v3.25.2
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2025
Accounting Policies [Abstract]  
Basis of Presentation

(a) Basis of Presentation

 

The accompany unaudited condensed consolidated financial statements of the Group are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s consolidated financial statements as of December 31, 2024 and accompanying notes in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the quarterly periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group’s consolidated financial statements for the year ended December 31, 2024. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future periods.

 

 
Revenue Recognition

(b) Revenue Recognition

 

Sales of transit buses

 

The Group recognizes revenue on sales of transit buses 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 when the Company can objectively demonstrate that the criteria specified in the contractual acceptance provisions are achieved prior to delivery. In cases where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue is recognized upon acceptance by the customer. The Group determined that the government grants should be considered as part of the transaction price because it is granted to the transit buses 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.

 

Sales of EVs and kits

 

The Group generates revenue from sales of EVs and kits, which are electric drive system kits that are integrated into shuttle buses sold to the customers. EV buyers in California are entitled to government grants when they purchase EVs that qualify for certain government grant project. The Group applies for and collects such government grants on behalf of the customers. Accordingly, customers only pay the amount after deducting government grants.

 

The Group recognizes revenue on sales of EVs and kits 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. The Group determined that the government grants 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 violating the government grant terms and conditions.

 

Lease of EVs

 

EV leasing revenue includes revenue recognized under lease accounting guidance for direct leasing programs. The Group accounts for most of the leasing transactions as operating leases under ASC 842 Leases, and revenues are recognized on a straight-line basis over the contractual term.

 

Sales of forklifts

 

Revenue on sale of forklifts is recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon delivery or acceptance of the customer depending on the terms of the underlying contracts.

 

Sales of parts

 

Revenue on sale of parts for transit buses or EVs is recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon delivery or acceptance of the customer depending on the terms of the underlying contracts.

 

Service revenue

 

Service revenue consists of maintenance, warranty, training and other services. For maintenance and warranty services, revenues are recognized on a straight-line basis over the contractual term. For training and other service revenue, the Group recognizes revenue at a point in time following the transfer of control of such services to the customer, which typically occurs upon delivery of service to the customer.

 

Other revenue

 

Other revenue consists of shipping and delivery fees and others. For shipping and delivery fees and others, the Group recognizes revenue at a point in time following the transfer of control of such products or services to the customer, which typically occurs upon the delivery to the customer.

 

Disaggregation of revenues

 

The Group disaggregates its revenue by seven primary categories: sales of transit buses, sales of EVs, lease of EVs, sales of forklifts, sales of parts, service revenue and others.

 

 

The following is a summary of the Group’s disaggregated revenues:

 

   June 30,
2025		   June 30,
2024		   June 30,
2025		   June 30,
2024		 
   Three Months Ended   Six Months Ended 
   June 30,
2025		   June 30,
2024		   June 30,
2025		   June 30,
2024		 
     
Sales of transit buses  $1,523   $10,585   $5,198   $19,116 
Sales of EVs   —    233    237    483 
Sales of parts   311    45    614    90 
Service revenue   374    —    465    — 
Lease of EVs   43    —    90    — 
Sales of forklifts   —    —    —    39 
Others   491    1,169    549    1,724 
Revenues  $2,742   $12,032   $7,153   $21,452 

 

The following is a summary of the Group’s disaggregated revenues by timing of revenue recognition:

 

   June 30,
2025		   June 30,
2024		   June 30,
2025		   June 30,
2024		 
   Three Months Ended   Six Months Ended 
   June 30,
2025		   June 30,
2024		   June 30,
2025		   June 30,
2024		 
     
Point in time  $2,606   $11,692   $6,806   $20,894 
Over time   136    340    347    558 
Revenues  $2,742   $12,032   $7,153   $21,452 

 

A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. The Group records contract liabilities as advance from customers and deferred income. As of June 30, 2025 and December 31, 2024, the balances of contract liabilities were $8,157 and $6,749, respectively. During the six months ended June 30, 2025, the Group recognized $2,227 as revenue that was included in the balance of advance from customers at January 1, 2025.

