SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterquarterly period ended September 25, 2022
or
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: number 001-41511
LiveWire Group, Inc.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
| | | | | | | | | | | | | | |
| Delaware | | | | 87-4730333 |
| | |
(State or other jurisdiction of incorporation or organization) | | |
| | | | |
| | | | (650) 447-8424 |
Milwaukee, Wisconsin 53208 (Address of principal executive offices) office) | | | |
(Zip Code)Issuer’s Telephone Number, including area code) |
(Issuer’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Trading Symbol(s) | | | |
Common stock,Stock, $0.0001 par value | LVWR | | | The New York Stock Exchange
|
Warrants to purchase common stock | | | | The New York Stock Exchange
|
CheckIndicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
anon-accelerateda non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company”company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | | ☐ | | Accelerated filer | | ☐ | | Emerging growth company | | ☒ |
| Non-accelerated filer | | | |
Non-accelerated
filer | | ☒ | | Smaller reporting company | | ☐ |
| | | |
| | | | Emerging growth company | | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the
Exchange Act). Yes ☐ No ☒
AsNumber of
November9
, 2022, there were 202,402,888 shares of
the registrant’s common stock
$0.0001outstanding at May 1, 2024: 203,162,565 shares
LiveWire Group, Inc.
Form 10-Q
For The Quarter Ended March 31, 2024
| | | | | | | | |
| Part I | | |
| Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| Part II | | |
| Item 1. | | |
| Item 1A. | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| Item 5. | | |
| Item 6. | | |
| |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to statements regarding future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth, plans and objectives relating to the Company’s climate commitment, and the Company’s objectives for future operations.
The forward-looking statements in this Quarterly Report are only predictions. The Company has based these forward-looking statements largely on current expectations and projections about future events and financial trends that the Company believes may affect the Company’s business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the Company’s history of losses and expectation to incur significant expenses and continuing losses for the foreseeable future; the Company’ ability to execute its business model, including market acceptance of its planned electric vehicles; risks related to the Company’s limited operating history, the rollout of its business and the timing of expected business milestones, including the Company’s ability to develop and sell electric vehicles of sufficient quality and appeal to customers on schedule and on a large scale; the Company’s financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder; changes in the Company’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; the Company’s ability to attract and retain a large number of customers; the Company’s future capital requirements and sources and uses of cash; the Company’s ability to obtain funding for its operations and manage costs; risks related to challenges the Company faces as a pioneer into the highly-competitive and rapidly-evolving electric vehicle industry; risks related to Harley Davidson, Inc. (“H-D”) making decisions for its overall benefit that could negatively impact the Company’s overall business; risks related to the Company’s relationship with H-D and its impact on the Company’s other business relationships; the Company’s ability to leverage contract manufacturers, including H-D and Kwang Yang Motor Co., Ltd., KYMCO Capital Fund I Co., Ltd., SunBright Investment Co., Ltd., CycleLoop Co., Ltd. and Kwang Yang Holdings Limited (collectively, the “KYMCO Group”), to contract manufacture its electric vehicles; risks related to retail partners being unwilling to participate in the Company’s go-to-market business model or its inability to establish or maintain relationships with customers for the Company’ electric vehicles; risks related to potential delays in the design, manufacture, financing, regulatory approval, launch and delivery of the Company’s electric vehicles; risks related to building out the Company’s supply chain, including the Company’s dependency on its existing suppliers and the Company’s ability to source suppliers, in each case many of which are single-sourced or limited-source suppliers, for its critical components such as batteries and semiconductor chips; the Company’s ability to rely on third-party and public charging networks; the Company’s ability to attract and retain key personnel; the Company’s business, expansion plans and opportunities, including its ability to scale its operations and manage its future growth effectively; the effects on the Company’s future business of competition, the pace and depth of electric vehicle adoption generally and its ability to achieve planned competitive advantages with respect to its electric vehicles and products, including with respect to reliability, safety and efficiency; risks related to the Company’s business and H-D’s business overlapping and being perceived as competitors; the Company’s inability to maintain a strong relationship with H-D or to resolve favorably any disputes that may arise between the Company and H-D; the Company’s dependency on H-D for a number of services, including services relating to quality and safety testing, and if those service arrangements terminate, it may require significant investment for the Company to build its own safety and testing facilities, or the Company may be required to obtain such services from another third-party at increased costs; risks related to any decision by the Company to electrify H-D products, or the products of any other company; the Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others; potential harm caused by misappropriation of the Company’s data and compromises in cybersecurity; changes in laws, regulatory requirements, governmental incentives and fuel and energy prices; the impact of health epidemics on the Company’s business, the other risks it face and the actions it may take in response thereto; litigation, regulatory proceedings, complaints, product liability claims and/or adverse; the possibility that the Company may be adversely affected by other economic, business and/or competitive factor publicity; and; the other important factors discussed in Part II, “Item 1A. Risk Factors” in this Quarterly Report, as well as in Item “1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The forward-looking statements are made as of the date of the filing of this report May 6, 2024, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The forward-looking statements in this Quarterly Report are based upon information available to the Company as of the date of this Quarterly Report, and while the Company believes such information forms a
reasonable basis for such statements, such information may be limited or incomplete, and the Company’s statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report and the documents that the Company references in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that actual future results, performance and achievements may be materially different from what the Company expects. The Company qualifies all of the forward-looking statements by these cautionary statements. The forward-looking statements in this report speak only as of the date of this Quarterly Report. Except as required by applicable law, the Company does not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.
As used in this Quarterly Report, unless otherwise stated or the context requires otherwise, references to “LiveWire,” the “Company,” “we,” “us,” and “our,” refer to LiveWire Group, Inc. and its consolidated subsidiaries.
PART I
Item 1. Financial Statements
LIVEWIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Revenue, net | $ | 4,978 | | | $ | 7,762 | | | | | |
| Costs and expenses: | | | | | | | |
| Cost of goods sold (including related party amounts of $5,176 and $2,047 in 2024 and 2023, respectively, as described in Note 11) | 9,105 | | | 6,498 | | | | | |
| Selling, administrative and engineering expense (including related party amounts of $2,948 and $3,397 in 2024 and 2023, respectively, as described in Note 11) | 26,295 | | | 26,171 | | | | | |
| Total operating costs and expenses | 35,400 | | | 32,669 | | | | | |
| Operating loss | (30,422) | | | (24,907) | | | | | |
| | | | | | | |
| | | | | | | |
| Interest income | 2,016 | | | 2,692 | | | | | |
| Change in fair value of warrant liabilities | 4,758 | | | 1,068 | | | | | |
| Loss before income taxes | (23,648) | | | (21,147) | | | | | |
| Income tax benefit | (4) | | | — | | | | | |
| Net loss | (23,644) | | | (21,147) | | | | | |
| Other comprehensive loss: | | | | | | | |
| Foreign currency translation adjustments | (18) | | | — | | | | | |
| Comprehensive loss | $ | (23,662) | | | $ | (21,147) | | | | | |
| | | | | | | |
| Net loss per share, basic and diluted (Note 5) | $ | (0.12) | | | $ | (0.10) | | | | | |
The accompanying notes are integral to the consolidated financial statements.
LIVEWIRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value, issuedvalue) | | | | | | | | | | | |
| (Unaudited) | | |
| March 31,
2024 | | December 31,
2023 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 141,033 | | | $ | 167,904 | |
| Accounts receivable, net | 2,086 | | | 4,295 | |
| Accounts receivable from related party | 1,051 | | | 3,402 | |
| Inventories, net | 35,105 | | | 32,122 | |
| Other current assets | 3,129 | | | 3,004 | |
| Total current assets | 182,404 | | | 210,727 | |
| Property, plant and equipment, net | 37,718 | | | 37,682 | |
| Goodwill | 8,327 | | | 8,327 | |
| Deferred tax assets | 11 | | | 4 | |
| Lease assets | 1,527 | | | 1,868 | |
| Intangible assets, net | 1,249 | | | 1,347 | |
| Other long-term assets | 5,852 | | | 6,192 | |
| Total assets | $ | 237,088 | | | $ | 266,147 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 1,770 | | | $ | 3,554 | |
| Accounts payable to related party | 25,687 | | | 20,371 | |
| Accrued liabilities | 15,762 | | | 21,189 | |
| Current portion of lease liabilities | 914 | | | 1,152 | |
| Total current liabilities | 44,133 | | | 46,266 | |
| Long-term portion of lease liabilities | 677 | | | 792 | |
| Deferred tax liabilities | 93 | | | 93 | |
| Warrant liabilities | 7,561 | | | 12,319 | |
| Other long-term liabilities | 847 | | | 814 | |
| Total liabilities | 53,311 | | | 60,284 | |
| Commitments and contingencies (Note 10) | | | |
| Shareholders' equity: | | | |
| Preferred Stock, $0.0001 par value; 20,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023 | — | | | — | |
| Common Stock, $0.0001 par value; 800,000 shares authorized; 203,410 issued and 203,163 outstanding as of March 31, 2024 and 203,210 issued and 203,030 outstanding as of December 31, 2023 | 20 | | | 20 | |
| Treasury Stock, at cost: March 31, 2024 - 247 shares and December 31, 2023 - 180 shares | (2,675) | | | (1,969) | |
| Additional paid-in-capital | 342,065 | | | 339,783 | |
| Accumulated deficit | (155,632) | | | (131,988) | |
| Accumulated other comprehensive income | (1) | | | 17 | |
| Total shareholders' equity | 183,777 | | | 205,863 | |
| Total liabilities and shareholders' equity | $ | 237,088 | | | $ | 266,147 | |
The accompanying notes are integral to the consolidated financial statements.
LIVEWIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) | | | | | | | | | | | |
| Three months ended |
| March 31,
2024 | | March 31,
2023 |
| Cash flows from operating activities: | | | |
| Net loss | $ | (23,644) | | | $ | (21,147) | |
| Adjustments to reconcile net loss to net cash used in operating activities | | | |
| Depreciation and amortization | 2,326 | | | 667 | |
| Change in fair value of warrant liabilities | (4,758) | | | (1,068) | |
| Stock compensation expense | 2,282 | | | 1,824 | |
| Provision for doubtful accounts | 3 | | | 39 | |
| Deferred income taxes | (7) | | | — | |
| Inventory write-down | 2,522 | | | 673 | |
| Cloud computing arrangements development costs | — | | | (967) | |
| Other, net | 4 | | | (779) | |
| Changes in current assets and liabilities: | | | |
| Accounts receivable, net | 2,206 | | | 1,356 | |
| Accounts receivable from related party | 2,351 | | | (317) | |
| Inventories | (5,505) | | | (2,560) | |
| Other current assets | 24 | | | 731 | |
| Accounts payable and accrued liabilities | (6,046) | | | (4,894) | |
| Accounts payable to related party | 5,316 | | | 1,892 | |
| Net cash used by operating activities | (22,926) | | | (24,550) | |
| Cash flows from investing activities: | | | |
| Capital expenditures | (3,239) | | | (4,648) | |
| Net cash used by investing activities | (3,239) | | | (4,648) | |
| Cash flows from financing activities: | | | |
| | | |
| Repurchase of common stock | (706) | | | — | |
| Net cash used by financing activities | (706) | | | — | |
| Net decrease in cash and cash equivalents | $ | (26,871) | | | $ | (29,198) | |
| | | |
| Cash and cash equivalents: | | | |
| Cash and cash equivalents—beginning of period | $ | 167,904 | | | $ | 265,240 | |
| Net decrease in cash and cash equivalents | (26,871) | | | (29,198) | |
| Cash and cash equivalents—end of period | $ | 141,033 | | | $ | 236,042 | |
| | | |
| | | |
| | | |
| | | |
| | | |
The accompanying notes are integral to the consolidated financial statements.
LIVEWIRE GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional
paid-in
capital | | Accumulated
Deficit | | Accumulated
other
comprehensive
income (loss) | | Treasury Stock | | Total |
| | Issued
shares | | Balance | | |
| Balance, December 31, 2023 | 203,210 | | | $ | 20 | | | $ | 339,783 | | | $ | (131,988) | | | $ | 17 | | | $ | (1,969) | | | $ | 205,863 | |
| Net loss | — | | | — | | | — | | | (23,644) | | | — | | | — | | | (23,644) | |
| Other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | (18) | | | — | | | (18) | |
| Share-based compensation expense | 200 | | | — | | | 2,282 | | | — | | | — | | | — | | | 2,282 | |
| | | | | | | | | | | | | |
| Repurchase of common stock | — | | | — | | | — | | | — | | | — | | | (706) | | | (706) | |
| Balance, March 31, 2024 | 203,410 | | | $ | 20 | | | $ | 342,065 | | | $ | (155,632) | | | $ | (1) | | | $ | (2,675) | | | $ | 183,777 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional
paid-in
capital | | Accumulated
Deficit | | Accumulated
other
comprehensive
income (loss) | | Treasury Stock | | Total |
| | Issued
shares | | Balance | | |
| Balance, December 31, 2022 | 202,403 | | | $ | 20 | | | $ | 329,218 | | | $ | (22,438) | | | $ | — | | | $ | — | | | $ | 306,800 | |
| Net loss | — | | | — | | | — | | | (21,147) | | | — | | | — | | | (21,147) | |
| | | | | | | | | | | | | |
| Share-based compensation expense | 6 | | | — | | | 1,824 | | | — | | | — | | | — | | | 1,824 | |
| Balance, March 31, 2023 | 202,409 | | | $ | 20 | | | $ | 331,042 | | | $ | (43,585) | | | $ | — | | | $ | — | | | $ | 287,477 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The accompanying notes are integral to the consolidated financial statements.
LIVEWIRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and outstanding.
Basis of PresentationLiveWire Group, Inc., a Delaware corporation, and its consolidated subsidiaries are referred to in these consolidated financial statements and notes as “we,” “our,” “us,” the “Company,” or “LiveWire.” The Company designs and sells electric motorcycles and electric balance bikes for kids with related electric motorcycle parts, accessories, and apparel. The Company operates in two segments: Electric Motorcycles and STACYC.
EXPLANATORY NOTE
On September 26, 2022, subsequent to the fiscal quarter ended September 25, 2022, the fiscal quarter to which this Quarterly Report on Form 10-Q (the “Quarterly Report”) relates, AEA-Bridges Impact Corp.,Company consummated a Delaware corporation that is our predecessor (“ABIC”), consummated the previously announced mergerbusiness combination and related financing transactions (collectively the “Business Combination”) pursuant to that certaina business combination agreement, dated as of December 12, 2021 (the “Business Combination Agreement”), by and among ABIC,AEA-Bridges Impact Corp (“ABIC”), LiveWire Group Inc., (formerly known as LW EV Holdings, Inc.), a Delaware corporation (“LiveWire”), LW EV Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Harley-Davidson, Inc., a Wisconsin corporation (“H-D”), and LiveWire EV, LLC (“Legacy LiveWire”)., a wholly-owned subsidiary of H-D. The transactions contemplated byBusiness combination was accounted for as a reverse recapitalization. Under this method of accounting, ABIC was treated as the “acquired” company for financial reporting purposes. The net assets of ABIC were stated at historical cost, with no goodwill or other intangible assets recorded. The Business Combination resulted in net proceeds of approximately $293.7 million. The Company also assumed the Public Warrants and Private Warrants upon consummation of the Business Combination Agreement are referred to herein as the “Business Combination.” Prior to the Business Combination, LiveWire was a subsidiary of ABIC and Merger Sub was a subsidiary of LiveWire. See further detail in Note 7, Warrant Liabilities.
In connection with the Business Combination, Merger Sub mergedH-D has the right to receive up to an additional 12,500,000 shares of the Company’s common stock in the future (the “Earn-Out Shares”) upon the occurrence of certain triggering events: (i) a one-time issuance of 6,250,000 Earn Out Shares if the volume-weighted average price (“VWAP”) of Common Stock is greater than or equal to $14.00 over any 20 trading days within any 30 consecutive trading day period; and (ii) a one-time issuance of 6,250,000 Earn Out Shares if the VWAP of Common Stock is greater than or equal to $18.00 over any 20 trading days within any 30 consecutive trading-day period, in each case, during a period beginning 18 months from September 26, 2022, the closing date of the Business Combination, and expiring five years thereafter.
Basis of Presentation
In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated balance sheet as of March 31, 2024 and the consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the three month periods ended March 31, 2024 and 2023.
Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and into ABIC,accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The preparation of financial statements in conformity with ABIC survivingU.S. GAAP requires the mergerCompany’s management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. All intercompany transactions within the Company have been eliminated in preparing the consolidated financial statements.
2. New Accounting Standards
Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis: (i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment's profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the chief operating decision maker uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit, (v) the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a single reportable segment. The new guidance is effective for the fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-07 will have on the Company's consolidated financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. The main provisions of ASU 2023-09 require a public entity to disclose on an annual basis (i) specific prescribed categories in the rate reconciliation, (ii) provide additional information for reconciling items that meet a quantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits and cumulative unrecognized temporary differences. The new guidance is effective for the fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-09 will have on the Company's consolidated financial
statement disclosures.
3. Revenue
The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.
Disaggregated revenue, net by major source was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Electric motorcycles | $ | 1,007 | | | $ | 1,411 | | | | | |
| Parts, accessories and apparel | 237 | | | 71 | | | | | |
| $ | 1,244 | | | $ | 1,482 | | | | | |
| STACYC | | | | | | | |
| Electric balance bikes | $ | 2,616 | | | $ | 5,508 | | | | | |
| Parts, accessories and apparel | 1,118 | | | 772 | | | | | |
| $ | 3,734 | | | $ | 6,280 | | | | | |
| Total Revenue, net | $ | 4,978 | | | $ | 7,762 | | | | | |
Revenue from the sale of LiveWire One electric motorcycles, electric balance bikes as well as parts and accessories and apparel are recorded when control is transferred to the customer, generally at the time of shipment to independent dealers and distributors or at the time of delivery to retail customers. S2 electric motorcycles, being motorcycles produced from LiveWire’s S2 platform using the Arrow Architecture model, contain two performance obligations, which is the sale of the electric motorcycle and a stand ready obligation to transfer Firmware Over The Air (“FOTA”) software updates to the electric motorcycle, when-and-if available, to the customer. Revenue on the sale of the S2 electric motorcycles is recorded at a point-in-time when control is transferred to the customer. As the unspecified FOTA software updates to S2 electric motorcycles are provided when-and-if they become available, revenue related to these updates is recognized ratably over the period the updates will be provided, estimated by management to be five years, commencing when control of the electric motorcycle is transferred to the customer. The standalone selling prices of performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The Company allocates the transaction price among the performance obligations in proportion to the standalone selling price of the Company’s performance obligations.
The Company offers sales incentive programs to independent dealers and retail customers designed to promote the sale of its products. The Company estimates its variable consideration related to its sales incentive programs using the expected value method. The Company accounts for consideration payable to a customer as part of its sales incentives as a direct, wholly owned subsidiaryreduction of LiveWirerevenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and LiveWire continuingcommunicated. Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes, or the consideration becomes fixed. During the first quarter of 2024, the Company revised its retail partner strategy and introduced new incentives with its retail partners resulting in $419 thousand of adjustments for variable consideration related to previously recognized sales. Adjustments for variable consideration for the three months ended March 31, 2023 were not material.
The Company offers the right to return eligible parts and accessories and apparel and, in limited circumstances, on electric motorcycles. The Company estimates returns based on an analysis of historical trends and probability of returns and records revenue on the initial sale only in the amount that it expects to be entitled. The remaining consideration is deferred in a refund liability account. The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue. The Company records a refund asset at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value as a reduction to cost of goods sold. This amount is monitored and adjusted for impairment as necessary. The Company had a refund asset of $264 thousand and $299 thousand at March 31, 2024 and December 31, 2023, respectively. The Company had a refund liability of $292 thousand and $327 thousand at March 31, 2024 and December 31, 2023, respectively.
Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs in Cost of goods sold. The Company accrues for the shipping and handling in the same period that the related revenue is recognized.
The Company offers standard, limited warranties on its electric motorcycles, electric balance bikes, and parts and accessories. These warranties provide assurance that the product will function as expected and are not separate performance obligations. The Company accounts for estimated warranty costs as a liability when control of the product transfers to the customer.
Contract Liabilities
The Company maintains certain contract liability balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles and consideration received upon transfer of control of the S2 motorcycles for FOTA software updates. Contract liabilities are recognized as revenue once the Company performs under the contract. The current portion of contract liabilities of $310 thousand and $214 thousand were included in Accrued liabilities and the long-term portion of contract liabilities of $281 thousand and $245 thousand were included in Other long-term liabilities in the Company's Consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively. The Company expects to recognize $310 thousand included in Accrued Liabilities as of March 31, 2024 over the next twelve months. The Company expects to recognize $281 thousand included in Other long-term liabilities at March 31, 2024 over the next five years.
Previously deferred revenue recognized as revenue in the three months ended March 31, 2024 and March 31, 2023 was $70 thousand and $78 thousand, respectively.
4. Income Taxes
TheCompany’s effective income tax rate was 0% for each of the three months ended March 31, 2024 and 2023.
The Company’s effective tax rate for each period differs from the U.S. statutory rate of 21% as the
public company.Unless stated otherwise, this Quarterly Report contains information about ABIC before the Business Combination. ReferencesCompany is not recognizing an income tax benefit related to the “Company,” “our,” “us”losses generated as there is not sufficient positive evidence regarding the ability to realize the benefit of these losses.
5. Earnings Per Share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted EPS is computed using the weighted-average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards- restricted stock, performance share units, and warrants. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the potentially dilutive shares were anti-dilutive in those periods.
Computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Net loss | $ | (23,644) | | | $ | (21,147) | | | | | |
| | | | | | | |
| Basic weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
| Effect of dilutive securities – warrants | — | | | — | | | | | |
| Effect of dilutive securities – employee stock compensation awards | — | | | — | | | | | |
| Diluted weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
Earnings per share (1): | | | | | | | |
| Basic | $ | (0.12) | | | $ | (0.10) | | | | | |
| Diluted | $ | (0.12) | | | $ | (0.10) | | | | | |
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding
Diluted net loss per share is computed by giving effect to all potential shares of common stock, to the extent dilutive, including unvested restricted stock units (“RSUs”), unvested performance share units (“PSUs”), and Warrants (as defined in Note 7, Warrant Liabilities). Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the periods presented or “we”if the issuance of shares is contingent upon events that did not occur by the end of the period. For the three months ended March 31, 2024 and 2023, 3,118 thousand and 3,129 thousand employee stock compensation plan awards, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. For the three months ended March 31, 2024 and 2023, 30,365 thousand and 30,500 thousand warrants, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. Additionally, the Company has not included the impact of the Earn-Out Shares, discussed in this Quarterly Report refer to ABIC beforeNote 1, Description of Business and Basis of Presentation, in the calculation of EPS as the triggering events have not occurred.
6. Additional Balance Sheet Information
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method for electric motorcycles and related products and average costing method for electric balance bikes. Inventories, net consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Raw materials and work in process | $ | — | | | $ | 486 | |
| Electric motorcycles and electric balance bikes | 32,317 | | | 28,205 | |
| Parts and accessories and apparel | 2,788 | | | 3,431 | |
| Inventories, net | $ | 35,105 | | | $ | 32,122 | |
Accrued liabilities primarily include accrued capital expenditures of $3,768 thousand, accrued payroll and employee benefits of $3,632 thousand, and accrued engineering costs of $3,319 thousand as of March 31, 2024. Accrued liabilities primarily include accrued capital expenditures of $4,933 thousand, accrued payroll and employee benefits of $7,077 thousand, and accrued engineering costs of $5,215 thousand as of December 31, 2023.
7. Warrant Liabilities
Upon consummation of the Business Combination, or LiveWirethe Company assumed 30,499,990 Warrants to purchase the Company’s Common Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and 10,500,000 of outstanding warrants originally issued in a private placement in connection with the IPO of ABIC (the “Private Placement Warrants”, collectively with the Public Warrants, the “Warrants”). The Warrants expire five years from the completion of the Business Combination. There were 19,865,207 Public Warrants outstanding as of March 31, 2024 and December 31, 2023, respectively, and 10,500,000 Private Warrants outstanding as of March 31, 2024 and December 31, 2023.
Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share. A Warrant holder may exercise its Warrants only for a whole number of shares of Common Stock. This means only a whole Warrant may be exercised at a given time by a Warrant holder. No fractional Warrants were issued upon separation of the units and only whole warrants trade. The Company will receive the proceeds from the exercise of any warrants in cash. The Warrants will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.
Public Warrants
Redemption of Warrants when the price per Common Stock share equals or exceeds $18.00: The Company may redeem the outstanding Warrants (except as described with respect to the Private Placement Warrants):
•in whole and not in part;
•at a price of $0.01 per Warrant;
•upon not less than 30 days’ prior written notice of redemption; and
•if, and only if, the reported last sales price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.
Redemption of Warrants when the price per Common Stock share equals or exceeds $10.00: Once the Warrants become exercisable, the Company may redeem the outstanding Warrants:
•in whole and not in part;
•at $0.10 per Warrant upon a minimum 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the agreed table, based on the redemption date and the “fair market value” of Common Stock;
•if, and only if, the closing price of the shares of Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the Warrant holders; and
•if the closing price of the shares of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the context suggests.Exceptoutstanding Warrants, as described above.
Private Placement Warrants
The Private Placement Warrants have terms and provisions that are similar to those of the Public Warrants, including as to the exercise price, exercisability and exercise period. The Private Placement Warrants will not be redeemable by the Company so long as they are (i) held by the initial purchasers of the Private Placement Warrants or its permitted transferees and (ii) the reference value exceeds $18.00 per share. The initial Private Placement Warrant purchasers, or its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $10.00 and $18.00. If the Private Placement Warrants are held by holders other than AEA-Bridges Impact Sponsor, LLC (the “Sponsor”) or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.
During the three months ended March 31, 2024 and 2023, there were no redemptions or exercises of the Public Warrants or Private Warrants.
During the three months ended March 31, 2024 and 2023, the Company recognized income of $4,758 thousand and $1,068 thousand, respectively, as a change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss. The Company determined the Public Warrants and Private Placement Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability. The Company’s Warrant liability was $7,561 thousand and $12,319 thousand as of March 31, 2024 and December 31, 2023, respectively.
8. Fair Value
The Company assesses the inputs used to measure fair value using a three-tier hierarchy.
•Level 1 inputs include quoted prices for identical instruments and are the most observable.
•Level 2 inputs include quoted prices for similar assets and observable inputs.
•Level 3 inputs are not observable in the market and include the Company’s judgments about the assumptions market participants would use in pricing the asset or liability.
The Company’s assets and liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 135,000 | | | $ | — | | | $ | — | | | $ | 135,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 4,946 | | | $ | — | | | $ | — | | | $ | 4,946 | |
| Private Placement Warrants | — | | | 2,615 | | | — | | | 2,615 | |
| Share-based awards settled in cash | 666 | | | — | | | — | | | 666 | |
| $ | 5,612 | | | $ | 2,615 | | | $ | — | | | $ | 8,227 | |
| | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 161,000 | | | $ | — | | | $ | — | | | $ | 161,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 8,059 | | | $ | — | | | $ | — | | | $ | 8,059 | |
| Private Placement Warrants | — | | | 4,260 | | | — | | | 4,260 | |
| Share-based awards settled in cash | 1,268 | | | — | | | — | | | 1,268 | |
| $ | 9,327 | | | $ | 4,260 | | | $ | — | | | $ | 13,587 | |
There were no significant assets or liabilities on the Company’s Consolidated balance sheets measured at fair value on a nonrecurring basis.
Recurring Fair Value Measurements
Money Market Funds
Money market funds include highly liquid investments with an original maturity of three or fewer months and are presented within Cash and cash equivalents in the Consolidated balance sheets. They are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.
Warrant Liabilities
The Public Warrants are publicly traded under the symbol “LVWR WS” and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date. As such, the Public Warrants are classified within Level 1 of the fair value hierarchy. The fair value of the Private Placement Warrants was determined using the closing price of the Public Warrants as the Private Placement Warrants have terms and provisions that are economically similar to those of the Public Warrants. The Private Placement Warrants are classified as Level 2 of the fair value hierarchy due to the use of an observable market quote for a similar asset in an active market.
Share-based awards settled in cash
Share-based awards settled in cash represent grants of share-based awards that will be settled with employees in cash and are presented within Accrued liabilities and Other long-term liabilities in the Consolidated balance sheets. They are valued using the market price of the Company’s and Harley-Davidson, Inc.’s stock and are remeasured at each balance sheet date and are classified under Level 1 under the fair value hierarchy.
Other Fair Value Measurements
The fair value of financial instruments classified as Cash and cash equivalents, Accounts receivable, net, and Accounts payable on the Consolidated balance sheets approximate carrying value due to the short-term nature and the relative liquidity of the instruments.
9. Product Warranty and Recall Campaigns
The Company provides a limited warranty on new electric motorcycles for a period of two years, except for the battery which is covered for five years. The Company also provides limited warranties on parts and accessories and electric balance bikes. The warranty coverage for the retail customer generally begins when the product is sold to the retail customer. The Company accrues for future warranty claims at the time of sale by the Company using an estimated cost based primarily on historical Company claim information. In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.
Additionally, the Company may from time-to-time initiate certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company’s management approves and commits to a recall. The warranty and recall liability are included in Accrued liabilities and Other long-term liabilitieson the Consolidated balance sheets.
Changes in the Company’s warranty and recall liability were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Balance, beginning of period | $ | 1,011 | | | $ | 566 | | | | | |
| Warranties issued during the period | 122 | | | 69 | | | | | |
| Settlements made during the period | (265) | | | (32) | | | | | |
| | | | | | | |
| Recalls and changes to pre-existing warranty liabilities | 14 | | | (3) | | | | | |
| Balance, end of period | $ | 882 | | | $ | 600 | | | | | |
The liability for recall campaigns included in the above table was $78 thousand and zero as of March 31, 2024 and December 31, 2023, respectively.
10. Commitments and Contingencies
Contingencies – The Company is subject to claims related to product and other commercial matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 9, Product Warranty and Recall Campaigns, for a discussion of warranty and recall liabilities. The Company had no product liability claims as of March 31, 2024 and December 31, 2023.
Litigation and Other Claims – The Company from time to time may be subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters in the normal course of business. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company, through H-D, also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.
11. Related Party Transactions
In connection with the Business Combination, the Company entered into a various number of agreements with H-D to govern and provide a framework for the relationship between the parties going forward pursuant to which the Company and/or H-D have continuing obligations to each other. All transactions with H-D subsequent to the Business Combination are considered related party transactions. Agreements that the Company entered into in connection with the separation from H-D that resulted in related party transactions include the Transition Services Agreement, Master Services Agreement, Contract Manufacturing Agreement, Joint Development Agreement, and Tax Matters Agreement. Refer to Note 16, Related Party Transactions, of the consolidated financial statements in the Company’s 2023 Form 10-K for additional details on the agreements entered into by the Company as part of the Separation.
Related Party Sales and Purchases in the Ordinary Course of Business
Transactions Associated with Service Agreements with H-D
Cost of goods sold - There are $5,176 thousand and $2,047 thousand of Cost of goods sold with H-D, respectively, related to purchases from H-D, primarily electric motorcycles, under the terms of the Contract Manufacturing Agreement, on the Consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023. These purchases of electric motorcycles from H-D are sold to the Company’s customers resulting in Cost of goods sold.
Selling, administrative and engineering - During the three months ended March 31, 2024 and 2023, there were $2,948 thousand and $3,397 thousand, respectively, in expenses associated with services rendered in conjunction with the various service agreements with H-D, which are presented within Selling, administrative and engineering on the Consolidated statements of operations and comprehensive loss.
Accounts payable to related party - As of March 31, 2024 and December 31, 2023, there is $25,687 thousand and $20,371 thousand, respectively, due to H-D and presented as Accounts payable to related party on the Consolidated balance sheets. Of the amount outstanding to H-D as of March 31, 2024 and December 31, 2023, $14,140 thousand and $10,020 thousand, respectively, is associated with inventory purchased under the Contract Manufacturing Agreement and $5,340 thousand and $4,042 thousand, respectively, is associated with services under the various service agreements with H-D and $6,207 thousand and $6,309 thousand, respectively, is associated with the obligation to reimburse H-D for excess inventory components held by H-D that the Company expects to be obligated to reimburse H-D under the terms of the Contract Manufacturing Agreement. This amount represents the Company’s best estimate of the liability as of each of the balance sheet dates and is subject to adjustment based on final negotiations with H-D regarding amounts owed under the terms of the Contract Manufacturing Agreement.
Convertible Delayed Draw Term Loan Agreement
On February 14, 2024, the Company entered into a Convertible Delayed Draw Term Loan Agreement (the “Convertible Term Loan”) with H-D providing for term loans from H-D to the Company in one or more advances up to an aggregate principal amount of $100 million. The outstanding principal under the Convertible Term Loan bears interest at a floating rate per annum, as calculated by H-D as of the date of each advance and as of each June 1 and December 1 thereafter, equal to the sum of (i) the forward-looking term rate based on SOFR (i.e., the secured overnight financing rate published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate)) for a 6-month interest period, plus (ii) 4.00%. The Company may elect to pay up to 100% of the amount of any interest due by increasing the outstanding principal amount of the applicable advance. The Convertible Term Loan does not include affirmative covenants impacting the operations of the Company. The Convertible Term Loan includes negative covenants restricting the ability of the Company to incur indebtedness, create liens, sell assets, make investments, make fundamental changes, make dividends or other restricted payments and enter into affiliate transactions. The Convertible Term Loan has a maturity date of the earlier of (i) 24 months from the date of the first draw on the loan or (ii) October 31, 2026. In the event that the Convertible Term Loan cannot be settled in cash by the Company at maturity, unless otherwise expressly provided herein,agreed between the Company and H-D, the Convertible Term Loan will be converted to equity of Company at a conversion price per share of common stock of the Company equal to 90% of the volume weighted average price per share of Common Stock for the 30 trading days immediately preceding the conversion date. As of March 31, 2024, there were no amounts outstanding under the Convertible Term Loan and the Company remained in compliance with all of the existing covenants.
Other transactions
Sales of electric motorcycles and related products to independent dealers and customers are primarily financed through Harley-Davidson Financial Services (“HDFS”), a wholly owned subsidiary of H-D; therefore, the Company’s accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets. Amounts financed through HDFS, not yet remitted to the Company by HDFS, are generally settled within 30 days. As of March 31, 2024 and December 31, 2023, there is $1,051 thousand and $3,351 thousand due from HDFS and other related receivables due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
During the three months ended March 31, 2024 and 2023, the Company recorded $20 thousand and $5 thousand, respectively, in related party sales between the Company and H-D with $15 thousand and $3 thousand, respectively, in Cost of goods sold. All sales were for the STACYC segment which sells electric balance bikes to H-D. As of March 31, 2024 and December 31, 2023, there was zero and $51 thousand due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
On September 26, 2022, the Company entered into a lease agreement with H-D to sublease a Product Development Center. Additionally, on August 28, 2023, the Company amended a lease agreement with H-D for office space to extend the term of the lease to a 12-month period expiring on September 26, 2024. These are classified as operating leases. As of March 31, 2024, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $233 thousand, $158 thousand, and $74 thousand, respectively. As of December 31, 2023, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $274 thousand, $162 thousand, and $112 thousand, respectively. In addition, the Company incurred $44 thousand in rent expense during the three months ended March 31, 2024 and 2023, which is included within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.
12. Reportable Segments
The Company operates in two segments: Electric Motorcycles and STACYC. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
The Electric Motorcycles segment consists of the business activities related to the design and sales of electric motorcycles. The Electric Motorcycles segment also sells electric motorcycle parts, accessories, and apparel. The Company’s products are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealership and through online sales, and direct to customers through select international partners primarily in Europe.
The STACYC segment consists of the business activities related to the design and sales of the STACYC brand of electric balance bikes for kids. The STACYC segment also sells electric balance bike parts, accessories, and apparel. STACYC products are sold in the U.S., Canada, Australia and Europe. The STACYC segment products are sold through independent retail partners in the U.S. and Canada, including powersports dealers, H-D dealers, bicycle retailers and direct to customers online. In Australia and Europe, STACYC sells its products through independent distributors.
Selected segment information is set forth below (in thousands): | | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Revenue, net | $ | 1,244 | | | $ | 1,482 | | | | | |
| Cost of goods sold | 6,471 | | 2,440 | | | | |
| Selling, administrative and engineering expense | 23,780 | | 23,811 | | | | |
| Operating loss | (29,007) | | (24,769) | | | | |
| STACYC | | | | | | | |
| Revenue, net | 3,734 | | 6,280 | | | | |
| Cost of goods sold | 2,634 | | 4,058 | | | | |
| Selling, administrative and engineering expense | 2,515 | | 2,360 | | | | |
| Operating loss | (1,415) | | (138) | | | | |
| Operating loss | $ | (30,422) | | | $ | (24,907) | | | | | |
Total assets for the Electric Motorcycles and STACYC segments were $206,479 thousand and $30,610 thousand, respectively, as of March 31, 2024 and $232,981 thousand and $33,166 thousand, respectively, as of December 31, 2023.
13. Subsequent Event
On April 24, 2024, the Company announced a plan to both relocate the operations of LiveWire Labs, the Company’s west coast product development facility, from Mountain View, California to Milwaukee, Wisconsin and streamline headcount at the Company. The Company believes this plan will enable synergies and optimize efficiencies in product development and simplify the Company’s overall path to future profitability.
Under this plan, the Company expects to incur one-time relocation costs of $1.0 million to $1.5 million and one-time termination benefit costs of $2.0 million to $3.5 million related to the Electric Motorcycles segment and expects the vast majority to be cash charges. The Company expects to complete this plan by the end of September 2024.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to help the reader understand the Company, the Company’s financial condition and results of operations, and the Company’s present business environment. The following discussion and analysis should be read together with the accompanying unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report does not reflectand the consummationaudited consolidated financial statements and related notes in the 2023 Annual Report on Form 10-K.
Overview
LiveWire is an industry-leading all-electric vehicle brand with a mission to pioneer the rapidly growing two-wheel electric motorcycle space. The Company operates in two segments: Electric Motorcycles and STACYC.
The Electric Motorcycles segment sells electric motorcycles, related parts and accessories and apparel in the United States and certain international markets, while the STACYC segment sells electric balance bikes, related parts and accessories and apparel in the United States and certain international markets.
Electric motorcycles are sold at wholesale to a network of independent retail partners, at retail through a Company-owned dealership, through online sales and direct to customers through select international partners. Electric balance bikes are sold at wholesale to independent dealers and independent distributors, as well as direct to customers online. As discussed below, on September 26, 2022 as part of the Business Combination, the Company, which asincluded LiveWire branded electric motorcycles and STACYC, became a separate, publicly traded company.
For the three months ended March 31, 2024, the Company’s net loss was $23,644 thousand compared to $21,147 thousand for the three months ended March 31, 2023. The Company’s net losses reflect the early-stage nature of the Company’s business. The increase in net losses of $2,497 thousand in 2024 reflect the segment results discussed
above, occurred subsequentbelow and a decrease of $676 thousand in interest income, offset by an increase of $3,690 thousand of non-operating income related to the
period covered hereunder.
