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Phoenix Motor Inc. (NASDAQ:PEV), a manufacturer of truck and bus bodies currently valued at $9.07 million, announced today that it will be amending its financial statements for the first and second quarters of 2024 due to accounting errors related to warrant liabilities. According to InvestingPro data, the company’s financial health score is rated as WEAK, with multiple indicators suggesting operational challenges. The company’s audit committee, in consultation with management, determined that the financial reports for the periods ending March 31 and June 30, 2024, should not be relied upon. This development comes as the company’s stock has declined by nearly 82% over the past year, while maintaining a high current ratio of 3.07, indicating sufficient liquid assets to meet short-term obligations.
The misstatements were identified during the preparation of the company’s financials for the quarter ending September 30, 2024. The errors pertain to the accounting treatment of warrants to purchase common stock, which were incorrectly reported. The company will correct the understatement of loss on warrants issued and gain on change in fair value of warrant liability for the first quarter, and the understatement of gain on change in fair value of warrant liability for the second quarter.
Specifically, for the quarter ended March 31, 2024, the company understated loss on warrants issued by $7,432,000 and gain on change in fair value of warrant liability by $9,407,000. Additionally, the warrant liability was understated by $7,098,000, and additional paid-in capital was overstated by $9,073,000.
For the six months ended June 30, 2024, the understatement of gain on change in fair value of warrant liability amounted to $14,618,000, and the loss on warrants issued was understated by $7,432,000. The warrant liability was reported $1,887,000 less than it should have been, and additional paid-in capital was overstated by $9,073,000.
Phoenix Motor Inc. has previously disclosed material weaknesses in its internal controls over financial reporting, which the company acknowledges contributed to these errors. The company plans to amend its previously filed Quarterly Reports on Form 10-Q to rectify these inaccuracies. For investors seeking deeper insights, InvestingPro offers comprehensive financial health analysis and 14 additional ProTips about PEV, including detailed metrics on cash flow and debt management that are crucial for monitoring companies with financial reporting challenges.
The company’s independent registered public accounting firm, Marcum Asia CPAs LLP, has been informed of the misstatements and the forthcoming amendments to the financial statements. This announcement is based on a press release statement.
In other recent news, Phoenix Motor Inc., a manufacturer of truck and bus bodies, has been issued a delinquency notice from The Nasdaq Stock Market LLC due to non-compliance with the exchange’s listing rules. The company failed to conduct an annual meeting of shareholders within twelve months following the end of its fiscal year, breaching Nasdaq Listing Rule 5620(a). Furthermore, Phoenix Motor also received a warning for not submitting its quarterly financial report on time, violating Nasdaq Listing Rule 5250(c)(1).
In response to these notifications, Phoenix Motor Inc. is required to submit a plan to regain compliance within 45 calendar days. If Nasdaq accepts the company’s plan, it may grant an extension of up to 180 calendar days from the fiscal year-end, or until June 30, 2025, for the company to meet the listing requirements. Similarly, for the late filing of its financial report, the company has until January 21, 2025, to submit a plan to regain compliance.
These are recent developments concerning Phoenix Motor Inc. It is worth noting that the company’s listing status hinges on the acceptance and successful execution of its compliance plan. The company has expressed its intention to comply with Nasdaq’s requirements, however, there is no assurance that its plan will be accepted or that it will regain compliance within the given timeframe.
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