 
Leases

(c) Leases

 

Lessor Accounting

 

During the year ended December 31, 2023, the Group amended agreements with the customers related to the leased EVs to renew the lease term. Since there was no grant of additional right-of-use assets, the Group did not account for the modified lease agreements as new leases but accounted for the original lease and the modified lease agreements as a combined lease. The Group reviewed the combined lease agreements and considered that (i) the lease term represents for the major part (greater than 75%) of the economic life of the underlying equipment; and (ii) the present value of the sum of lease payments and any residual value guaranteed by the lessee that has not already been included in lease payments equals or exceeds substantially (greater than 90%) all of the fair value of the underlying asset.

 

The modified EV lease agreements are thus accounted for as sales-type leases. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease, and interest income from the lease is recognized over the lease term.

 

The net investment in leases was $119 as of June 30, 2025, in which current portion of $79 was included in prepaid expenses and other current assets, net on the balance sheet. During the three and six months ended June 30, 2025 and 2024, there was no gain or loss on sales-type leases.

 

 
Business Combination

(d) Business Combination

 

Business combinations are recorded using the acquisition method of accounting and, accordingly, the acquired assets and liabilities are recorded at their fair market value at the date of acquisition. Any excess of acquisition cost over the fair value of the acquired assets and liabilities, including identifiable intangible assets, is recorded as goodwill. The Group charges acquisition-related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred. Those costs typically include transaction and integration costs, such as legal, accounting, and other professional fees.

 

According to Business Combination (Topic 805) the Group performs a screen test to evaluate whether a transaction should be accounted for as an acquisition and/or disposal of a business versus assets. In order for a purchase to be considered an acquisition of a business, and receive business combination accounting treatment, the set of transferred assets and activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business.

 
Fair Value Measurement

(e) Fair Value Measurement

 

The Group measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

 

  ● Level 1 — Quoted market prices in active markets for identical assets or liabilities.

 

  ● Level 2 — Significant other observable inputs (e.g., quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs).

 

  ● Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions.

 

The Group uses quoted market prices to determine the fair value when available. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates.

 

The carrying values of the Group’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payables, accrued liabilities and advance from customers, approximate their fair values due to the short-term nature of these instruments.

 
Product Warranties

(f) Product Warranties

 

Products Warranties on EVs and Kits

 

The Group provides warranties on all vehicles or components sold in addition to pass through warranties from third party component suppliers. The Group accrues a warranty reserve for the products sold by the Group, which includes the Group’s best estimate of the projected costs to repair or replace items under warranties. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Group’s relatively short history of sales, and changes to the Group’s historical or projected warranty experience may cause material changes to the warranty reserve in the future. The Group considers the warranty provided is not providing incremental service to customers rather an assurance to the quality of the vehicle, and therefore is not a separate performance obligation and should be accounted for in accordance with ASC 460, Guarantees.

 

Products Warranties on transit buses and batteries

 

The Group provides a limited warranty to customers on vehicles, battery systems and components. The limited warranty ranges from one to 12 years depending on the components. Pursuant to these warranties, the Group will repair, replace, or adjust the parts on the products that are defective in factory supplied materials or workmanship. The Group records a warranty reserve for the products sold at the point of revenue recognition, which includes the best estimate of the projected costs to repair or replace items under the limited warranty. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the relatively short history of sales. Changes to the historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within warranty reserve - short term liabilities while the remaining balance is included within warranty reservice - long term liabilities on the balance sheets.

 

 

Warranty expense is recorded as a component of cost of sales in the condensed consolidated statements of operations. The balance of warranty reserves was $11,497 and $14,289 as of June 30, 2025 and December 31, 2024, respectively.

 
Goodwill

(g) Goodwill

 

The Group assess goodwill for impairment on annual basis in accordance with ASC 350-20, Intangibles – Goodwill and Other: Goodwill, which permits the Group to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative impairment test. If this is the case, the quantitative goodwill impairment test is required. If it is more likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the quantitative goodwill impairment test is not required.

 

Quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired. If the fair value of the reporting unit is less than its carrying amount, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

 

During the six months ended June 30, 2024, the Group identified impairment indicator resulted from the Company’s continuous decreasing stock price since January 2024 and performed interim goodwill impairment testing. The Group recorded an impairment on goodwill of $4,271 based on the difference between fair value and the carrying amount of the reporting unit.