PHOENIX MOTOR INC.

Item 1A. Risk Factors

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In aAdditionally, on April 30, 2025, we received a notice from the Staff indicating that we were no longer t 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 servesd 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 Companys request for continued listing. Accordingly, the Companys common stock will remains delisted and continues to trade on the OTC Pink Limited Market.

We haved the right to request a review of the Panels 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 decisions issuance. On June 24, 2025, we submitted a request for a review of the Panels decision by the Council.

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

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

We are continuing to take actions to regain full compliance with Nasdaqs 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 iwas intended to restore compliance with Rule 5550(a)(2).

While theThere can be no assurance that these actions will result in the relisting on Nasdaq or that th. We review by the Council will be successful, we remain committed to pursuing all reasonable and strategic options to regain compliance and restore our listing on a national securities exchange.

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

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

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