LIVEWIRE GROUP, INC.
(successordecrease in fair value of the outstanding warrants as of March 31, 2024 as compared to AEA-Bridges Impact Corp.)
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 25, 2022
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
(successorFor the three months ended March 31, 2024, the Electric Motorcycles segment operating loss was $29,007 thousand, compared to
AEA-Bridges
Impact Corp.)CONDENSED CONSOLIDATED BALANCE SHEETS
ITEM 1 — FINANCIAL STATEMENTS
| | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | |
| | $ | 240,329 | | | $ | 1,027,517 | |
| Cash — restricted | | | 402,367,209 | | | | — | |
| | | 22,917 | | | | 249,167 | |
Investments held in Trust Account | | | — | | | | 400,249,491 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY /SHAREHOLDERS’ DEFICIT | | | | | | | | |
Accounts payable and a ccrued liabilities | | $ | 11,244,872 | | | $ | 6,850,353 | |
| Derivative warrant liabilities | | | 13,420,000 | | | | 34,617,500 | |
| Mandatorily redeemable Class A ordinary shares | | | 368,136,945 | | | | — | |
| Deferred underwriting fee payable | | | 9,376,639 | | | | 13,125,000 | |
| | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
Commitments and Contingencies | | | | | | | | |
Class A ordinary shares subject to possible redemption, $0.0001 par value, zero as of September 25, 2022 and
40,000,000 shares issued and outstanding at $10.00 per share redemption value December 31, 2021 | | | — | | | | 400,000,000 | |
Stockholders’ Equity (Deficit)/Shareholders’ Deficit | | | | | | | | |
Preference shares, $0.0001 par value; 5,000,000 shares authorized; no shares issued or outstanding as of December 31, 2021 | | | — | | | | — | |
Class A ordinary shares , $0.0001 par value; 500,000,000 shares authorized; zero shares issued and outstanding as of December 31, 2021 (excluding 40,000,000 shares subject to possible redemption as of December 31, 2021) | | | — | | | | — | |
Class B ordinary shares , $0.0001 par value; 50,000,000 shares authorized; 10,000,000 shares issued and outstanding as of December 31, 2021 | | | — | | | | 1,000 | |
Preferred Stock, $0.0001 par value; 20,000,000 shares authorized; no shares issued or outstanding | | | — | | | | — | |
| Common Stock, $0.0001 par value; 800,000,000 shares authorized; 11,402,888 shares issues and outstanding as of September 25, 2022 | | | 1,140 | | | | — | |
| | | 30,906,382 | | | | — | |
| | | (30,455,523 | ) | | | (53,067,678 | ) |
| | | | | | | | | |
Total Stockholders’ Equity /Shareholders’ Deficit | | | | | | | | |
| | | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY /SHAREHOLDERS’ DEFICIT | | | | | | | | |
| | | | | | | | | |
The accompanying notes are an integral partoperating loss of these unaudited condensed consolidated financial statements.
(successor toAEA-Bridges
Impact Corp.)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | |
Formation and operating costs | | $ | 3,367,356 | | | $ | 3,117,068 | | | $ | 5,632,797 | | | $ | 3,838,489 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Interest earned on investments held in Trust Account | | | 1,792,628 | | | | 28,889 | | | | 2,117,718 | | | | 129,415 | |
| Forgiveness of deferred underwriting fee payable | | | 3,748,361 | | | | — | | | | 3,748,361 | | | | — | |
Interest on mandatorily redeemable Class A ordinary shares | | | 3,323,742 | | | | — | | | | 3,323,742 | | | | — | |
Change in fair value of derivative warrant liabilities | | | (1,830,000 | ) | | | 8,540,000 | | | | 21,197,500 | | | | 26,230,000 | |
Other income and expense, net | | | 224,840 | | | | — | | | | 224,840 | | | | — | |
| | | | | | | | | | | | | | | | | |
| | | 7,259,571 | | | | 8,568,889 | | | | 30,612,161 | | | | 26,359,415 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average shares outstanding of Class A ordinary shares | | | — | | | | 40,000,000 | | | | — | | | | 40,000,000 | |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net income per share, Class A ordinary shares | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding of Class B ordinary shares | | | — | | | | 10,000,000 | | | | — | | | | 10,000,000 | |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net income per share, Class B ordinary shares | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding of common stock (see Note 2) | | | 45,912,405 | | | | — | | | | 48,612,048 | | | | — | |
| | | | | | | | | | | | | | | | | |
| Basic and diluted net income per share, common stock | | $ | 0.01 | | | $ | — | | | $ | 0.45 | | | $ | — | |
| | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(successor toAEA-Bridges
Impact Corp.)CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 25, 2022
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance — December 31, 2021 | | | | | | $ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | — | | | | — | | | | | | | | | | | | — | | | | — | | | | — | | | | 8,997,219 | | | | 8,997,219 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accretion for Class A ordinary shares to redemption amount | | | — | | | | — | | | | | | | | | | | | — | | | | — | | | | — | | | | (574,581 | ) | | | (574,581 | ) |
| | | — | | | | — | | | | | | | | | | | | — | | | | — | | | | — | | | | 12,089,930 | | | | 12,089,930 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accretion for Class A ordinary shares to redemption amount | | | — | | | | — | | | | | | | | | | | | — | | | | — | | | | — | | | | (1,792,628 | ) | | | (1,792,628 | ) |
| Class A ordinary shares no longer redeemable | | | — | | | | — | | | | | | | | | | | | — | | | | — | | | | 30,906,182 | | | | — | | | | 30,906,522 | |
| Net income | | | — | | | | — | | | | | | | | | | | | — | | | | — | | | | — | | | | 3,892,215 | | | | 3,892,215 | |
| Adjustment to capital structure due to domestication (see Note 1) | | | 11,402,888 | | | | 1,140 | | | | (3,402,888 | ) | | | (340 | ) | | | (10,000,000 | ) | | | (1,000 | ) | | | 200 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance — September 25, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 26, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Balance — December 31, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,314,054 | | | | 19,314,054 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,244,949 | ) | | | (2,244,949 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,451,821 | | | | 5,451,821 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance — September 26, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(successor toAEA-Bridges
Impact Corp.)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | |
| | | | | | | |
| | | | | | | |
Cash Flows from Operating Activities: | | | | | | | | |
| | | | | | | | |
| Net income | | $ | 24,979,364 | | | $ | 22,520,926 | |
| Adjustments to reconcile net income to net cash used in operating activities: | | | | | | | | |
| Interest earned on investments held in Trust Account | | | (2,117,718 | ) | | | (129,415 | ) |
| Interest on mandatorily redeemable Class A ordinary shares | | | (3,323,742 | ) | | | — | |
| Change in fair value of derivative warrant liabilities | | | (21,197,500 | ) | | | (26,230,000 | ) |
| Forgiveness of deferred underwriting fee payable | | | (3,748,361 | ) | | | — | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Prepaid expenses | | | 226,250 | | | | 237,163 | |
| Accounts payable and accrued expenses | | | 4,394,519 | | | | 3,031,028 | |
| | | | | | | | | |
Net cash used in operating activities | | | | | | | | |
| | | | | | | | | |
Cash Flows from Investi n g Activities: | | | | | | | | |
| Withdrawal of funds from Trust Account | | | 402,367,209 | | | | — | |
| | | | | | | | | |
Net restricted cash provided by investing activities | | | | | | | | |
| | | | | | | | | |
| | | |
| Cash and restricted cash | | | | | | | | |
| Cash and restricted cash, beginning of period | | | 1,027,517 | | | | 1,661,085 | |
| Net change in cash and restricted cash | | | 401,580,021 | | | | (570,298 | ) |
| | | | | | | | | |
Cash and restricted cash, end of period | | | | | | | | |
| | | | | | | | | |
| | | |
| Reconciliation of cash and restricted cash on the Condensed Consolidated Balance Sheet to the Condensed Consolidated Statement of Cash Flows | | | | | | | | |
| Cash | | $ | 240,329 | | | $ | 1,090,787 | |
| Restricted cash | | | 402,367,209 | | | | — | |
| | | | | | | | | |
Cash and restricted cash per the Condensed Consolidated Statement of Cash Flows | | | | | | | | |
| | | | | | | | | |
Non-cash investing and financing activities: | | | | | | | | |
| Mandatorily redeemable Class A ordinary shares | | $ | 368,136,345 | | | $ | — | |
| | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
AEA-Bridges
Impact Corp. (the “Company”) was incorporated as a Cayman Islands exempted company on July 29, 2020. The Company was incorporated$24,769 thousand for the
purposethree months ended March 31, 2023. The increase in operating loss of
effecting$4,238 thousand resulted from a
merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.decrease in revenue due to product mix and a revised structure around our retail partners in the first quarter of 2024, which introduced new incentives, and an increase in cost of sales resulting from increased net realizable value adjustments, volumes and depreciation expense. Refer to the Electric Motorcycles segment analysis below for further discussion.
For the three months ended March 31, 2024, the STACYC segment operating loss was $1,415 thousand, as compared to an operating loss of $138 thousand for the three months ended March 31, 2023. The increase in operating loss of $1,277 thousand was primarily related to a decrease in volumes to our independent distributors. Refer to the STACYC segment analysis below for further discussion.
Basis of Presentation
In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated balance sheet as of March 31, 2024 and the consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the three month periods ended March 31, 2024 and 2023.
Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. All intercompany transactions within the Company have been eliminated in preparing the consolidated financial statements.
2. New Accounting Standards
Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis: (i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment's profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the chief operating decision maker uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit, (v) the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a single reportable segment. The new guidance is effective for the fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-07 will have on the Company's consolidated financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. The main provisions of ASU 2023-09 require a public entity to disclose on an annual basis (i) specific prescribed categories in the rate reconciliation, (ii) provide additional information for reconciling items that meet a quantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax expense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from continuing operations disaggregated by federal, state, and foreign. ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits and cumulative unrecognized temporary differences. The new guidance is effective for the fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-09 will have on the Company's consolidated financial
statement disclosures.
3. Revenue
The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.
Disaggregated revenue, net by major source was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Electric motorcycles | $ | 1,007 | | | $ | 1,411 | | | | | |
| Parts, accessories and apparel | 237 | | | 71 | | | | | |
| $ | 1,244 | | | $ | 1,482 | | | | | |
| STACYC | | | | | | | |
| Electric balance bikes | $ | 2,616 | | | $ | 5,508 | | | | | |
| Parts, accessories and apparel | 1,118 | | | 772 | | | | | |
| $ | 3,734 | | | $ | 6,280 | | | | | |
| Total Revenue, net | $ | 4,978 | | | $ | 7,762 | | | | | |
Revenue from the sale of LiveWire One electric motorcycles, electric balance bikes as well as parts and accessories and apparel are recorded when control is transferred to the customer, generally at the time of shipment to independent dealers and distributors or at the time of delivery to retail customers. S2 electric motorcycles, being motorcycles produced from LiveWire’s S2 platform using the Arrow Architecture model, contain two performance obligations, which is the sale of the electric motorcycle and a stand ready obligation to transfer Firmware Over The Air (“FOTA”) software updates to the electric motorcycle, when-and-if available, to the customer. Revenue on the sale of the S2 electric motorcycles is recorded at a point-in-time when control is transferred to the customer. As the unspecified FOTA software updates to S2 electric motorcycles are provided when-and-if they become available, revenue related to these updates is recognized ratably over the period the updates will be provided, estimated by management to be five years, commencing when control of the electric motorcycle is transferred to the customer. The standalone selling prices of performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The Company allocates the transaction price among the performance obligations in proportion to the standalone selling price of the Company’s performance obligations.
The Company offers sales incentive programs to independent dealers and retail customers designed to promote the sale of its products. The Company estimates its variable consideration related to its sales incentive programs using the expected value method. The Company accounts for consideration payable to a customer as part of its sales incentives as a reduction of revenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and communicated. Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes, or the consideration becomes fixed. During the first quarter of 2024, the Company revised its retail partner strategy and introduced new incentives with its retail partners resulting in $419 thousand of adjustments for variable consideration related to previously recognized sales. Adjustments for variable consideration for the three months ended March 31, 2023 were not material.
The Company offers the right to return eligible parts and accessories and apparel and, in limited circumstances, on electric motorcycles. The Company estimates returns based on an analysis of historical trends and probability of returns and records revenue on the initial sale only in the amount that it expects to be entitled. The remaining consideration is deferred in a refund liability account. The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue. The Company records a refund asset at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value as a reduction to cost of goods sold. This amount is monitored and adjusted for impairment as necessary. The Company had a refund asset of $264 thousand and $299 thousand at March 31, 2024 and December 31, 2023, respectively. The Company had a refund liability of $292 thousand and $327 thousand at March 31, 2024 and December 31, 2023, respectively.
Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs in Cost of goods sold. The Company accrues for the shipping and handling in the same period that the related revenue is recognized.
The Company offers standard, limited warranties on its electric motorcycles, electric balance bikes, and parts and accessories. These warranties provide assurance that the product will function as expected and are not separate performance obligations. The Company accounts for estimated warranty costs as a liability when control of the product transfers to the customer.
Contract Liabilities
The Company maintains certain contract liability balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles and consideration received upon transfer of control of the S2 motorcycles for FOTA software updates. Contract liabilities are recognized as revenue once the Company performs under the contract. The current portion of contract liabilities of $310 thousand and $214 thousand were included in Accrued liabilities and the long-term portion of contract liabilities of $281 thousand and $245 thousand were included in Other long-term liabilities in the Company's Consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively. The Company expects to recognize $310 thousand included in Accrued Liabilities as of March 31, 2024 over the next twelve months. The Company expects to recognize $281 thousand included in Other long-term liabilities at March 31, 2024 over the next five years.
Previously deferred revenue recognized as revenue in the three months ended March 31, 2024 and March 31, 2023 was $70 thousand and $78 thousand, respectively.
4. Income Taxes
TheCompany’s effective income tax rate was 0% for each of the three months ended March 31, 2024 and 2023.
The Company’s effective tax rate for each period differs from the U.S. statutory rate of 21% as the Company is not recognizing an income tax benefit related to the losses generated as there is not sufficient positive evidence regarding the ability to realize the benefit of these losses.
5. Earnings Per Share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted EPS is computed using the weighted-average number of shares of common stock, plus the effect of potentially dilutive securities. The Company applies the treasury method to calculate the dilution impact of share-based awards- restricted stock, performance share units, and warrants. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share as all of the potentially dilutive shares were anti-dilutive in those periods.
Computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Net loss | $ | (23,644) | | | $ | (21,147) | | | | | |
| | | | | | | |
| Basic weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
| Effect of dilutive securities – warrants | — | | | — | | | | | |
| Effect of dilutive securities – employee stock compensation awards | — | | | — | | | | | |
| Diluted weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
Earnings per share (1): | | | | | | | |
| Basic | $ | (0.12) | | | $ | (0.10) | | | | | |
| Diluted | $ | (0.12) | | | $ | (0.10) | | | | | |
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding
Diluted net loss per share is computed by giving effect to all potential shares of common stock, to the extent dilutive, including unvested restricted stock units (“RSUs”), unvested performance share units (“PSUs”), and Warrants (as defined in Note 7, Warrant Liabilities). Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the periods presented or if the issuance of shares is contingent upon events that did not occur by the end of the period. For the three months ended March 31, 2024 and 2023, 3,118 thousand and 3,129 thousand employee stock compensation plan awards, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. For the three months ended March 31, 2024 and 2023, 30,365 thousand and 30,500 thousand warrants, respectively, were excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. Additionally, the Company has not included the impact of the Earn-Out Shares, discussed in Note 1, Description of Business and Basis of Presentation, in the calculation of EPS as the triggering events have not occurred.
6. Additional Balance Sheet Information
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method for electric motorcycles and related products and average costing method for electric balance bikes. Inventories, net consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Raw materials and work in process | $ | — | | | $ | 486 | |
| Electric motorcycles and electric balance bikes | 32,317 | | | 28,205 | |
| Parts and accessories and apparel | 2,788 | | | 3,431 | |
| Inventories, net | $ | 35,105 | | | $ | 32,122 | |
Accrued liabilities primarily include accrued capital expenditures of $3,768 thousand, accrued payroll and employee benefits of $3,632 thousand, and accrued engineering costs of $3,319 thousand as of March 31, 2024. Accrued liabilities primarily include accrued capital expenditures of $4,933 thousand, accrued payroll and employee benefits of $7,077 thousand, and accrued engineering costs of $5,215 thousand as of December 31, 2023.
7. Warrant Liabilities
Upon consummation of the Business Combination, the Company assumed 30,499,990 Warrants to purchase the Company’s Common Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and 10,500,000 of outstanding warrants originally issued in a private placement in connection with the IPO of ABIC (the “Private Placement Warrants”, collectively with the Public Warrants, the “Warrants”). The Warrants expire five years from the completion of the Business Combination. There were 19,865,207 Public Warrants outstanding as of March 31, 2024 and December 31, 2023, respectively, and 10,500,000 Private Warrants outstanding as of March 31, 2024 and December 31, 2023.
Each Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share. A Warrant holder may exercise its Warrants only for a whole number of shares of Common Stock. This means only a whole Warrant may be exercised at a given time by a Warrant holder. No fractional Warrants were issued upon separation of the units and only whole warrants trade. The Company will receive the proceeds from the exercise of any warrants in cash. The Warrants will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.
Public Warrants
Redemption of Warrants when the price per Common Stock share equals or exceeds $18.00: The Company may redeem the outstanding Warrants (except as described with respect to the Private Placement Warrants):
•in whole and not in part;
•at a price of $0.01 per Warrant;
•upon not less than 30 days’ prior written notice of redemption; and
•if, and only if, the reported last sales price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.
Redemption of Warrants when the price per Common Stock share equals or exceeds $10.00: Once the Warrants become exercisable, the Company may redeem the outstanding Warrants:
•in whole and not in part;
•at $0.10 per Warrant upon a minimum 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the agreed table, based on the redemption date and the “fair market value” of Common Stock;
•if, and only if, the closing price of the shares of Common Stock equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the Warrant holders; and
•if the closing price of the shares of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Warrants, as described above.
Private Placement Warrants
The Private Placement Warrants have terms and provisions that are similar to those of the Public Warrants, including as to the exercise price, exercisability and exercise period. The Private Placement Warrants will not be redeemable by the Company so long as they are (i) held by the initial purchasers of the Private Placement Warrants or its permitted transferees and (ii) the reference value exceeds $18.00 per share. The initial Private Placement Warrant purchasers, or its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $10.00 and $18.00. If the Private Placement Warrants are held by holders other than AEA-Bridges Impact Sponsor, LLC (the “Sponsor”) or its permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants.
During the three months ended March 31, 2024 and 2023, there were no redemptions or exercises of the Public Warrants or Private Warrants.
During the three months ended March 31, 2024 and 2023, the Company recognized income of $4,758 thousand and $1,068 thousand, respectively, as a change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss. The Company determined the Public Warrants and Private Placement Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability. The Company’s Warrant liability was $7,561 thousand and $12,319 thousand as of March 31, 2024 and December 31, 2023, respectively.
8. Fair Value
The Company assesses the inputs used to measure fair value using a three-tier hierarchy.
•Level 1 inputs include quoted prices for identical instruments and are the most observable.
•Level 2 inputs include quoted prices for similar assets and observable inputs.
•Level 3 inputs are not observable in the market and include the Company’s judgments about the assumptions market participants would use in pricing the asset or liability.
