VIVIC CORP

Previous wording

The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes to those statements included elsewhere in this Form 10-Q and with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date hereof. Any forward-looking statements represent management’s commercially reasonable judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation to revise any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated events. You should specifically consider the various risk factors identified in our 2023 Form 10-K, that could cause actual results to differ materially from those anticipated in these forward-looking statements.

Current wording

Statements made in this Report that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act “) and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s commercially reasonable judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Previous wording

Our yachts are manufactured by third parties selected by us on the basis of their production capabilities, technical ability and financial wherewithal. Once a customer places an order, we negotiate and sign an original equipment manufacturer contract with a selected local manufacturer. Our technical staff closely monitors the progress of construction. Upon completion, we deliver the boat to the location designated by our customer.

Current wording

Our yachts are manufactured by third parties selected by us on the basis of their production capabilities, technical ability and financial wherewithal. Once a customer places an order, we negotiate and sign an original equipment manufacturer (“OEM”) contract with a selected local manufacturer. Upon completion, we deliver the boat to the location designated by our customer. Our principal supplier and distributor in mainland China is Guangdong Weiguan Ship Technology Co., Ltd., which utilizes the mainland’s production and supply chain advantages to provide us with yacht production, delivery, and after-sales services based on our designs. Guangdong Weiguan is responsible for providing the required products and after-sales services for all sales orders in mainland China and remits 15% of the order amount of each yacht to us as a “VIVIC” brand usage fee.

Previous wording

On July 12, 2023, our subsidiary, Vivic Corporation (Hong Kong) Co. Limited (“Vivic Hong Kong”), entered into a Stock Purchase Agreement with Yun-Kuang Kung pursuant to which Mr. Kung acquired all of the shares of our indirectly wholly-owned subsidiary, Guangdong Weiguan Ship Tech Co., Ltd. (“Weiguan Ship”). In consideration for our interest in Weiguan Ship, we received RMB 1,000 ($137) and the agreement of Mr. Kung to indemnify us and our affiliates against any and all claims, including unknown claims and claims for taxes, related to the business of Weiguan Ship whether arising before or after the date of the Stock Purchase Agreement. The divestiture of Weiguan Ship completed our plan to divest of all activities other than our ongoing yacht business in Taiwan.

Current wording

In 2023, we determined to focus our efforts on yacht sales in Taiwan and other selected regions throughout the world, and since that time have disposed of all of our business operations in mainland China. On July 12, 2023, our subsidiary, Vivic Corporation (Hong Kong) Co. Limited (“Vivic Hong Kong”), entered into a Stock Purchase Agreement with Yun-Kuang Kung pursuant to which Mr. Kung acquired all of the shares of our wholly-owned subsidiary, Guangdong Weiguan Ship Tech Co., Ltd. (“Weiguan Ship”). The divestiture of Weiguan Ship completed our plan to divest of all activities other than our ongoing yacht business in Taiwan.

Previous wording

As a result of the sale of our interest in Weiguan Ship and its subsidiaries, the assets and related liabilities and the results of operations of such entities are included in the financial statements included in this report as discontinued operations. The following table sets forth the results of our operations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.

Current wording

As a result of the sale of our interest in Weiguan Ship and its subsidiaries, the assets and related liabilities and the results of operations of such entities are included our financial statements as discontinued operations. The following table sets forth the results of our operations for the periods indicated as a percentage of net sales. Certain columns may not add due to rounding.

Previous wording

Cost of revenue from continuing operations was $1,749,265 for the three months ended June 30, 2024. We did not generate revenues from continuing operations in the three months ended June 30, 2023 and thus had no cost of revenues in the period. The cost of revenues in the three months ended June 30, 2024 was mainly due to costs associated with yacht sales.

Current wording

Cost of revenue from continuing operations was $128,584 for the three months ended September 30, 2024. Cost of revenue from continuing operations was $699,217 for the three months ended September 30, 2023. The cost of revenues in three months ended September 30, 2024 was mainly due to costs associated with yacht model sales. We sold 100 yacht models to one of the Company’s directors below cost. We considered this as marketing and advertising because the director will give our yacht models to prospective purchasers to promote and market our yachts.

Previous wording

Selling expenses consist mainly of employee salaries and welfare, entertainment, and transportation expenses of the marketing department. There were no selling expenses incurred for the three months ended June 30, 2024 and June 30, 2023.

Current wording

Selling expenses consisted mainly of advertising, employee salaries and welfare, entertainment, and transportation expenses of the marketing department. Selling expenses were $nil for three months ended September 30, 2024, compared to $nil for the three months ended September 30, 2023.

Previous wording

Net other expenses were $37,031 for the six months ended June 30, 2024, and $35,847 for the six months ended June 30, 2023, respectively. For the six months ended June 30, 2024, the net other expenses mainly consisted of other expenses of $24,609 and interest expense of $12,422. For the six months ended June 30, 2023, the net other expenses mainly consisted of other expenses of $28,921, and interest expense of $6,926.

Current wording

Net other expenses were $8,413 for the three months ended September 30, 2024, and $6,652 for the three months ended September 30, 2023. For the three months ended September 30, 2024, net other expenses mainly consisted of interest expense of $7,958, and other expenses of $455. For the period ended September 30, 2023, net other expenses mainly consisted of interest expense of $6,271 and miscellaneous expenses of $381.

Previous wording

We had net income from continuing operations of $425,222 for the three months ended June 30, 2024, compared to a net loss of $82,737 for the three months ended June 30, 2023, an increase of $507,959 or 613.94%. The increase in net income from continuing operations was mainly due to the gross profit generated through yacht sales which was partly offset by increased G&A expenses.

