily as a result of (i) net loss of $14.6
million, (ii) increase in prepaid expenses and other assets of $6.4 million and (iii) increase in inventories of $4.6 million; was partially
offset by (i) increase in accounts payable of $4.0 million, (ii) increase in advances from customers of $2.7 million, and (iii) stock-based
compensation expense of $2.2 million.
Investing Activities
Net
cash used in investing activities was $0.4 million for six months ended June 30, 2022, primarily as a result of cash paid for purchase
of property and equipment of $2.0 million, partially offset by proceeds from disposal of equipment of $1.6 million.
Net
cash used in investing activities was $8.8 million for six months ended June 30, 2021, primarily as a result of cash paid for asset purchase
of PDI in the amount of $8.0 million and purchase of property and equipment of $0.9 million.
Financing Activities
Net
cash generated from financing activities was $15.9 million for the six months ended June 30, 2022, primarily consisted of (i) proceeds
from IPO of Phoenix of $13.4 million, (ii) proceeds from issuance of convertible note of $2.0 million.
Net
cash generated from financing activities was $11.3 million for the six months ended June 30, 2021, primarily consisted of (i) proceeds
from issuance of ordinary shares of $13.6 million, (ii) proceeds from issuance of convertible note of $8.0 million, and (iii) net proceeds
received from borrowings of $2.4 million; partially offset by (i) repayment of convertible notes of $13.8 million.
Capital Expenditures
We
incurred capital expenditures of $2.4 million and $8.9 million for the six months ended June 30, 2022 and 2021, respectively. Capital
commitments amounted to approximately $7.2 million as of June 30, 2022. These capital commitments were solely related to contracts signed
with vendors automation production line, equipment or PV related products used for the construction of solar PV systems being developed
by the Group. We expect to finance construction of these projects using cash from our operations and private placements, registered offerings,
bank borrowings as well as other third-party financing options.
Trend information
Our
operating results substantially depend on revenues derived from sales of PV project assets, provision of electricity, our Australian subsidiary’s
trading of PV components, and our U.S. subsidiary’s business on roofing and solar energy systems installation and sales, leasing
of EVs, sales of forklifts, and sale of solar modules, respectively. As the COVID-19 spread and impact of the outbreak of war in Ukraine
continues, the measures implemented to curb the spread of the virus and the crisis in Ukraine have resulted in supply chain disruptions,
insufficient work force and suspended manufacturing and construction works for solar industry. In light of the rapidly changing situation
across different countries and regions, it remains difficult to estimate the duration and magnitude of the impact of COVID-19 and the
crisis in Ukraine.
Other
than as disclosed elsewhere in this quarterly report, we are not aware of any trends, uncertainties, demands, commitments or events for
the six months ended June 30, 2022 that 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.
Off-Balance Sheet
Arrangements
As
of June 30, 2022, 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 8 to the unaudited condensed consolidated financial
statements in Part I, Item 1 of this Quarterly Report Form 10-Q.