The Company’s assets and liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 135,000 | | | $ | — | | | $ | — | | | $ | 135,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 4,946 | | | $ | — | | | $ | — | | | $ | 4,946 | |
| Private Placement Warrants | — | | | 2,615 | | | — | | | 2,615 | |
| Share-based awards settled in cash | 666 | | | — | | | — | | | 666 | |
| $ | 5,612 | | | $ | 2,615 | | | $ | — | | | $ | 8,227 | |
| | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 161,000 | | | $ | — | | | $ | — | | | $ | 161,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 8,059 | | | $ | — | | | $ | — | | | $ | 8,059 | |
| Private Placement Warrants | — | | | 4,260 | | | — | | | 4,260 | |
| Share-based awards settled in cash | 1,268 | | | — | | | — | | | 1,268 | |
| $ | 9,327 | | | $ | 4,260 | | | $ | — | | | $ | 13,587 | |
There were no significant assets or liabilities on the Company’s Consolidated balance sheets measured at fair value on a nonrecurring basis.
Recurring Fair Value Measurements
Money Market Funds
Money market funds include highly liquid investments with an original maturity of three or fewer months and are presented within Cash and cash equivalents in the Consolidated balance sheets. They are valued using quoted market prices in active markets and are classified under Level 1 within the fair value hierarchy.
Warrant Liabilities
The Public Warrants are publicly traded under the symbol “LVWR WS” and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date. As such, the Public Warrants are classified within Level 1 of the fair value hierarchy. The fair value of the Private Placement Warrants was determined using the closing price of the Public Warrants as the Private Placement Warrants have terms and provisions that are economically similar to those of the Public Warrants. The Private Placement Warrants are classified as Level 2 of the fair value hierarchy due to the use of an observable market quote for a similar asset in an active market.
Share-based awards settled in cash
Share-based awards settled in cash represent grants of share-based awards that will be settled with employees in cash and are presented within Accrued liabilities and Other long-term liabilities in the Consolidated balance sheets. They are valued using the market price of the Company’s and Harley-Davidson, Inc.’s stock and are remeasured at each balance sheet date and are classified under Level 1 under the fair value hierarchy.
Other Fair Value Measurements
The fair value of financial instruments classified as Cash and cash equivalents, Accounts receivable, net, and Accounts payable on the Consolidated balance sheets approximate carrying value due to the short-term nature and the relative liquidity of the instruments.
9. Product Warranty and Recall Campaigns
The Company provides a limited warranty on new electric motorcycles for a period of two years, except for the battery which is covered for five years. The Company also provides limited warranties on parts and accessories and electric balance bikes. The warranty coverage for the retail customer generally begins when the product is sold to the retail customer. The Company accrues for future warranty claims at the time of sale by the Company using an estimated cost based primarily on historical Company claim information. In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.
Additionally, the Company may from time-to-time initiate certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company’s management approves and commits to a recall. The warranty and recall liability are included in Accrued liabilities and Other long-term liabilitieson the Consolidated balance sheets.
Changes in the Company’s warranty and recall liability were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Balance, beginning of period | $ | 1,011 | | | $ | 566 | | | | | |
| Warranties issued during the period | 122 | | | 69 | | | | | |
| Settlements made during the period | (265) | | | (32) | | | | | |
| | | | | | | |
| Recalls and changes to pre-existing warranty liabilities | 14 | | | (3) | | | | | |
| Balance, end of period | $ | 882 | | | $ | 600 | | | | | |
The liability for recall campaigns included in the above table was $78 thousand and zero as of March 31, 2024 and December 31, 2023, respectively.
10. Commitments and Contingencies
Contingencies – The Company is subject to claims related to product and other commercial matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 9, Product Warranty and Recall Campaigns, for a discussion of warranty and recall liabilities. The Company had no product liability claims as of March 31, 2024 and December 31, 2023.
Litigation and Other Claims – The Company from time to time may be subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters in the normal course of business. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company, through H-D, also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.
11. Related Party Transactions
In connection with the Business Combination, the Company entered into a various number of agreements with H-D to govern and provide a framework for the relationship between the parties going forward pursuant to which the Company and/or H-D have continuing obligations to each other. All transactions with H-D subsequent to the Business Combination are considered related party transactions. Agreements that the Company entered into in connection with the separation from H-D that resulted in related party transactions include the Transition Services Agreement, Master Services Agreement, Contract Manufacturing Agreement, Joint Development Agreement, and Tax Matters Agreement. Refer to Note 16, Related Party Transactions, of the consolidated financial statements in the Company’s 2023 Form 10-K for additional details on the agreements entered into by the Company as part of the Separation.
Related Party Sales and Purchases in the Ordinary Course of Business
Transactions Associated with Service Agreements with H-D
Cost of goods sold - There are $5,176 thousand and $2,047 thousand of Cost of goods sold with H-D, respectively, related to purchases from H-D, primarily electric motorcycles, under the terms of the Contract Manufacturing Agreement, on the Consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023. These purchases of electric motorcycles from H-D are sold to the Company’s customers resulting in Cost of goods sold.
Selling, administrative and engineering - During the three months ended March 31, 2024 and 2023, there were $2,948 thousand and $3,397 thousand, respectively, in expenses associated with services rendered in conjunction with the various service agreements with H-D, which are presented within Selling, administrative and engineering on the Consolidated statements of operations and comprehensive loss.
Accounts payable to related party - As of March 31, 2024 and December 31, 2023, there is $25,687 thousand and $20,371 thousand, respectively, due to H-D and presented as Accounts payable to related party on the Consolidated balance sheets. Of the amount outstanding to H-D as of March 31, 2024 and December 31, 2023, $14,140 thousand and $10,020 thousand, respectively, is associated with inventory purchased under the Contract Manufacturing Agreement and $5,340 thousand and $4,042 thousand, respectively, is associated with services under the various service agreements with H-D and $6,207 thousand and $6,309 thousand, respectively, is associated with the obligation to reimburse H-D for excess inventory components held by H-D that the Company expects to be obligated to reimburse H-D under the terms of the Contract Manufacturing Agreement. This amount represents the Company’s best estimate of the liability as of each of the balance sheet dates and is subject to adjustment based on final negotiations with H-D regarding amounts owed under the terms of the Contract Manufacturing Agreement.
Convertible Delayed Draw Term Loan Agreement
On February 14, 2024, the Company entered into a Convertible Delayed Draw Term Loan Agreement (the “Convertible Term Loan”) with H-D providing for term loans from H-D to the Company in one or more advances up to an aggregate principal amount of $100 million. The outstanding principal under the Convertible Term Loan bears interest at a floating rate per annum, as calculated by H-D as of the date of each advance and as of each June 1 and December 1 thereafter, equal to the sum of (i) the forward-looking term rate based on SOFR (i.e., the secured overnight financing rate published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate)) for a 6-month interest period, plus (ii) 4.00%. The Company may elect to pay up to 100% of the amount of any interest due by increasing the outstanding principal amount of the applicable advance. The Convertible Term Loan does not include affirmative covenants impacting the operations of the Company. The Convertible Term Loan includes negative covenants restricting the ability of the Company to incur indebtedness, create liens, sell assets, make investments, make fundamental changes, make dividends or other restricted payments and enter into affiliate transactions. The Convertible Term Loan has a maturity date of the earlier of (i) 24 months from the date of the first draw on the loan or (ii) October 31, 2026. In the event that the Convertible Term Loan cannot be settled in cash by the Company at maturity, unless otherwise agreed between the Company and H-D, the Convertible Term Loan will be converted to equity of Company at a conversion price per share of common stock of the Company equal to 90% of the volume weighted average price per share of Common Stock for the 30 trading days immediately preceding the conversion date. As of March 31, 2024, there were no amounts outstanding under the Convertible Term Loan and the Company remained in compliance with all of the existing covenants.
Other transactions
Sales of electric motorcycles and related products to independent dealers and customers are primarily financed through Harley-Davidson Financial Services (“HDFS”), a wholly owned subsidiary of H-D; therefore, the Company’s accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets. Amounts financed through HDFS, not yet remitted to the Company by HDFS, are generally settled within 30 days. As of March 31, 2024 and December 31, 2023, there is $1,051 thousand and $3,351 thousand due from HDFS and other related receivables due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
During the three months ended March 31, 2024 and 2023, the Company recorded $20 thousand and $5 thousand, respectively, in related party sales between the Company and H-D with $15 thousand and $3 thousand, respectively, in Cost of goods sold. All sales were for the STACYC segment which sells electric balance bikes to H-D. As of March 31, 2024 and December 31, 2023, there was zero and $51 thousand due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
On September 26, 2022, the Company consummatedentered into a lease agreement with H-D to sublease a Product Development Center. Additionally, on August 28, 2023, the previously announced merger pursuantCompany amended a lease agreement with H-D for office space to extend the term of the lease to a 12-month period expiring on September 26, 2024. These are classified as operating leases. As of March 31, 2024, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $233 thousand, $158 thousand, and $74 thousand, respectively. As of December 31, 2023, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $274 thousand, $162 thousand, and $112 thousand, respectively. In addition, the Company incurred $44 thousand in rent expense during the three months ended March 31, 2024 and 2023, which is included within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.
12. Reportable Segments
The Company operates in two segments: Electric Motorcycles and STACYC. The Company’s reportable segments are strategic business units that certainoffer different products and services and are managed separately based on the fundamental differences in their operations.
The Electric Motorcycles segment consists of the business combination agreement, datedactivities related to the design and sales of electric motorcycles. The Electric Motorcycles segment also sells electric motorcycle parts, accessories, and apparel. The Company’s products are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealership and through online sales, and direct to customers through select international partners primarily in Europe.
The STACYC segment consists of the business activities related to the design and sales of the STACYC brand of electric balance bikes for kids. The STACYC segment also sells electric balance bike parts, accessories, and apparel. STACYC products are sold in the U.S., Canada, Australia and Europe. The STACYC segment products are sold through independent retail partners in the U.S. and Canada, including powersports dealers, H-D dealers, bicycle retailers and direct to customers online. In Australia and Europe, STACYC sells its products through independent distributors.
Selected segment information is set forth below (in thousands): | | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Revenue, net | $ | 1,244 | | | $ | 1,482 | | | | | |
| Cost of goods sold | 6,471 | | 2,440 | | | | |
| Selling, administrative and engineering expense | 23,780 | | 23,811 | | | | |
| Operating loss | (29,007) | | (24,769) | | | | |
| STACYC | | | | | | | |
| Revenue, net | 3,734 | | 6,280 | | | | |
| Cost of goods sold | 2,634 | | 4,058 | | | | |
| Selling, administrative and engineering expense | 2,515 | | 2,360 | | | | |
| Operating loss | (1,415) | | (138) | | | | |
| Operating loss | $ | (30,422) | | | $ | (24,907) | | | | | |
Total assets for the Electric Motorcycles and STACYC segments were $206,479 thousand and $30,610 thousand, respectively, as of March 31, 2024 and $232,981 thousand and $33,166 thousand, respectively, as of December 12, 2021 (the “Business Combination Agreement”), by and among31, 2023.
13. Subsequent Event
On April 24, 2024, the Company
announced a plan to both relocate the operations of LiveWire
Group, Inc. (formerly known as LW EV Holdings, Inc.), a Delaware corporation (“LiveWire”), LW EV Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Harley-Davidson, Inc., aLabs, the Company’s west coast product development facility, from Mountain View, California to Milwaukee, Wisconsin
corporation(H-D),
and
LiveWire EV, LLC (“Legacy LiveWire”).streamline headcount at the Company. The Company believes this plan will enable synergies and optimize efficiencies in product development and simplify the Company’s overall path to future profitability.
Under this plan, the Company expects to incur one-time relocation costs of $1.0 million to $1.5 million and one-time termination benefit costs of $2.0 million to $3.5 million related to the Electric Motorcycles segment and expects the vast majority to be cash charges. The Company expects to complete this plan by the end of September 2024.
On September 16, 2022, the Company held a special meeting of shareholders, at which the shareholders considered and adopted, among other matters, a proposal to approve the Business Combination Agreement and the transactions contemplated thereby.
The Company provided the holders of the public shares (the “PublicS
hareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination (the “Business Combination”), and36,597,112
of the Class A ordinary shareholders elected to redeem. There are no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.19
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to help the terms of the Business Combination Agreement: (a) on September 23, 2022,reader understand the Company, migrated to and domesticated as a Delaware corporation (“Domesticated ABIC”) (the “Domestication”), in connection with which all of the Company’s (i) outstanding
were converted, on a
basis, into common stock, par value $0.0001 per share,financial condition and results of
Domesticated ABIC, (ii) outstanding warrants were converted, on abasis, into warrants to acquire one share each of common stock of Domesticated ABIC and (iii) outstanding units were canceled and instead entitle the holder thereof to, per unit, one share of common stock of Domesticated ABIC andone-half
of one warrant of Domesticated ABIC; (b) on September 26, 2022,H-D
and Legacy LiveWire consummated the separation of the Legacy LiveWire businessoperations, and the
other transactions contemplated byCompany’s present business environment. The following discussion and analysis should be read together with the
Separation Agreement (the “Separation Agreement”), byaccompanying unaudited consolidated financial statements and
betweenH-D
related notes included elsewhere in this Quarterly Report and
Legacy LiveWire, dated as of September 26, 2022 (the “Separation”); (c) following the
Domesticationaudited consolidated financial statements and
immediately following the Separation, Merger Sub merged with and into Domesticated ABIC, with Domesticated ABIC surviving as a direct, wholly owned subsidiary of LiveWire (the “Merger”), and LiveWire continuing as the public companyrelated notes in the
Merger,2023 Annual Report on Form 10-K.
Overview
LiveWire is an industry-leading all-electric vehicle brand with
each share of common stock of Domesticated ABIC being converted intoa mission to pioneer the
right of the holder thereof to receive one share of LiveWire common stock, par value $0.0001 (“LiveWire Common Stock”); (d) immediately following the Merger,H-D
caused all of the membership interests of Legacy LiveWire (“Legacy LiveWire Equity”) held by ElectricSoul, LLC (the “Legacy LiveWire Equityholder”), a Delaware limited liability companyrapidly growing two-wheel electric motorcycle space. The Company operates in two segments: Electric Motorcycles and
a subsidiary ofSTACYC. H-D,
to be contributed to LiveWire in exchange for 161,000,000 shares of LiveWire Common StockThe Electric Motorcycles segment sells electric motorcycles, related parts and
the right to receive up to an additional 12,500,000 shares of LiveWire Common Stockaccessories and apparel in the
future (the“Earn-Out
Shares”,United States and
certain international markets, while the
transactions contemplated by this clause (d), collectively, the “Exchange”),STACYC segment sells electric balance bikes, related parts and
as a result of the Exchange, Legacy LiveWire became a direct, wholly owned subsidiary of LiveWire; (e) immediately following the consummation of the Exchange, LiveWire contributed 100% of the outstanding equity interests of Legacy Livewire to Domesticated ABIC. Holders of 36,597,112 Class
sold in its initial public offering (the “Initial Shares”) properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from the Company’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination, which was approximately $
10.06per share, or approximately $
368,136,945accessories and apparel in the aggregate.
United States and certain international markets.
On September 26, 2022, an aggregateElectric motorcycles are sold at wholesale to a network of $
368,136,945 was paid from the Company’s trust accountindependent retail partners, at retail through a Company-owned dealership, through online sales and direct to holders who properly exercised their rightcustomers through select international partners. Electric balance bikes are sold at wholesale to have their Initial Shares redeemed,independent dealers and the remaining balance immediately priorindependent distributors, as well as direct to the closing of the Business Combination of approximately $34
million was used to fund the Business Combination.
customers online. As a result of the Exchange,discussed below, on September 26, 2022 LiveWire issued
161,000,000 shares of LiveWire Common Stock to the Legacy LiveWire Equityholder, valued at a price per share of $10.00, in exchange for 100% of the Legacy LiveWire Equity.
In connection with the Business Combination, on September 23, 2022, AEA-Bridges Impact Sponsor, LLC (the “Sponsor”) forfeited an aggregate of
2,000,000Class B ordinary shares in accordance with the Investor Support Agreement, dated as
of December 12, 2021 (the “Investor Support Agreement”), by and among the Sponsor, LiveWire, ABIC, John Garcia, John Replogle and George Serafeim. The remaining Class B ordinary shares held by Sponsor automatically converted7,950,000shares of LiveWire Common Stock at the closing of the Business Combination.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to investment agreements entered into in connection with the Business Combination Agreement, Kwang Yang Motor Co., Ltd., KYMCO Capital Fund I Co., Ltd., SunBright Investment Co., Ltd., CycleLoop Co., Ltd. and Kwang Yang Holdings Limited (collectively, “KYMCO Group”) agreed to subscribe for an aggregate of 10,000,000 newly-issued shares of LiveWire Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $100,000,000 (the “KYMCO PIPE Investment”).
Pursuant to the Business Combination Agreement, and an investment agreement entered into prior to the Closing, the Legacy LiveWire Equityholder agreed to subscribe for an aggregate of 10,000,000 newly-issued shares of LiveWire Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $100,000,000 (the “Legacy LiveWire Equityholder PIPE Investment” and, together with the KYMCO PIPE Investment, the “PIPE Investments”). At the closing of the Business Combination, LiveWire consummated the PIPE Investments.
Pursuant to the Business Combination Agreement,H-D
caused the Legacy LiveWire Equityholder to pay and deliver to LiveWire an amount in cash equal $100,000,000, which is the HD Backstop Amount (as defined in the Business Combination Agreement) in exchange for 10,000,000 shares of LiveWire Common Stock (the“H-D
Backstop Shares”) at a purchase price of $10.00 perH-D
Backstop Share.After giving effect to the Business Combination, the redemption of Initial Shares as described above, the issuance of theH-D
Backstop Shares and the consummation of the PIPE Investments, there are currently 202,402,888 shares of LiveWire Common Stock issued and outstanding.Business Prior to the Business Combination
As of September 25, 2022, the Company had not commenced any operations. All activity for the period from July 29, 2020 (inception) through September 25, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a business combination. The Company did not generate any operating revenues prior to the completion of the Business Combination, which closed on September 26, 2022. The Company, prior to the closing of the Business Combination, generatednon-operating
income in the form of interest income from the investments held in the Trust Account (as defined below).The registration statement for the Company’s Initial Public Offering was declared effective on October 1, 2020. On October 5, 2020 the Company consummated the Initial Public Offering of 40,000,000
units (the “Units” and, with respect to the
Class A ordinary shares included
in the Units sold, the “Public Shares”), generating gross proceeds of $
400,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 10,500,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $10,500,000, which is described in Note 4.
Transaction costs amounted to $21,292,016, consisting of $7,275,000 of underwriting fees (net of expenses reimbursed by the underwriter of $225,000), $13,125,000 of deferred underwriting fees and $892,016 of other offering costs.
Following the closing of the Initial Public Offering on October 5, 2020, an amount of $400,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions underRule 2a-7
of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earliest of: (i) the completion of a business combination and (ii) the distribution of the funds in the Trust Account to the Company’s, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At September 25, 2022, the Company had $240,329
At September 25, 2022, the Company hasin restricted cash which is to only be used to pay stockholders as a result of redemptions from the Business Combination, to pay the deferred underwriting fee payable, and the remainder is to fund the Business Combination.
Until the consummationpart of the Business Combination, the Company, usedwhich included LiveWire branded electric motorcycles and STACYC, became a separate, publicly traded company.
For the funds not heldthree months ended March 31, 2024, the Company’s net loss was $23,644 thousand compared to $21,147 thousand for the three months ended March 31, 2023. The Company’s net losses reflect the early-stage nature of the Company’s business. The increase in net losses of $2,497 thousand in 2024 reflect the segment results discussed below and a decrease of $676 thousand in interest income, offset by an increase of $3,690 thousand of non-operating income related to the decrease in fair value of the outstanding warrants as of March 31, 2024 as compared to prior year.