Current wording

We had a net loss from continuing operations of $584,508 for the three months ended September 30, 2024, compared to a net loss of $20,060 for the three months ended September 30, 2023, an increase in our loss of $564,448. The increase in our net loss from continuing operations was mainly due to the decrease in our revenue and increased G&A expenses as described above.

Previous wording

We had $310,859 of cash and cash equivalents and working capital of $3,202,096 as of June 30, 2024, and generated net income from continuing operations of $1,035,387 during the six months ended June 30, 2024. The following is a summary of cash provided by or used in each of the indicated types of activities during the six months ended June 30, 2024, and 2023.

Current wording

We had $213,259 of cash and cash equivalents and working capital of $4,039,077 as of September 30, 2024, and generated a net loss of $584,508 during the three months ended September 30, 2024. Of the assets included in working capital, approximately $2,500,000 was amounts due from related parties The following is a summary of cash provided by or used in each of the indicated types of activities during the three months ended September 30, 2024 and 2023.

Previous wording

There was no cash used in investing activities for continuing operations for both the six months ended June 30, 2024, and 2023, respectively.

Current wording

There was no cash provided by or used in investing activities for the three months ended September 30, 2024 and 2023.

Previous wording

Net cash used in financing activities for continuing operations was $10,495 for the six months ended June 30, 2024, compared to net cash provided by financing activities for continuing operations of $491,438 for six months ended June 30, 2023. Net cash used in financing activities for continuing operations for the six months ended June 30, 2024, consisted of advance from related party of $17,095 and repayment to related party of $6,600. Net cash provided by financing activities for continuing operations for the six months ended June 30, 2023, consisted of proceeds from loans of $555,900, which was partly offset by repayment to related parties of $64,462.

Current wording

Net cash provided by financing activities was $31,395 for the three months ended September 30, 2024, compared to net cash used in financing activities of $330,692 for the three months ended September 30, 2023. Net cash provided by financing activities for the three months ended September 30, 2024, consisted of proceeds from related party advances of $77,426, which was partly offset by payments to related parties of $46,031. Net cash used in financing activities for the three months ended September 30, 2023, consisted of payments to related parties of $739,861, which was partly offset by proceeds from related party advances of $409,169.

Previous wording

The Company had $310,859 of cash and cash equivalents and working capital of approximately $3.2 million as of June 30, 2024, which included a receivable from a related party in the amount of $2.8 million, and the Company generated net income of $1.04 million during the six months ended June 30, 2024. However, the Company had an accumulated deficit of approximately $2.3 million as of June 30, 2024.

Current wording

The Company had $213,259 of cash and cash equivalents and working capital of approximately $4.0 million as of September 30, 2024, which included amounts due from related parties of $2.5 million. The Company generated a net loss of $0.6 million during the three months ended September 30, 2024, and the Company had an accumulated deficit of approximately $2.9 million as of September 30, 2024, and generated negative cash flow from operating activities during the period of $129,776. The Company does not have sustained and stable income, and there is also significant uncertainty in regarding its income for the next 12 months.

Previous wording

The continuation of the Company as a going concern through the one-year anniversary of the date of this filing is dependent upon the continued financial support from its related parties and loans or investments from third parties. The Company is actively pursuing additional financing for its operations through loans and the sale of equity. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain its operations.

Current wording

The continuation of the Company as a going concern through the one-year anniversary of the date of this filing is dependent upon continued financial support from its related parties and loans or investments from third parties. The Company is actively pursuing additional financing for its operations through loans and the sale of equity. However, there is no assurance that the Company will be successful in securing sufficient funds to sustain its operations.

Previous wording

We expect that working capital requirements will continue to be funded through a combination of our existing funds, cash generated from operations and further issuances of securities to our principal shareholders. Our working capital requirements are expected to increase in line with the growth of our business.

Current wording

We expect that working capital requirements will continue to be funded through a combination of our existing funds, cash generated from operations, loans from and further issuances of securities to, our principal shareholders. Our working capital requirements are expected to increase in line with the growth of our business.

Previous wording

Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements apart from amounts outstanding under our SBA Loan and our loan with Taiwan Hua Nan Bank. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments to our principal shareholders. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with our business and (ii) marketing expenses. We intend to finance these expenses with further issuances of equity securities and debt instruments. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available on acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Current wording

Existing working capital, further advances and the issuance of debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next six months. We have no lines of credit or other bank financing arrangements apart from amounts outstanding under our SBA Loan and our loan with Taiwan Hua Nan Bank. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments to our principal shareholders. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with our business and (ii) marketing expenses. We intend to finance these expenses with further issuances of equity securities and debt instruments. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available on acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Previous wording

As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are 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.

Current wording

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are 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.

Previous wording

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions which affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. Accounting policies are critical and necessary to account for the material estimates and assumptions on our unaudited condensed consolidated financial statements. For further information on all of our significant accounting policies, see the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Annual Report.

Current wording

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions which affect the reported the amounts of assets, liabilities, revenue, costs and expenses and related disclosures. Accounting policies are critical and necessary to account for the material estimates and assumptions on our unaudited condensed consolidated financial statements. For further information on all of our significant accounting policies, see the “Notes to unaudited condensed Consolidated Financial Statements” of this Report.

Previous wording

On January1, 2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of January 1, 2023.

Current wording

On January1, 2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of the credit loss accounting standard has no material impact on the Company’s unaudited condensed consolidated financial statements as of January 1, 2023.

Previous wording

Expected credit losses are recorded as allowance for credit losses on the consolidated statements of operations. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amount that is previously reserved for, the Company will reduce the specific allowance for credit losses.

Current wording

Expected credit losses are recorded as allowance for credit losses on the unaudited condensed consolidated statements of operations. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amount that is previously reserved for, the Company will reduce the specific allowance for credit losses.