For the three months ended March 31, 2024, the Electric Motorcycles segment operating loss was $29,007 thousand, compared to an operating loss of $24,769 thousand for the three months ended March 31, 2023. The increase in operating loss of $4,238 thousand resulted from a decrease in revenue due to product mix and a revised structure around our retail partners in the Trust Accountfirst quarter of 2024, which introduced new incentives, and an increase in cost of sales resulting from increased net realizable value adjustments, volumes and depreciation expense. Refer to the Electric Motorcycles segment analysis below for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selectingfurther discussion.
For the target businessthree months ended March 31, 2024, the STACYC segment operating loss was $1,415 thousand, as compared to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessmentan operating loss of
going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update(“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete a business combination by October 5, 2022, then the Company would cease all operations except$138 thousand for the
purposethree months ended March 31, 2023. The increase in operating loss of
liquidating. As$1,277 thousand was primarily related to a
result ofdecrease in volumes to our independent distributors. Refer to the
consummation of the Business Combination on September 26, 2022, the Company’s existing going concern consideration has been alleviated.NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION
TheIn the opinion of the Company’s management, the accompanying unaudited condensedinterim consolidated financial statements have been prepared in accordance with accounting principles generally accepted incontain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the United Statesconsolidated balance sheet as of America (“U.S. GAAP”)March 31, 2024 and the consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for interim financial informationthe three month periods ended March 31, 2024 and in accordance with the instructions to Form2023.
10-Q
and Article 8 of RegulationS-X
of the Securities and Exchange Commission (“SEC”). Certain information
or footnoteand disclosures normally included in
complete financial statements
prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the
SECUnited States Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting.
Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanyingThese unaudited
condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form
10-K
for the
periodyear ended December 31,
2021, as filed with the SEC on March 25, 2022. The interim results for the three and nine months ended September 25, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.2023.The Company operates on a calendar year with each year ending on December 31 of each respective year. Prior to the third quarter of 2022, the Company’s interim fiscal quarters ended on the calendar quarter. To align with the fiscal calendar of the Legacy LiveWire as part of the Business Combination, the Company revised its third quarter to end on September 25, 2022 and retrospectively adjusted the prior year for third quarter of 2021 to end on September 26, 2021. The March 31 and June 30 periods presented herein have not been adjusted. For presentation purposes, these unaudited condensed consolidated financial statements present periods referred to as the three and nine months ended September 25, 2022 and September 26, 2021, although they do not reflect a true calendar three month or calendar nine months by a few days. Given the nature of the Company’s business, this presentation does not have any material impact to the Company’s financial position, operating results and cash flows for all periods presented.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply tonon-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atin the date of theconsolidated financial statements and the reported amounts of revenues and expenses duringaccompanying notes. Actual results could differ from those estimates. All intercompany transactions within the reporting period.Company have been eliminated in preparing the consolidated financial statements.
2. New Accounting Standards
Making estimates requires management
Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to exerciseReportable Segment Disclosures (ASU 2023-07). ASU 2023-07 is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant judgment. It is at least reasonably possiblesegment expenses. The main provisions of ASU 2023-07 require a public entity to disclose on an annual and interim basis: (i) significant segment expenses provided to the chief operating decision maker, (ii) an amount representing the difference between segment revenue less segment expenses disclosed under the significant segment expense principle and each reported measure of segment profit or loss and a description of its composition, (iii) provide all annual disclosures about a reportable segment's profit or loss and assets currently required under Topic 280 in interim periods, (iv) clarify that if the estimate of the effectchief operating decision maker uses more than one measure of a condition, situationsegment's profit or set of circumstances that existed at the date of the financial statements, which management consideredloss in formulating its estimate, could change in the near term dueassessing segment performance and deciding how to allocate resources, a public entity may report one or more future confirming events. Accordingly,of those additional measures of segment profit, (v) the actual results could differ significantly from those estimates.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Investments Held in Trust Account
The Company’s portfolio of investments held in trustwa
s substantially comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)title and position of the
Investment Company Act,chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (vi) all disclosures required by ASU 2023-07 and all existing segment disclosures under Topic 280 for an entity with a
maturity of 185days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof, which are classified as trading securities. Trading securities are presentedsingle reportable segment. The new guidance is effective for the fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is still evaluating the impact ASU 2023-07 will have on the balance sheet at fair value atCompany's consolidated financial statement disclosures.
In December 2023, the endFASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of each reporting period. Gains and losses resulting from the change in fair valueincome tax disclosures. The main provisions of these investments are included in income earnedASU 2023-09 require a public entity to disclose on investments in Trust Accountan annual basis (i) specific prescribed categories in the accompanying unaudited condensed consolidated statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
At September 25, 2022 restricted cash consists of funds restrictedrate reconciliation, (ii) provide additional information for the payment of redemptions, payment of deferred underwriting fees, and the remainder is only to be used to fund the Business Combination.
Offering costs consisted of legal, accounting, and other expenses incurred through the balance sheets datereconciling items that
are directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering onmeet a
relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred in the unaudited condensed consolidated statements of operations. Offering costs associated with the Class A issued were initially charged to temporary equity and then accreted to permanent equity upon the completion of the Initial Public Offering. Offering costs amounted to $21,292,016, of which $20,292,642 were charged to temporary equity upon the completion of the Initial Public Offering on October 5, 2020, and $999,374 was expensed in the unaudited condensed consolidated statements of operations.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to the FASB Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The Company accounts for the Public Warrants and Private Placement Warrants (together with the Public Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815 under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value at each reporting period. This liability is subject tore-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available were valued using a binomial lattice model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.Equity Instruments Subject to Possible Redemption
The Company accounts for its equity instruments (ordinary shares or common stock subsequent to the Domestication) subject to possible redemption in accordance with the guidance in ASC 480. Equity instruments subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable equity instruments (including equity instruments that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, equity instruments are classified as stockholders’ or shareholders’ equity. The Company’s equity instruments feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2021
40,000,000
Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed consolidated balance sheet. As noted in Note 1, on September 16, 2022, Holders of
Class A ordinary shares properly exercised their right to have such shares redeemed and were recorded as a mandatorily redeemable ordinary shares liability in the Company’s condensed consolidated balance sheet. The remainder of the Class A ordinary shares are no longer redeemable and were recorded in the shareholders’ equity section of the Company’s condensed consolidated balance sheet.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable equity instruments to equal the redemption value at the end of each reporting period. As of December 31, 2021, t
here was
nochange to the redemption value of the
At September 25, 2022, and December 31, 2021, the common stock and Class A ordinary shares,respectively
,reflected
in the condensed consolidated balance sheets are reconciled in the following table: | | | | |
| | $ | 400,000,000 | |
| | | | |
Proceeds allocated to Public Warrants | | | (18,400,000 | ) |
Class A ordinary shares issuance costs
| | | (20,292,642 | ) |
| | | | |
Accretion of carrying value to redemption value | | | 38,692,642 | |
| | | | | |
Class A ordinary shares subject to possible redemption (December 31, 2021)
| | | | |
| | | | |
Accretion of carrying value to redemption value | | | 2,367,209 | |
| | | | |
| | | (368,136,945 | ) |
Class A ordinary shares no longer redeemable
| | | (34,230,264 | ) |
| | | | | |
Common stock subject to possible redemption (September 25, 2022)
| | | | |
| | | | | |
For the period from July 29, 2020 (inception) to September 22, 2022, the Company was considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and was not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero for the period from July 29, 2020 (inception) to September 22, 2022. Pursuant to the terms of the Business Combination Agreement, on September 23, 2022, the Company migrated to and domesticated as a Delaware corporation. The Company determined thatquantitative threshold, (iii) the amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes, (iv) the amount of income taxes paid, net of refunds received, disaggregated by individual jurisdictions in which income taxes paid is equal to greater than 5 percent of total income taxes paid, (v) income or loss from continuing operations before income tax for the periodexpense or benefit disaggregated between domestic and foreign, and (vi) income tax expense or benefit from September 23, 2022 to September 25, 2022 was considered to be immaterial.
ASC Topic 740, “Income Taxes,” prescribes a recognition thresholdcontinuing operations disaggregated by federal, state, and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penaltiesforeign. ASU 2023-09 also removes certain disclosure requirements related to unrecognized tax benefits as income tax expense. As of September 25, 2022 there were noand cumulative unrecognized tax benefits and no amounts accruedtemporary differences. The new guidance is effective for interest and penalties.the fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
still evaluating the impact ASU 2023-09 will have on the Company's consolidated financialASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
3. Revenue
The Company recognizes accrued interestrevenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.
Disaggregated revenue, net by major source was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Electric motorcycles | $ | 1,007 | | | $ | 1,411 | | | | | |
| Parts, accessories and apparel | 237 | | | 71 | | | | | |
| $ | 1,244 | | | $ | 1,482 | | | | | |
| STACYC | | | | | | | |
| Electric balance bikes | $ | 2,616 | | | $ | 5,508 | | | | | |
| Parts, accessories and apparel | 1,118 | | | 772 | | | | | |
| $ | 3,734 | | | $ | 6,280 | | | | | |
| Total Revenue, net | $ | 4,978 | | | $ | 7,762 | | | | | |
Revenue from the sale of LiveWire One electric motorcycles, electric balance bikes as well as parts and penaltiesaccessories and apparel are recorded when control is transferred to the customer, generally at the time of shipment to independent dealers and distributors or at the time of delivery to retail customers. S2 electric motorcycles, being motorcycles produced from LiveWire’s S2 platform using the Arrow Architecture model, contain two performance obligations, which is the sale of the electric motorcycle and a stand ready obligation to transfer Firmware Over The Air (“FOTA”) software updates to the electric motorcycle, when-and-if available, to the customer. Revenue on the sale of the S2 electric motorcycles is recorded at a point-in-time when control is transferred to the customer. As the unspecified FOTA software updates to S2 electric motorcycles are provided when-and-if they become available, revenue related to unrecognized tax benefitsthese updates is recognized ratably over the period the updates will be provided, estimated by management to be five years, commencing when control of the electric motorcycle is transferred to the customer. The standalone selling prices of performance obligations are estimated by considering costs to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The Company allocates the transaction price among the performance obligations in proportion to the standalone selling price of the Company’s performance obligations.
The Company offers sales incentive programs to independent dealers and retail customers designed to promote the sale of its products. The Company estimates its variable consideration related to its sales incentive programs using the expected value method. The Company accounts for consideration payable to a customer as part of its sales incentives as a reduction of revenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and communicated. Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes, or the consideration becomes fixed. During the first quarter of 2024, the Company revised its retail partner strategy and introduced new incentives with its retail partners resulting in $419 thousand of adjustments for variable consideration related to previously recognized sales. Adjustments for variable consideration for the three months ended March 31, 2023 were not material.
The Company offers the right to return eligible parts and accessories and apparel and, in limited circumstances, on electric motorcycles. The Company estimates returns based on an analysis of historical trends and probability of returns and records revenue on the initial sale only in the amount that it expects to be entitled. The remaining consideration is deferred in a refund liability account. The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue. The Company records a refund asset at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value as a reduction to cost of goods sold. This amount is monitored and adjusted for impairment as necessary. The Company had a refund asset of $264 thousand and $299 thousand at March 31, 2024 and December 31, 2023, respectively. The Company had a refund liability of $292 thousand and $327 thousand at March 31, 2024 and December 31, 2023, respectively.
Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs in Cost of goods sold. The Company accrues for the shipping and handling in the same period that the related revenue is recognized.
The Company offers standard, limited warranties on its electric motorcycles, electric balance bikes, and parts and accessories. These warranties provide assurance that the product will function as expected and are not separate performance obligations. The Company accounts for estimated warranty costs as a liability when control of the product transfers to the customer.
Contract Liabilities
The Company maintains certain contract liability balances related to payments received at contract inception in advance of the Company’s performance under the contract that generally relates to customer deposits for electric balance bikes and electric motorcycles and consideration received upon transfer of control of the S2 motorcycles for FOTA software updates. Contract liabilities are recognized as revenue once the Company performs under the contract. The current portion of contract liabilities of $310 thousand and $214 thousand were included in Accrued liabilities and the long-term portion of contract liabilities of $281 thousand and $245 thousand were included in Other long-term liabilities in the Company's Consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively. The Company expects to recognize $310 thousand included in Accrued Liabilities as of March 31, 2024 over the next twelve months. The Company expects to recognize $281 thousand included in Other long-term liabilities at March 31, 2024 over the next five years.
Previously deferred revenue recognized as revenue in the three months ended March 31, 2024 and March 31, 2023 was $70 thousand and $78 thousand, respectively.
4. Income Taxes
TheCompany’s effective income tax expense. There were no unrecognizedrate was 0% for each of the three months ended March 31, 2024 and 2023.
The Company’s effective tax benefits and no amounts accruedrate for interest and penaltieseach period differs from the U.S. statutory rate of 21% as the Company is not recognizing an income tax benefit related to the losses generated as there is not sufficient positive evidence regarding the ability to realize the benefit of September 25, 2022. these losses.
5. Earnings Per Share
The Company is currently not aware of any issues under review that could resultcomputes earnings per share (“EPS”) in significant payments, accruals or material deviation from its position.
Net Income (Loss) Per Commonaccordance with ASC 260, Earnings per Share and Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per common share or ordinary share. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted averageweighted-average number of shares of common stock or ordinaryoutstanding. Diluted EPS is computed using the weighted-average number of shares outstanding for the periods presented. Accretion associated with the redeemableof common stock, or Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The calculation of diluted income (loss) per common share or ordinary share does not considerplus the effect of
theWarrants
issued in connection withpotentially dilutive securities. The Company applies the
(i) Initial Public Offering,treasury method to calculate the dilution impact of share-based awards- restricted stock, performance share units, and
(ii) the private placement since the exercise of the Warrants is contingent upon the occurrence of future events. The Warrants are exercisable to purchasecommon stock or Class A ordinary shares in the aggregate. As of September 25, 2022 and September 26, 2021,warrants. Because the Company
did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock or Class A ordinary shares and then share in the earnings of the Company. Ashas reported a
result,net loss for all periods presented, diluted net
income (loss)loss per
common stock or ordinary share is the same as basic net
income (loss)loss per
common share
or ordinary share foras all of the
periods presented.potentially dilutive shares were anti-dilutive in those periods.
The following table reflects the calculationComputation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Net loss | $ | (23,644) | | | $ | (21,147) | | | | | |
| | | | | | | |
| Basic weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
| Effect of dilutive securities – warrants | — | | | — | | | | | |
| Effect of dilutive securities – employee stock compensation awards | — | | | — | | | | | |
| Diluted weighted-average shares outstanding | 203,100 | | | 202,404 | | | | | |
Earnings per share (1): | | | | | | | |
| Basic | $ | (0.12) | | | $ | (0.10) | | | | | |
| Diluted | $ | (0.12) | | | $ | (0.10) | | | | | |
(1) Earnings per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding
Diluted net income (loss)loss per share is computed by giving effect to all potential shares of common stock, or ordinary share (in dollars, except share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Basic and diluted net income per common share or ordinary share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 568,473 | | | | | | | $ | 4,361,457 | | | $ | 1,090,364 | | | | 21,655,622 | | | | | | | $ | 18,016,741 | | | $ | 4,504,185 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 45,912,405 | | | | | | | | 40,000,000 | | | | 10,000,000 | | | | 48,612,048 | | | | | | | | 40,000,000 | | | | 10,000,000 | |
| Basic and diluted net income per common share | | $ | 0.01 | | | | | | | $ | 0.11 | | | $ | 0.11 | | | $ | 0.45 | | | | | | | $ | 0.45 | | | $ | 0.45 | |
(1) | Net income of $3,892,215 and $24,979,364 for the three and nine months ended September 25, 2022, respectively, was reduced by the interest on mandatorily redeemable Class A ordinary shares of $3,323,742 for both periods for earnings per share purposes.
|
(2) | For the three and nine months ended September 25, 2022, the weighted average shares outstanding includes the period of time previous to the Domestication when the Company had Class A and Class B ordinary shares outstanding.
|
As of September 25, 2022 and September 26, 2021, basic and diluted shares are the same as there are nonon-redeemable
securities that are dilutive to the
Company’s stockholdersextent dilutive, including unvested restricted stock units (“RSUs”), unvested performance share units (“PSUs”), and Warrants (as defined in Note 7, Warrant Liabilities). Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the periods presented or
shareholders.Concentrationif the issuance of Credit Risk
Financial instrumentsshares is contingent upon events that potentially subjectdid not occur by the Company to concentrationsend of credit risk consistthe period. For the three months ended March 31, 2024 and 2023, 3,118 thousand and 3,129 thousand employee stock compensation plan awards, respectively, were excluded from the computation of a cash account in a financial institution, which, at times, may exceeddiluted net loss per share because the Federal Deposit Insurance Corporation coverage limiteffect would have been anti-dilutive. For the three months ended March 31, 2024 and 2023, 30,365 thousand and 30,500 thousand warrants, respectively, were excluded from the computation of $250,000. Thediluted net loss per share because the effect would have been anti-dilutive. Additionally, the Company has not experienced losses on this accountincluded the impact of the Earn-Out Shares, discussed in Note 1, Description of Business and management believesBasis of Presentation, in the Company iscalculation of EPS as the triggering events have not exposed to significant risks on such account.occurred.
Fair Value of Financial Instruments
12
6. Additional Balance Sheet Information
Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method for electric motorcycles and related products and average costing method for electric balance bikes. Inventories, net consisted of the Company’s assetsfollowing (in thousands):
| | | | | | | | | | | |
| March 31,
2024 | | December 31,
2023 |
| Raw materials and work in process | $ | — | | | $ | 486 | |
| Electric motorcycles and electric balance bikes | 32,317 | | | 28,205 | |
| Parts and accessories and apparel | 2,788 | | | 3,431 | |
| Inventories, net | $ | 35,105 | | | $ | 32,122 | |
Accrued liabilities primarily include accrued capital expenditures of $3,768 thousand, accrued payroll and liabilities, excluding the warrant liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s condensed consolidated balance sheets, primarily due to their short-term nature. Asemployee benefits of September 25, 2022 and December 31, 2021, the carrying values of cash, accounts payable$3,632 thousand, and accrued expenses approximate their fair values due to the short-term natureengineering costs of the instruments. The Company’s portfolio$3,319 thousand as of investments held in the Trust AccountMarch 31, 2024. Accrued liabilities primarily include accrued capital expenditures of $4,933 thousand, accrued payroll and employee benefits of $7,077 thousand, and accrued engineering costs of $5,215 thousand as of December 31, 2021 was comprised of investments in money market funds that invested in U.S. Treasury securities with an original maturity
2023.185
days or less. The fair value for trading securities is determined using quoted market prices in active markets. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a binomial lattice model. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
On October 5, 2020, pursuant to the Initial Public Offering, the Company sold 40,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one Class Ashare andone-half
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class Ashare at an exercise price of $11.50 per whole share (see Note 8).NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 10,500,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $10,500,000. Each Private Placement Warrant is exercisable to purchase one Class Ashare at a price of $11.50 per share, subject to adjustment (see Note 8). A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account.NOTE 5 — RELATED PARTY TRANSACTIONS FOUNDER SHARES
On July 29, 2020, the Sponsor paid $25,000 to cover certain offering and formation costs of the Company in consideration for 11,500,000 Class Bshares (the “Founder Shares”). On August 4, 2020, the Company effected a share dividend resulting in 14,375,000 Class Bshares being issued and outstanding. On September 14, 2020, the Sponsor irrevocably surrendered to the Company for cancellation and for nil consideration 2,875,000 Class B shares resulting in the Sponsor holding 11,500,000 Class Bshares. All share andper-share
amounts have been retroactively restated to reflect the share transactions. The Founder Shares include an aggregate of up to 1,500,000 shares that are subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised, so that the number of Founder Shares will equal, on anas-converted
basis, approximately 20% of the Company’s issued and outstanding shares after the Initial Public Offering. On November 16, 2020, the underwriters’ election to exercise their over-allotment option expired unexercised, resulting in the forfeiture of 1,500,000shares. Accordingly, previous to the Domestication, there we
re 10,000,000Founder Shares issued and outstanding.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) one year after the completion of a business combination and (B) subsequent to a business combination, (x) if the closing price of the Class A ordinary share equals or exceed
12.00per share (as adjusted for sharesub-divisions,
share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any30-trading
day period commencing at least 150 days after a business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary share for cash, securities or other property.In connection with the Business Combination,
on September 23
, 2022, the Sponsor forfeited an aggregate of 2,000,000 Founder Shares in accordance with the Investor Support Agreement. Upon
the closingconsummation of the Business Combination, the
remaining 8,000,000Founder Shares (now shares of common stock of Domesticated ABIC) were converted on abasis into shares of LiveWire Common Stock.
(successorCompany assumed 30,499,990 Warrants to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Administrative Services Agreement
The Company entered into an agreement, commencing on October 5, 2020, to pay an affiliate of the Sponsor up to an amount not to exceed $10,000 per month for office space, secretarial and administrative support services. Upon completion of a business combination or its liquidation, the Company will cease paying these monthly fees. For the three and nine months ended September 25, 2022, the Company incurred $30,000 and $90,000 in fees for these services, respectively. For the three and nine months ended September 26, 2021, the Company incurred $30,000 and $90,000 in fees for these services, respectively.
As of September 25, 2022,
the Sponsor has agreed to forgive the entirety of the accrued administrative services fee which totaled $230,000.
The forgiveness of this obligation is reflected in the other income section of the statement of operations.
In order to finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or certain ofpurchase the Company’s officersCommon Stock, comprised of 19,999,990 public warrants, originally issued by ABIC as part of ABIC’s IPO of units (the “Public Warrants”) and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion10,500,000 of outstanding warrants originally issued in a business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a business combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 25, 2022 and December 31, 2021, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 6 — COMMITMENTS AND CONTINGENCIES RISKS AND UNCERTAINTIES
Management continues to evaluate the impact of theCOVID-19
global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.Registration and Shareholders Rights
Pursuant to a registration rights agreement entered into on October 5, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights. The holders of these securities well be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and Shareholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurredprivate placement in connection with the filingIPO of any such registration statements.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $13,125,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement. An affiliate of the Sponsor has purchased 2,500,000
Public Units atABIC (the “Private Placement Warrants”, collectively with the Public
Offering Price. In connection withWarrants, the
closing of the Business Combination, the underwriters have agreed to reduce the amount of their deferred fees by $3,748,361, which is shown in the condensed consolidated statement of operations
as forgiveness of deferred underwriting fee payable. As a result of the reduction, the outstanding deferred underwriting fee payable was reduced to$9,376,638.
NOTE 7 — STOCKHOLDERS’ EQUITY (DEFICIT)/SHAREHOLDERS’ DEFICIT
—“Warrants”). The
Company was authorized toissue
5,000,000preference shares with a par value of $
0.0001per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
At December 31, 2021, there
were
nopreference shares issued or outstanding.
—The Companywa
s authorized to issue 500,000,000 Class Aordinary shares
, with a par value of $0.0001 per share. Holders of Class Acommon stock
are entitled to one vote for each share. Accordingly, at December 31, 2021, 40,000,000 Class Aordinary shares
subject to possible redemption, respectively, are presented at redemption value as temporary equity, outside of thedeficit section of the Company’s condensed consolidated balance sheet. As noted in Note 1, Holders of 36,597,112ordinary shares
properly exercised their right to have such shares redeemed and were recorded as a Mandatorily redeemable Class A
ordinary shares
liability in the Company’s condensed consolidated balance sheet. The remainder of the Class A
ordinary shares
are no longer redeemable and were recorded in the
section of the Company’s condensed consolidated balance sheet.
—The Companywa
s authorized to issue50,000,000 Class Bordinary shares
, with a par value of $0.0001per share. Holders of the Class B
ordinary shares
one votefor each share. At December 31, 2021, there were
10,000,000ordinary shares
Only holders of the Class B
ordinary shares
will have the right to vote on the election of directors prior to a business combination. Holders of Class A
ordinary shares
ordinary shares
will vote together as a single class on all other matters submitted to a vote of
shareholders
, except as required by law.
The Class B ordinary shares will automatically
convert into Class A
ordinary shares
at the time of a business combination or earlier at the option of the holders thereof at a ratio such that the number of Class A
ordinary shares
issuable upon conversion of all Founder Shares will equal, in the aggregate, on anas-converted
basis,20% of the sum of (i) the total number of
ordinary shares
issued and outstanding upon completion of Initial Public Offering, plus (ii) the total number of Class A
ordinary shares
issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a business combination, excluding any Class A
ordinary shares
or equity-linked securities exercisable for or convertible into Class A
ordinary shares
issued, deemed issued, or to be issued, to any seller in a business combination and any Private Placement Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans. In no event will the Class B
ordinary shares
convert into Class A
ordinary shares
—The Company is authorized to issue 20,000,000 preferred shares with a par value of $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 25, 2022, there was no preferred stock issued or outstanding.
—The Company is authorized to issue 800,000,000 shares of common stock, with a par value of $0.0001 per share. Holders of the common stock are entitled to one vote for each share. At September 25, 2022 there were 11,402,888 shares of common stock issued and outstanding.
NOTE 8 — DERIVATIVE WARRANT LIABILITIES
At September 25, 2022 and December 31, 2021, there were 20,000,000 Public Warrants outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a business combination and (b) one year from the closing of the Initial Public Offering. The Public Warrants will expire five years from the completion of the Business Combination. There were 19,865,207 Public Warrants outstanding as of March 31, 2024 and December 31, 2023, respectively, and 10,500,000 Private Warrants outstanding as of March 31, 2024 and December 31, 2023.
Each Warrant entitles the registered holder to purchase one share of Common Stock at a business combinationprice of $11.50 per share. A Warrant holder may exercise its Warrants only for a whole number of shares of Common Stock. This means only a whole Warrant may be exercised at a given time by a Warrant holder. No fractional Warrants were issued upon separation of the units and only whole warrants trade. The Company will receive the proceeds from the exercise of any warrants in cash. The Warrants will expire five years after the completion of the Business Combination, or earlier upon redemption or liquidation.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary shares issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of a business combination, it will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a business combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its commercially reasonable efforts to register or qualify the stock under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonable efforts to register or qualify the stock under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrantsWarrants when the price per Class
Common Stock share equals or exceeds $
Once the warrants become exercisable, the18.00: The Company may redeem the outstanding warrantsWarrants (except as described with respect to the Private Placement Warrants):
•in whole and not in part;
•at a price of $0.01
$0.01 per warrant; •upon not less than 30 days’ prior written notice of redemption; and
•if, and only if, the reported last sales price of the Company’s Class Aordinary shares
Common Stock equals or exceeds $18.00 per share for any 20 trading days within a30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrantWarrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Redemption of warrantsWarrants when the price per Class
Common Stock share equals or exceeds $
. $10.00: Once the warrantsWarrants become exercisable, the Company may redeem the outstanding warrants:Warrants:•in whole and not in part;
•at $0.10 per Warrant upon a price equalminimum 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of Class A
ordinary shares
determined by reference to be determined,the agreed table, based on the redemption date and the fair“fair market valuevalue” of the Company’s Class A
Common Stock;ordinary shares
upon a minimum of 30 days’ prior written notice of redemption;
•if, and only if, the last reported saleclosing price of the Company’s Class A ordinary shares
of Common Stock equals or exceeds $10.00 per share (as adjusted for
share splits, share dividends, reorganizations, recapitalizationsadjustments to the number of shares issuable upon exercise or the exercise price of a Warrant) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the Warrant holders; and
•if the like)closing price of the shares of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sendswe send the notice of redemption to the warrant holders;
if, and only if,Warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant), the Private Placement Warrants aremust also be concurrently exchanged atcalled for redemption on the same price (equal to a number of Class A
ordinary shares
)terms as the outstanding Public Warrants; and
if, and only if, there is an effective registration statement covering the Class Aordinary shares
issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the30-day
period after written notice of redemption is given. If the Company calls the Public Warrants, for redemption, as described above, its management willabove.
Private Placement Warrants
The Private Placement Warrants have the optionterms and provisions that are similar to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercisethose of the Public Warrants, may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a business combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional Class A
ordinary shares
or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $
9.20
ordinary shares
with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than
60
% of the total equity proceeds, and interest thereon, available for the funding of a business combination on the date of the consummation of a business combination (net of redemptions), and (z) the volume weighted average trading price of its Class A
ordinary shares
during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price, of the warrants will be adjusted (to the nearest cent) to be equal to
115
% of the higher of the Market Valueexercisability and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to
180%
of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At September 25, 2022 and December 31, 2021, there were 10,500,000Private Placement Warrants outstanding.exercise period. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A
ordinary shares
issuable upon the exercise of the Private Placement Warrants will not be
transferable, assignable or salable until 30 days afterredeemable by the
completion of a business combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and benon-redeemable,
except as described above,Company so long as they are
(i) held by the initial purchasers
of the Private Placement Warrants or
theirits permitted
transferees.transferees and (ii) the reference value exceeds $18.00 per share. The initial Private Placement Warrant purchasers, or its permitted transferees, have the option to exercise the Private Placement Warrants on a cashless basis if the reference value is between $10.00 and $18.00. If the Private Placement Warrants are held by
someoneholders other than
the initial purchasersAEA-Bridges Impact Sponsor, LLC (the “Sponsor”) or theirits permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by suchthe holders on the same basis as the Public Warrants.NOTE 9 — FAIR VALUE MEASUREMENTS
During the three months ended March 31, 2024 and 2023, there were no redemptions or exercises of the Public Warrants or Private Warrants.
During the three months ended March 31, 2024 and 2023, the Company recognized income of $4,758 thousand and $1,068 thousand, respectively, as a change in fair value of warrant liabilities in the Consolidated statements of operations and comprehensive loss. The Company determined the Public Warrants and Private Placement Warrants do not meet the criteria to be classified in stockholders’ equity and the fair value of the warrants should be classified as a liability. The Company’s financialWarrant liability was $7,561 thousand and $12,319 thousand as of March 31, 2024 and December 31, 2023, respectively.
8. Fair Value
The Company assesses the inputs used to measure fair value using a three-tier hierarchy.
•Level 1 inputs include quoted prices for identical instruments and are the most observable.
•Level 2 inputs include quoted prices for similar assets and liabilities reflects management’s estimate of amounts thatobservable inputs.
•Level 3 inputs are not observable in the Company would have received in connection withmarket and include the sale ofCompany’s judgments about the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based onuse in pricing the observable inputs and unobservable inputs used in order to value the assets and liabilities:
asset or liability. | Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
| Level 3: | Unobservable inputs based on an assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The Company classifies its U.S. Treasury and equivalent securities asin accordance with ASC Topic 320 “Investments—Debt and Equity Securities.”securities are those securities which the Company has the ability and intent to hold until maturity.treasury securities are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.At December 31, 2021, assets held in the Trust Account were comprised of $549 in cash and $400,248,942 in U.S. Treasury securities, respectively. Following the maturity date of April 14, 2022, the Company subsequently reinvested its holdings in the Trust Account into money market funds. During the period ended September 25, 2022 and December 31, 2021, the Company did not withdraw any interest income from the Trust Account.
(successor to AEA-Bridges Impact Corp.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
following table presents information about the gross holding gains and fair value ofsecurities at December 31, 2021 as follows: | | | | | | | | | | | | | | |
| | | | | | | |
| | |
| |
| | U.S. Treasury Securities (Matured on January 13, 2022) | | $ | 400,248,942 | | | $ | 3,389 | | | $ | 400,252,331 | |
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, at September 25, 2022 and December 31, 2021, and indicatesaggregated by the level in the fair value hierarchy within which those measurements fall, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 135,000 | | | $ | — | | | $ | — | | | $ | 135,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 4,946 | | | $ | — | | | $ | — | | | $ | 4,946 | |
| Private Placement Warrants | — | | | 2,615 | | | — | | | 2,615 | |
| Share-based awards settled in cash | 666 | | | — | | | — | | | 666 | |
| $ | 5,612 | | | $ | 2,615 | | | $ | — | | | $ | 8,227 | |
| | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | 161,000 | | | $ | — | | | $ | — | | | $ | 161,000 | |
| Liabilities: | | | | | | | |
| Public Warrants | $ | 8,059 | | | $ | — | | | $ | — | | | $ | 8,059 | |
| Private Placement Warrants | — | | | 4,260 | | | — | | | 4,260 | |
| Share-based awards settled in cash | 1,268 | | | — | | | — | | | 1,268 | |
| $ | 9,327 | | | $ | 4,260 | | | $ | — | | | $ | 13,587 | |
There were no significant assets or liabilities on the Company’s Consolidated balance sheets measured at fair value on a nonrecurring basis.
Recurring Fair Value Measurements
Money Market Funds
Money market funds include highly liquid investments with an original maturity of the valuation inputs the Company utilized to determine such fair value:
| | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | |
Warrant Liabilities– Public Warrants | | | 1 | | | $ | 8,800,000 | | | $ | 22,700,000 | |
Warrant Liabilities– Private Placement Warrants | | | 2 | | | $ | 4,620,000 | | | $ | 11,917,500 | |
The Warrants were accounted for as liabilities in accordance with ASC 815three or fewer months and are presented within derivative warrant liabilitiesCash and cash equivalents in the accompanying condensed consolidatedConsolidated balance sheets. The derivative warrant liabilitiesThey are measured atvalued using quoted market prices in active markets and are classified under Level 1 within the fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of derivative warrant liabilities in the condensed consolidated statements of operations.
hierarchy.
Warrant Liabilities
The Public Warrants were valued as of at initial measurement using a binomial lattice model, which is considered to be a Level 3 fair value measurement. The binomial lattice model’s primary unobservable input utilized in determiningare publicly traded under the symbol “LVWR WS” and the fair value of the Public Warrants at a specific date is determined by the expected volatility of the common stock. The expected volatility as of the Initial Public Offering date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. For periods subsequent to the detachmentclosing price of the Public Warrants from the Units, the close priceas of that date. As such, the Public Warrant price was used asWarrants are classified within Level 1 of the fair value for the Warrants as of each relevant date.hierarchy. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units are classified as Level 1 due to the use of an observable market quote in an active market. The subsequent measurementsfair value of the Private Placement Warrants afterwas determined using the detachmentclosing price of the Public Warrants fromas the Units isPrivate Placement Warrants have terms and provisions that are economically similar to those of the Public Warrants. The Private Placement Warrants are classified as Level 2 of the fair value hierarchy due to the use of an observable market quote for a similar asset in an active market.
Share-based awards settled in cash
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent eventsShare-based awards settled in cash represent grants of share-based awards that will be settled with employees in cash and transactions that occurred afterare presented within Accrued liabilities and Other long-term liabilities in the unaudited condensed consolidatedConsolidated balance sheets. They are valued using the market price of the Company’s and Harley-Davidson, Inc.’s stock and are remeasured at each balance sheet date upand are classified under Level 1 under the fair value hierarchy.
Other Fair Value Measurements
The fair value of financial instruments classified as Cash and cash equivalents, Accounts receivable, net, and Accounts payable on the Consolidated balance sheets approximate carrying value due to the dateshort-term nature and the relative liquidity of the instruments.
9. Product Warranty and Recall Campaigns
The Company provides a limited warranty on new electric motorcycles for a period of two years, except for the battery which is covered for five years. The Company also provides limited warranties on parts and accessories and electric balance bikes. The warranty coverage for the retail customer generally begins when the product is sold to the retail customer. The Company accrues for future warranty claims at the time of sale by the Company using an estimated cost based primarily on historical Company claim information. In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.
Additionally, the Company may from time-to-time initiate certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company’s management approves and commits to a recall. The warranty and recall liability are included in Accrued liabilities and Other long-term liabilitieson the Consolidated balance sheets.
Changes in the Company’s warranty and recall liability were as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Balance, beginning of period | $ | 1,011 | | | $ | 566 | | | | | |
| Warranties issued during the period | 122 | | | 69 | | | | | |
| Settlements made during the period | (265) | | | (32) | | | | | |
| | | | | | | |
| Recalls and changes to pre-existing warranty liabilities | 14 | | | (3) | | | | | |
| Balance, end of period | $ | 882 | | | $ | 600 | | | | | |
The liability for recall campaigns included in the above table was $78 thousand and zero as of March 31, 2024 and December 31, 2023, respectively.
10. Commitments and Contingencies
Contingencies – The Company is subject to claims related to product and other commercial matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 9, Product Warranty and Recall Campaigns, for a discussion of warranty and recall liabilities. The Company had no product liability claims as of March 31, 2024 and December 31, 2023.
Litigation and Other Claims – The Company from time to time may be subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters in the normal course of business. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company, through H-D, also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.
11. Related Party Transactions
In connection with the Business Combination, the Company entered into a various number of agreements with H-D to govern and provide a framework for the relationship between the parties going forward pursuant to which the Company and/or H-D have continuing obligations to each other. All transactions with H-D subsequent to the Business Combination are considered related party transactions. Agreements that the unaudited condensedCompany entered into in connection with the separation from H-D that resulted in related party transactions include the Transition Services Agreement, Master Services Agreement, Contract Manufacturing Agreement, Joint Development Agreement, and Tax Matters Agreement. Refer to Note 16, Related Party Transactions, of the consolidated financial statements were issued. Based upon this review, other than as described below,in the Company’s 2023 Form 10-K for additional details on the agreements entered into by the Company did not identify any subsequent events that would have required adjustment or disclosureas part of the Separation.
Related Party Sales and Purchases in the unaudited condensed consolidated financial statements.Ordinary Course of Business
Transactions Associated with Service Agreements with H-D
Cost of goods sold - There are $5,176 thousand and $2,047 thousand of Cost of goods sold with H-D, respectively, related to purchases from H-D, primarily electric motorcycles, under the terms of the Contract Manufacturing Agreement, on the Consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023. These purchases of electric motorcycles from H-D are sold to the Company’s customers resulting in Cost of goods sold.
Selling, administrative and engineering - During the three months ended March 31, 2024 and 2023, there were $2,948 thousand and $3,397 thousand, respectively, in expenses associated with services rendered in conjunction with the various service agreements with H-D, which are presented within Selling, administrative and engineering on the Consolidated statements of operations and comprehensive loss.
Accounts payable to related party - As of March 31, 2024 and December 31, 2023, there is $25,687 thousand and $20,371 thousand, respectively, due to H-D and presented as Accounts payable to related party on the Consolidated balance sheets. Of the amount outstanding to H-D as of March 31, 2024 and December 31, 2023, $14,140 thousand and $10,020 thousand, respectively, is associated with inventory purchased under the Contract Manufacturing Agreement and $5,340 thousand and $4,042 thousand, respectively, is associated with services under the various service agreements with H-D and $6,207 thousand and $6,309 thousand, respectively, is associated with the obligation to reimburse H-D for excess inventory components held by H-D that the Company expects to be obligated to reimburse H-D under the terms of the Contract Manufacturing Agreement. This amount represents the Company’s best estimate of the liability as of each of the balance sheet dates and is subject to adjustment based on final negotiations with H-D regarding amounts owed under the terms of the Contract Manufacturing Agreement.
Convertible Delayed Draw Term Loan Agreement
On February 14, 2024, the Company entered into a Convertible Delayed Draw Term Loan Agreement (the “Convertible Term Loan”) with H-D providing for term loans from H-D to the Company in one or more advances up to an aggregate principal amount of $100 million. The outstanding principal under the Convertible Term Loan bears interest at a floating rate per annum, as calculated by H-D as of the date of each advance and as of each June 1 and December 1 thereafter, equal to the sum of (i) the forward-looking term rate based on SOFR (i.e., the secured overnight financing rate published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate)) for a 6-month interest period, plus (ii) 4.00%. The Company may elect to pay up to 100% of the amount of any interest due by increasing the outstanding principal amount of the applicable advance. The Convertible Term Loan does not include affirmative covenants impacting the operations of the Company. The Convertible Term Loan includes negative covenants restricting the ability of the Company to incur indebtedness, create liens, sell assets, make investments, make fundamental changes, make dividends or other restricted payments and enter into affiliate transactions. The Convertible Term Loan has a maturity date of the earlier of (i) 24 months from the date of the first draw on the loan or (ii) October 31, 2026. In the event that the Convertible Term Loan cannot be settled in cash by the Company at maturity, unless otherwise agreed between the Company and H-D, the Convertible Term Loan will be converted to equity of Company at a conversion price per share of common stock of the Company equal to 90% of the volume weighted average price per share of Common Stock for the 30 trading days immediately preceding the conversion date. As of March 31, 2024, there were no amounts outstanding under the Convertible Term Loan and the Company remained in compliance with all of the existing covenants.
Other transactions
Sales of electric motorcycles and related products to independent dealers and customers are primarily financed through Harley-Davidson Financial Services (“HDFS”), a wholly owned subsidiary of H-D; therefore, the Company’s accounts receivable related to these sales are recorded in Accounts receivable from related party on the Consolidated balance sheets. Amounts financed through HDFS, not yet remitted to the Company by HDFS, are generally settled within 30 days. As of March 31, 2024 and December 31, 2023, there is $1,051 thousand and $3,351 thousand due from HDFS and other related receivables due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
During the three months ended March 31, 2024 and 2023, the Company recorded $20 thousand and $5 thousand, respectively, in related party sales between the Company and H-D with $15 thousand and $3 thousand, respectively, in Cost of goods sold. All sales were for the STACYC segment which sells electric balance bikes to H-D. As of March 31, 2024 and December 31, 2023, there was zero and $51 thousand due from H-D, which is presented as Accounts receivable from related party on the Consolidated balance sheets, respectively.
On September 26, 2022, the partiesCompany entered into a lease agreement with H-D to sublease a Product Development Center. Additionally, on August 28, 2023, the Company amended a lease agreement with H-D for office space to extend the term of the lease to a 12-month period expiring on September 26, 2024. These are classified as operating leases. As of March 31, 2024, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $233 thousand, $158 thousand, and $74 thousand, respectively. As of December 31, 2023, the right of use assets included within Lease assets, short-term lease liabilities included within Current portion of lease liabilities, and long-term lease liabilities included within Long-term portion of lease liabilities in the Consolidated balance sheets were $274 thousand, $162 thousand, and $112 thousand, respectively. In addition, the Company incurred $44 thousand in rent expense during the three months ended March 31, 2024 and 2023, which is included within Selling, administrative and engineering expense on the Consolidated statements of operations and comprehensive loss.
12. Reportable Segments
The Company operates in two segments: Electric Motorcycles and STACYC. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
The Electric Motorcycles segment consists of the business activities related to the Business Combination Agreement completeddesign and sales of electric motorcycles. The Electric Motorcycles segment also sells electric motorcycle parts, accessories, and apparel. The Company’s products are sold at wholesale to a network of independent dealers and at retail through a Company-owned dealership and through online sales, and direct to customers through select international partners primarily in Europe.
The STACYC segment consists of the Business Combination (see Note 1).
business activities related to the design and sales of the STACYC brand of electric balance bikes for kids. The STACYC segment also sells electric balance bike parts, accessories, and apparel. STACYC products are sold in the U.S., Canada, Australia and Europe. The STACYC segment products are sold through independent retail partners in the U.S. and Canada, including powersports dealers, H-D dealers, bicycle retailers and direct to customers online. In Australia and Europe, STACYC sells its products through independent distributors.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to AEA-Bridges
Impact Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to
AEA-Bridges Impact Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. CertainSelected segment information
contained in the discussion and analysisis set forth below
includes forward-looking statements that involve risks(in thousands): | | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Electric Motorcycles | | | | | | | |
| Revenue, net | $ | 1,244 | | | $ | 1,482 | | | | | |
| Cost of goods sold | 6,471 | | 2,440 | | | | |
| Selling, administrative and engineering expense | 23,780 | | 23,811 | | | | |
| Operating loss | (29,007) | | (24,769) | | | | |
| STACYC | | | | | | | |
| Revenue, net | 3,734 | | 6,280 | | | | |
| Cost of goods sold | 2,634 | | 4,058 | | | | |
| Selling, administrative and engineering expense | 2,515 | | 2,360 | | | | |
| Operating loss | (1,415) | | (138) | | | | |
| Operating loss | $ | (30,422) | | | $ | (24,907) | | | | | |
Total assets for the Electric Motorcycles and
uncertainties.Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” withinSTACYC segments were $206,479 thousand and $30,610 thousand, respectively, as of March 31, 2024 and $232,981 thousand and $33,166 thousand, respectively, as of December 31, 2023.
13. Subsequent Event
On April 24, 2024, the meaningCompany announced a plan to both relocate the operations of Section 27ALiveWire Labs, the Company’s west coast product development facility, from Mountain View, California to Milwaukee, Wisconsin and streamline headcount at the Company. The Company believes this plan will enable synergies and optimize efficiencies in product development and simplify the Company’s overall path to future profitability.
Under this plan, the Company expects to incur one-time relocation costs of $1.0 million to $1.5 million and one-time termination benefit costs of $2.0 million to $3.5 million related to the Securities ActElectric Motorcycles segment and Section 21Eexpects the vast majority to be cash charges. The Company expects to complete this plan by the end of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this September 2024.
Form 10-Q
including, without limitation, statements in this “Management’s
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” regardingOperations
The following discussion and analysis is intended to help the reader understand the Company, the Company’s financial position, business strategycondition and results of operations, and the plansCompany’s present business environment. The following discussion and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would”analysis should be read together with the accompanying unaudited consolidated financial statements and variations thereofrelated notes included elsewhere in this Quarterly Report and similar wordsthe audited consolidated financial statements and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussedrelated notes in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s2023 Annual Report on Form 10-K.
10-K
filed
Overview
LiveWire is an industry-leading all-electric vehicle brand with
a mission to pioneer the
SEC on March 25, 2022.rapidly growing two-wheel electric motorcycle space. The
Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company
disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.Overview
We are a former blank check company incorporatedoperates in two segments: Electric Motorcycles and STACYC.
The Electric Motorcycles segment sells electric motorcycles, related parts and accessories and apparel in the Cayman IslandsUnited States and certain international markets, while the STACYC segment sells electric balance bikes, related parts and accessories and apparel in the United States and certain international markets.
Electric motorcycles are sold at wholesale to a network of independent retail partners, at retail through a Company-owned dealership, through online sales and direct to customers through select international partners. Electric balance bikes are sold at wholesale to independent dealers and independent distributors, as well as direct to customers online. As discussed below, on
July 29, 2020 formed for the purposeSeptember 26, 2022 as part of
effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with one or more businesses.On September 16, 2022, we held a special meeting of stockholders, at which the stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, Agreementthe Company, which included LiveWire branded electric motorcycles and STACYC, became a separate, publicly traded company.
For the transactions contemplated thereby, includingthree months ended March 31, 2024, the Company’s net loss was $23,644 thousand compared to $21,147 thousand for the three months ended March 31, 2023. The Company’s net losses reflect the early-stage nature of the Company’s business. The increase in net losses of $2,497 thousand in 2024 reflect the segment results discussed below and a decrease of $676 thousand in interest income, offset by an increase of $3,690 thousand of non-operating income related to the decrease in fair value of the outstanding warrants as of March 31, 2024 as compared to prior year.
For the three months ended March 31, 2024, the Electric Motorcycles segment operating loss was $29,007 thousand, compared to an operating loss of $24,769 thousand for the three months ended March 31, 2023. The increase in operating loss of $4,238 thousand resulted from a decrease in revenue due to product mix and a revised structure around our retail partners in the first quarter of 2024, which introduced new incentives, and an increase in cost of sales resulting from increased net realizable value adjustments, volumes and depreciation expense. Refer to the Electric Motorcycles segment analysis below for further discussion.
For the three months ended March 31, 2024, the STACYC segment operating loss was $1,415 thousand, as compared to an operating loss of $138 thousand for the three months ended March 31, 2023. The increase in operating loss of $1,277 thousand was primarily related to a decrease in volumes to our independent distributors. Refer to the STACYC segment analysis below for further discussion.
Business Combination. Combination
On September 26, 2022, the
partiesCompany consummated
a previously announced business combination and related financing transactions (collectively the
Business Combination.Holders of 36,597,112 Class A ordinary shares sold in its initial public offering (the “Initial Shares”“Business Combination”) properly exercised their rightpursuant to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from the Company’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination, which was approximately $10.06 per share, or $368,136,945 in the aggregate.
On September 26, 2022, an aggregate of $368,136,945 was paid from the trust account to holders who properly exercised their right to have their Initial Shares redeemed, and the remaining balance immediately prior to the Closing of approximately $34 million was used to fund the Business Combination.
In connection with the Business Combination, on September 23, 2022, the Sponsor forfeited an aggregate of 2,000,000 Class B ordinary shares in accordance with the Investor Support Agreement,combination agreement, dated as of December 12, 2021 (the “Business Combination Agreement”), by and among the Sponsor,AEA-Bridges Impact Corp (“ABIC”), LiveWire ABIC, John Garcia, John Replogle and George Serafeim. The remaining Class B ordinary shares held by Sponsor automatically converted to 7,950,000 shares of LiveWire Common Stock.
Recent Developments/Subsequent Events
On December 12, 2021, the Company, LiveWire,EV Holdings, Inc., a Delaware corporation (now known as “LiveWire Group, Inc.”), LW EV Merger Sub, Legacy LiveWire andInc., a Delaware corporation (“Merger Sub”), Harley-Davidson, Inc. entered into, a Wisconsin corporation (“H-D”), and LiveWire EV, LLC (“Legacy LiveWire”), a wholly-owned subsidiary of H-D.
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, ABIC was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination Agreement (eachwas treated as definedthe equivalent of the Company issuing stock for the net assets of ABIC, accompanied by a recapitalization. The net assets of ABIC were stated at historical cost, with no goodwill or other intangible assets recorded. The Business Combination resulted in net proceeds of approximately $293.7 million. The Company also assumed the Public Warrants and Private Warrants upon consummation of the Business Combination. See further detail in Note 17 to the unaudited financial statements included herein). On September 26, 2022, the parties consummated the transactions contemplated by the Business Combination Agreement. See Note 1 to the unaudited consolidated financial statements, included herein for more information.Results of Operations
We have neither engaged in any operations nor generated any operating revenuesWarrant Liabilities.
2024 Outlook
For 2024, LiveWire's focus continues to date. Our only activities from inception through September 25, 2022 were organizational activitiesbe on our investment into product development, product innovation, and those necessary to prepare forfuture additional models on the Initial Public Offering, described below, and identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance),S2 platform, as well as market expansion and continued cost improvements. LiveWire plans to continue to expand globally in 2024 with the focus on our priority markets in Europe.
Key Business Metrics
To analyze LiveWire’s business performance, determine financial forecasts and help develop long-term strategic plans, management reviews the following key business metrics, which are important measures that represent the growth of the business:
•Wholesale Motorcycle Unit Sales – LiveWire defines Wholesale Motorcycle Unit Sales as the number of electric motorcycles sold by LiveWire to independent dealers for due diligence expenses in connectionwhich LiveWire recognized revenue during the period.
•Company Retail Motorcycle Unit Sales – LiveWire defines Company Retail Motorcycle Unit Sales as the number of new electric motorcycles sold at retail by LiveWire through its Company-owned dealership, through online sales or direct to customers through select international partners for which LiveWire recognized revenue during the period.
•Independent Retail Motorcycle Unit Sales – LiveWire defines Independent Retail Motorcycle Unit Sales as the number of new electric motorcycles sold at retail by Independent Retail Partners. These unit sales do not generate revenues for LiveWire but generate revenues for individual retail partners. The data source for electric motorcycle retail sales figures is new sales warranty and registration information provided by Independent Retail Partners and compiled by LiveWire. LiveWire must rely on information that its Independent Retail Partners supply concerning new retail sales, and LiveWire does not regularly verify the information that its independent retail partners supply. This information is subject to revision.
•Retail Motorcycle Unit Sales – LiveWire defines retail motorcycle unit sales as the sum of Company Retail Motorcycle Unit Sales and Independent Retail Motorcycle Unit Sales.
•Company-owned dealership – Dealership owned and operated by LiveWire to sell electric motorcycles, related products, and services.
•Independent Retail Partners (Electric Motorcycles) – Retail Partners owned and operated by independent entities under contract with searchingLiveWire to sell LiveWire electric motorcycles, related products, and services.
•Electric Balance Bike Unit Sales (STACYC) – LiveWire defines Electric Balance Bike Unit Sales as the number of electric balance bikes sold by LiveWire for which LiveWire recognized revenue during the period.
•Independent Retail Partners (STACYC) – Retail Partners owned and completing, a business combination.18
operated by independent entities under contract with STACYC to sell electric balance bikes, related products, and services.
The following table details the key business metric amounts for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Three months ended | | |
| March 31,
2024 | | March 31,
2023 | | | | |
| Wholesale Motorcycle Unit Sales | 74 | | | 45 | | | | | |
| Company Retail Motorcycle Unit Sales | 43 | | | 18 | | | | | |
| Total LiveWire Motorcycle Unit Sales | 117 | | | 63 | | | | | |
| | | | | | | |
| Retail Motorcycle Unit Sales: | | | | | | | |
Company Retail Motorcycle Unit Sales (1) | 43 | | | 18 | | | | | |
Independent Retail Partners (2) | 128 | | | 34 | | | | | |
| Total Retail Motorcycle Unit Sales | 171 | | | 52 | | | | | |
| | | | | | | |
| Electric Balance Bike Unit Sales: | | | | | | | |
| US | 2,342 | | | 7,261 | | | | | |
| International | 590 | | | 967 | | | | | |
| Total Electric Balance Bike Unit Sales | 2,932 | | | 8,228 | | | | | |
| | | | | | | |
(1) Data source for Company Retail Motorcycle Unit Sales figures shown above is LiveWire’s records.
(2) Data source for Independent Retail Motorcycle Unit Sales figures shown above is new sales warranty and registration information provided by retail partners and compiled by LiveWire. LiveWire must rely on information that its Independent Retail Partners supply concerning new retail sales, and LiveWire does not regularly verify the information that its Independent Retail Partners supply. This information is subject to revision.
The following table details the number of retail partners:
| | | | | | | | | | | |
| As of | | As of |
| March 31, 2024 | | December 31, 2023 |
| Electric Motorcycles | | | |
| Company-owned dealership | 1 | | | 1 | |
| Independent Retail Partners | 123 | | | 126 | |
| Total Electric Motorcycles Retail Partners | 124 | | | 127 | |
| | | |
| STACYC | | | |
| Independent Retail Partners: | | | |
| U.S. | 1,998 | | | 1,975 | |
| International | 137 | | | 137 | |
| Total STACYC Independent Retail Partners | 2,135 | | | 2,112 | |
The Electric Motorcycles independent retail partners shown above include those that have been contracted by LiveWire to sell LiveWire motorcycles. As of March 31, 2024 and December 31, 2023, this total includes 3 and 4 partners, respectively, that were actively working to complete the licensing required to sell LiveWire motorcycles as of the end of the period. LiveWire intends to grow this network as it expands its distribution capabilities.
LiveWire believes these key business metrics provide useful information to help investors understand and evaluate LiveWire’s business performance. Wholesale Motorcycle Unit Sales and Company Retail Motorcycle Unit Sales are key drivers of revenue and operating results for the Electric Motorcycles segment. Retail Motorcycle Unit Sales made through both the Company-owned dealership and Independent Retail Partners are a key measure of consumer demand and market share for LiveWire’s electric motorcycles. Total Electric Balance Bike Unit Sales is a key driver of revenue and profit for STACYC.
Results of Operations
The following table presents consolidated results of operations for the three months ended September 25, 2022, we had net incomeMarch 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | | | |
| March 31,
2024 | | March 31,
2023 | | $ Change | | % Change |
| Operating loss from Electric Motorcycles | $ | (29,007) | | | $ | (24,769) | | | $ | (4,238) | | | 17.1 | % |
| Operating loss from STACYC | (1,415) | | | (138) | | | (1,277) | | | 925.4 | % |
| Operating loss | (30,422) | | | (24,907) | | | (5,515) | | | 22.1 | % |
| | | | | | | |
| Interest income | 2,016 | | | 2,692 | | | (676) | | | (25.1) | % |
| Change in fair value of warrant liabilities | 4,758 | | | 1,068 | | | 3,690 | | | 345.5 | % |
| Loss before income taxes | (23,648) | | | (21,147) | | | (2,501) | | | 11.8 | % |
| Income tax benefit | (4) | | | — | | | (4) | | | nm |
| Net loss | (23,644) | | | (21,147) | | | (2,497) | | | 11.8 | % |
| Other comprehensive loss: | | | | | | | |
| Foreign currency translation adjustments | (18) | | | — | | | (18) | | | nm |
| Comprehensive loss | $ | (23,662) | | | $ | (21,147) | | | $ | (2,515) | | | 11.9 | % |
| Net loss per share, basic and diluted | $ | (0.12) | | | $ | (0.10) | | | $ | (0.02) | | | 20.0 | % |
*nm - not meaningful
Operating Income (Loss)
The Company reported an operating loss of
$3,892,215, which consisted of interest earned on investments held in the Trust Account of $1,792,628, change in deferred underwriting fees of $3,748,361, other income and expense (net) of $224,480, and interest on mandatorily redeemable Class A ordinary shares of $3,323,742, partially offset by operating expenses of $3,367,356 and change in fair value of derivative warrant liabilities of $1,830,000.For the nine months ended September 25, 2022, we had a net income of $24,979,364, which consisted of interest earned on investments held in the Trust Account of $2,117,718, change in deferred underwriting fees of $3,748,361, other income and expense (net) of $224,480, interest on mandatorily redeemable Class A ordinary shares of $3,323,742, and change in fair value of derivative warrant liabilities of $21,197,500, partially offset by operating expenses of $5,632,797.
For$30,422 thousand for the three months ended September 26, 2021, we hadMarch 31, 2024 compared to an operating loss of $24,907 thousand for the three months ended March 31, 2023. The Electric Motorcycles segment reported an operating loss of $29,007 thousand for the three months ended March 31, 2024, as compared to an operating loss of $24,769 thousand for the three months ended March 31, 2023. The STACYC segment reported operating loss of $1,415 thousand for the three months ended March 31, 2024, compared to operating loss of $138 thousand for the three months ended March 31, 2023. Refer to the Electric Motorcycles and STACYC Segment discussions for a netmore detailed analysis of the factors affecting operating results.
Interest Income (Expense)
Interest income for the three months ended March 31, 2024 was $2,016 thousand, as compared to interest income of $5,451,821, which consisted$2,692 thousand for the three months ended March 31, 2023. The decrease was primarily driven by the decrease in the balance of money market funds at March 31, 2024 as compared to the changeprior year. The Company had investments of $135,000 thousand and $232,000 thousand in money market funds as of March 31, 2024 and March 31, 2023, respectively.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities
for the three months ended March 31, 2024 was income of
$8,540,000 and interest earned on marketable securities held$4,758 thousand, as compared to income of $1,068 thousand for the three months ended March 31, 2023. The income recognized was due to the decrease in the
Trust Account of $28,889, offset by formation and operational costs of $3,117,068.For the nine months ended September 26, 2021, we had a net income of $22,520,926, which consisted of the change inestimated fair value of warrant liabilities of $26,230,000the warrants during the three months ended March 31, 2024 and interest earned on marketable securities held2023 due to fluctuations in the Trust Accountmarket price of $129,415,the warrants. See Note 7, Warrant Liabilities, in the consolidated financial statements for further discussion.
Income Tax (Benefit) Provision
The income tax benefit for the three months ended March 31, 2024 was $4 thousand, as compared to income tax benefit of zero for the three months ended March 31, 2023. The Company believes there is not sufficient positive evidence for the tax benefit generated by the current period operating loss in the U.S. to be benefited in future periods.
Segment Results
Electric Motorcycles
The following table presents consolidated results of operations for the Electric Motorcycles segment for the three months ended March 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | | | |
| March 31,
2024 | | March 31,
2023 | | $ Change | | % Change |
| Revenue: | | | | | | | |
| Electric motorcycles | $ | 1,007 | | | $ | 1,411 | | | $ | (404) | | | (28.6) | % |
| Parts, accessories and apparel | 237 | | | 71 | | | 166 | | | 233.8 | % |
| Revenue, net | 1,244 | | | 1,482 | | | (238) | | | (16.1) | % |
| Cost of goods sold | 6,471 | | | 2,440 | | | 4,031 | | | 165.2 | % |
| Gross profit | (5,227) | | | (958) | | | (4,269) | | | 445.6 | % |
| Operating expenses: | | | | | | | |
| Selling, administrative and engineering expense | 23,780 | | | 23,811 | | | (31) | | | (0.1) | % |
| Operating loss | $ | (29,007) | | | $ | (24,769) | | | $ | (4,238) | | | 17.1 | % |
Revenue
Revenue for the three months ended March 31, 2024 decreased by $238 thousand, or 16.1%, to $1,244 thousand from $1,482 thousand for the three months ended March 31, 2023. Unit sales increased by 86% driven by more products in the market, including the new S2 Mulholland model launched in the first quarter of 2024. The Company has three bikes in market at March 31, 2024 as compared to one bike in market at March 31, 2023. The impact on revenue of the increased unit sales in the first quarter 2024 was offset by formationa reduction in revenue of $688 thousand resulting from product mix due to the S2 Del Mar and operationalMulholland having lower selling prices than LiveWire ONE and $498 thousand resulting from the impact of new incentives associated with a revised strategy with our retail partners implemented in the first quarter of 2024.
Cost of Goods Sold
Cost of goods sold for the three months ended March 31, 2024 increased by $4,031 thousand, or 165.2%, to $6,471 thousand from $2,440 thousand for the three months ended March 31, 2023. The increase was primarily due to increased net realizable value adjustments of $1,703 thousand, increased depreciation expense of $784 thousand, and the impact of increased volumes in the first quarter 2024 as compared to the first quarter 2023.
Selling, Administrative and Engineering Expense
Selling, administrative and engineering expense for the three months ended March 31, 2024 remained relatively flat compared to prior year, decreasing by $31 thousand, or 0.1%, to $23,780 thousand from $23,811 thousand for the three months ended March 31, 2023.
STACYC
The following table presents consolidated results of operations for the STACYC segment for the three months ended March 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | | | |
| March 31,
2024 | | March 31,
2023 | | $ Change | | % Change |
| Revenue: | | | | | | | |
| Electric balance bikes | $ | 2,616 | | | $ | 5,508 | | | $ | (2,892) | | | (52.5) | % |
| Parts, accessories and apparel | 1,118 | | | 772 | | | 346 | | | 44.8 | % |
| Revenue, net | 3,734 | | | 6,280 | | | (2,546) | | | (40.5) | % |
| Cost of goods sold | 2,634 | | | 4,058 | | | (1,424) | | | (35.1) | % |
| Gross profit | 1,100 | | | 2,222 | | | (1,122) | | | (50.5) | % |
| Operating expenses: | | | | | | | |
| Selling, administrative and engineering expense | 2,515 | | | 2,360 | | | 155 | | | 6.6 | % |
| Operating income | $ | (1,415) | | | $ | (138) | | | $ | (1,277) | | | 925.4 | % |
Revenue
Revenue for the three months ended March 31, 2024 decreased by $2,546 thousand, or 40.5%, to $3,734 thousand from $6,280 thousand for the three months ended March 31, 2023. The decrease in revenue of $2,546 thousand was driven by a $2,678 thousand reduction in electric balance bikes revenue due to lower shipment volumes primarily to our independent distributors and a $214 thousand reduction due to pricing in the three months ended March 31, 2024. This decrease was offset by a $346 thousand increase in parts, accessories and apparel revenue due primarily to increased battery and replacement part sales in the three months ended March 31, 2024.
Cost of Goods Sold
Cost of goods sold for the three months ended March 31, 2024 decreased by $1,424 thousand, or 35.1%, to $2,634 thousand from $4,058 thousand for the three months ended March 31, 2023. The decrease was primarily due to lower volumes in alignment with the decreased revenue described above.
Selling, Administrative and Engineering Expense
Selling, administrative and engineering expense for the three months ended March 31, 2024 increased by $155 thousand, or 6.6%, to $2,515 thousand from $2,360 thousand for the three months ended March 31, 2023. The increase was primarily due to increased research and development costs relating to new product development of $156 thousand, increased personnel costs of
$3,838,489.$131 thousand, offset by decreased marketing expense of $132 thousand in the first quarter of 2024.
Other Matters
Commitments and Contingencies
The Company is subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 10, Commitments and Contingencies, in the consolidated financial statements for a discussion of the Company's commitments and contingencies
Liquidity and Capital Resources
As of March 31, 2024 and December 31, 2023, LiveWire’s cash and cash equivalents were $141,033 thousand and $167,904 thousand, respectively.
As an early growth company, LiveWire does not expect to generate positive cash flow from operations over the next twelve months. Prior to the Business Combination, H-D supported LiveWire’s operating, investing and financing activities. Following the Business Combination, LiveWire received net proceeds of approximately $293.7 million as more fully described below.
On October 5, 2020, weSeptember 26, 2022, LiveWire consummated the Initial Public Offering of 40,000,000 units, at a price of $10.00 per unit, generating grossBusiness Combination with ABIC resulting in net proceeds of $400,000,000. Simultaneously withapproximately $293.7 million. The Company also assumed the closingPublic Warrants and Private Warrants upon consummation of the Initial Public Offering, we consummated the sale of 10,500,000 Private Placement WarrantsBusiness Combination. See further detail in Note 7 to the Sponsor at a priceconsolidated financial statements, Warrant Liabilities.
In the event of
$1.00 per private placement warrant generating grossthe exercise of any of Warrants for cash, LiveWire will receive the proceeds
from such exercise. Assuming the exercise in full of
$10,500,000.Following the Initial Public Offering andall of Warrants for cash, LiveWire would receive an aggregate of approximately $349.2 million, but would not receive any proceeds from the sale of the Private Placementshares of Common Stock issuable upon such exercise. To the extent any of the Warrants are exercised on a total“cashless basis,” LiveWire will not receive any proceeds upon such exercise. LiveWire expects to use any proceeds it receives from Warrant exercises for general corporate and working capital purposes, which would increase its liquidity. LiveWire believes the likelihood that warrant holders will exercise their Warrants, and therefore the amount of $400,000,000cash proceeds LiveWire would receive, is dependent upon the trading price of its Common Stock. As of March 31, 2024, the reported sales price of Common Stock was placed$7.23 per share. If the trading price of Common Stock is less than the $11.50 exercise price per share of the Warrants, LiveWire expects that warrant holders will not exercise their Warrants. There is no guarantee the Warrants will be in the Trust Account. We incurred $21,292,016money following the time they become exercisable and prior to their expiration, and as such, the Warrants may expire worthless and LiveWire may receive no proceeds from the exercise of Warrants. As a result, LiveWire does not expect to rely on the cash exercise of Warrants to fund its operations and LiveWire does not believe that it needs such proceeds to support working capital and capital expenditure requirements for the next twelve months. LiveWire will continue to evaluate the probability of Warrant exercises and the merit of including potential cash proceeds from the exercise of the Warrants in transaction costs, including $7,275,000its future liquidity projections. LiveWire instead currently expects to rely on the sources of underwriting fees (netfunding described below, if available on reasonable terms or at all.
On February 14, 2024, the Company entered into a Convertible Delayed Draw Term Loan Agreement (the “Convertible Term Loan”) with H-D providing for term loans from H-D to the Company in one or more advances up to an aggregate principal amount of expenses reimbursed$100 million. The outstanding principal under the Convertible Term Loan bears interest at a floating rate per annum, as calculated by H-D as of the date of each advance and as of each June 1 and December 1 thereafter, equal to the sum of (i) the forward-looking term rate based on SOFR (i.e., the secured overnight financing rate published by the underwriterFederal Reserve Bank of $225,000)New York (or a successor administrator of the secured overnight financing rate)) for a 6-month interest period, plus (ii) 4.00%. The Company may elect to pay up to 100% of the amount of any interest due by increasing the outstanding principal amount of the applicable advance. The Convertible Term Loan does not include affirmative covenants impacting the operations of the Company. The Convertible Term Loan includes negative covenants restricting the ability of the Company to incur indebtedness, create liens, sell assets, make investments, make fundamental changes, make dividends or other restricted payments and enter into affiliate transactions. The Convertible Term Loan has a maturity date of the earlier of (i) 24 months from the date of the first draw on the loan or (ii) October 31, 2026. In the event that the Convertible Term Loan cannot be settled in cash by the Company at maturity, unless otherwise agreed between the Company and H-D, the Convertible Term Loan will be converted to equity of Company at a conversion price per share of common stock of the Company equal to 90% of the volume weighted average price per share of Common Stock for the 30 trading days immediately preceding the conversion date. As of March 31, 2024, $13,125,000there were no amounts outstanding under the Convertible Term Loan and the Company remained in compliance with all of deferred underwriting feesthe existing covenants.
Management believes that cash on hand, including the proceeds received from the Business Combination, and $892,016 of other offering costs.the Convertible Term Loan will provide sufficient liquidity to meet LiveWire’s projected obligations, including those related to existing contractual obligations, for at least the next twelve months.
The Company plans to use its current cash on hand, including the financing raised through the Business Combination, and available funds under the Convertible Term Loan to support its core business operations and strategic plan, invest in new product development, and enhance its global distribution capabilities. LiveWire expects its capital expenditures and working capital requirements to increase in the future, as it grows the business, develops its customer support and marketing infrastructure and expands its product development efforts.
The Company’s material contractual operating cash commitments at March 31, 2024 relate to leases and inventory purchase commitments. In connection with the closingaddition, as a result of the Business Combination completed on September 26, 2022, LiveWire will be subject to certain payments in the deferred underwriting fee was reducedevent minimum purchase commitments under the Contract Manufacturing Agreement with H-D are not met beginning in the year 2025.
On April 24, 2024, the Company announced a plan to
$9,376,638.Forboth relocate the nineoperations of LiveWire Labs, the Company’s west coast product development facility, from Mountain View, California to Milwaukee, Wisconsin and streamline headcount at the Company. The Company believes this plan will enable synergies and optimize efficiencies in product development and simplify the Company’s overall path to future profitability.
Under this plan, the Company expects to incur one-time relocation costs of $1.0 million to $1.5 million and one-time termination benefit costs of $2.0 million to $3.5 million related to the Electric Motorcycles segment and expects the vast majority to be cash charges. The Company expects to complete this plan by the end of September 2024.
Cash Flow Activity
The following table presents condensed highlights from the Company’s Consolidated statements of cash flows for the three months ended September 25, 2022, netMarch 31, 2024 and 2023 (in thousands):
| | | | | | | | | | | |
| Three months ended |
| March 31,
2024 | | March 31,
2023 |
| Net cash used by operating activities | $ | (22,926) | | | $ | (24,550) | |
| Net cash used by investing activities | (3,239) | | | (4,648) | |
| Net cash used by financing activities | (706) | | | — | |
| Net change in cash and cash equivalents | $ | (26,871) | | | $ | (29,198) | |
The overall decrease in cash during the three months ended March 31, 2024 was due primarily to cash used for operating activities, as described below.
Operating Activities
The Company had negative cash flow from operating activities during the three months ended March 31, 2024 and 2023. Net cash used by operating activities decreased by $1,624 thousand to $22,926 thousand for the three months ended March 31, 2024 compared to $24,550 thousand for the three months ended March 31, 2023. The decrease in negative cash flow from operating activities was $787,188. Net income of $24,979,364 was impactedprimarily driven by interest earned on investments heldfavorable changes in the TrustAccounts receivable, net, Account of $2,117,718, changereceivable from related party, and Accounts payable to related party offset by unfavorable changes in deferred underwriting fees of $3,748,261, interest on mandatorily redeemable Class A ordinary shares of $3,323,742 and change in fair value of derivative warrant liabilities of $21,197,500. Changes in operatingother working capital amounts, including Inventories, Other current assets, and Accounts payable and accrued liabilities, provided $4,620,769and the increase in net loss of $2,497 thousand.
Investing Activities
Net cash
from operating activities.Forused by investing activities decreased by $1,409 thousand to $3,239 thousand for the ninethree months ended September 26, 2021, netMarch 31, 2024 compared to $4,648 thousand for the three months ended March 31, 2023. The decrease was due to higher capital expenditures in 2023 related to investments to support future product development activities.
The Company expects to fund future cash
flows used in
operatinginvesting activities
was $570,298. Net income of $22,520,926 was affected bywith the
change in fair value of warrant liabilities of $26,230,000, interest earned on marketable securities held in the Trust Account of $129,415 and changes in operating assets and liabilities which provided $3,268,191 of cash from operating activities.At September 25, 2022, we had cash of $402,607,538 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination.
Recent Developments
On December 12, 2021, the Company, LiveWire, Merger Sub, Legacy LiveWire and Harley-Davidson, Inc. entered intofinancing raised through the Business Combination Agreement (each as definedand available funds under the Convertible Term Loan. The Company estimates capital expenditures to be between $10 million and $20 million in Note 12024.
Financing Activities
Net cash used by financing activities decreased by $706 thousand to $706 thousand for the three months ended March 31, 2024 compared to zero for the three months ended March 31, 2023. The $706 thousand cash outflow related to the
unaudited financial statements included herein). On September 26, 2022, the parties consummated the transactions contemplated by the Business Combination Agreement. See Note 1repurchase of common stock to
the unaudited consolidated financial statements included herein for more information.19
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 25, 2022. We do not participatesatisfy withholding taxes in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of up to $10,000 for office space, secretarial and administrative support services provided to the company. We began incurring these fees on October 5, 2020 and will continue to incur these fees monthly until the earlier of the completion of a business combination or the company’s liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $13,125,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement. An affiliate of the Sponsor has purchased 2,500,000 Public Units at the Public Offering Price. In connection with the closingvesting of restricted stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2024, the Business Combination,Company’s cash and cash equivalents amounted to $141,033 thousand. The Company manages its liquidity risk by effectively managing its working capital, capital expenditures and cash flows.
Financial instruments that potentially subject the underwriters have agreedCompany to reduceconcentrations of credit risk principally consist of accounts receivable. The Company limits its credit risk with respect to accounts receivable by performing credit evaluations and requiring collateral to secure amounts owed to the amountCompany by its customers, each when deemed necessary.
Inflationary factors, such as cost increases for logistics, manufacturing, raw materials and purchased components, may adversely affect the Company’s operating results. Although the Company does not believe inflation has had a material impact on its financial condition given its lower production volumes, a high rate of their deferred fees by $3,748,361, which is showninflation in the condensed consolidated statementfuture may have an adverse effect on the Company’s ability to increase its gross margin or decrease its operating expenses as a percentage of operationsits revenues if the selling prices of its products do not increase as forgivenessmuch or more than its increase in costs.
The Company is also exposed to possible disruption of deferred underwriting fee payable.supply or shortage of materials, in particular for lithium-ion battery cells and key semiconductor chip components necessary for electric vehicles, and any inability to purchase raw materials and components could negatively impact the Company’s operations.
The Company sells electric balance bikes and its electric motorcycles and related products internationally, and in most markets, those sales are made in the foreign country’s local currency. As a result,
the Company’s operating results are affected by fluctuations in the values of the
reduction,U.S. dollar relative to foreign currencies, however, the
outstanding deferred underwriting fee was reducedimpact of such fluctuations on the Company’s operations to
$9,376,638.Critical Accounting Policies
The preparationdate are not material given the majority of unaudited condensed consolidated financial statements and related disclosures in conformity with accounting principles generally acceptedthe Company’s sales are currently in the United StatesU.S. The Company plans to expand its business and operations internationally and expects its exposure to currency rate risk to increase as it grows its international presence.
Item 4. Controls and Procedures
Limitations on Effectiveness of America requires management to make estimatesDisclosure Controls and assumptions that affectProcedures
In designing and evaluating the
reported amounts of assets and liabilities,Company’s disclosure
of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). We account for the warrants in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheets date until exercised, and any change in fair value is recognized in our statements of operations.
20
Equity Instruments Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in ASC 480. Equity instruments subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable Equity instruments (including Equity instruments that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, Equity instruments is classified as stockholders’ or shareholders’ equity. Our Equity instruments feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Equity instruments subject to possible redemption are presented as temporary equity, outside of the stockholders’/shareholders’ deficit section of our balance sheets.
Net Income (Loss) per Common Stock or Ordinary Share
Net income (loss) per common stock or ordinary share is computed by dividing net income (loss) by the weighted average number of common stock or ordinary shares outstanding for the period. Accretion associated with the redeemable common stock or Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined in Item 10 of Regulation S-K and are not required to provide the information otherwise required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures, aremanagement recognizes that any controls and other procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of the disclosure controls and procedures must reflect the fact that there are designedresource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the Company’s principal executive officer and principal financial officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed
by the Company in
ourthe reports
filedit files or
submittedsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time
periodsperiod specified in the
SEC’sSecurities and Exchange Commission rules and
forms. Disclosure controlsforms, and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by the Company in
ourthe reports
filedit files or
submittedsubmits under the Exchange Act is accumulated and communicated to
ourthe Company’s management,
including our Chief Executive Officerthe Company’s principal executive officer and
Chief Financial Officer,principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure.
21
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officers and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 25, 2022. Based upon their evaluation, our Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control Overover Financial Reporting
There were no changes in
ourthe Company’s internal control over financial reporting,
(as such term is definedas identified in
connection with the evaluation required by Rules
13a-15(f)13a-15(e) and
15d-15(f) of15d-15(e) under the Exchange
Act)Act, that occurred during the
most recent fiscal quarter ended
March 31, 2024 that have materially affected, or are reasonably likely to materially affect,
ourthe Company’s internal control over financial reporting.
22
PART II—II – OTHER INFORMATION
ITEM
Item 1.
LEGAL PROCEEDINGS.None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from thoseLegal Proceedings
The information required under this Item 1 of Part II is contained in Item 1 of Part I of this Quarterly Report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 25, 2022 (“Form 10-K”) and in our Quarterly Report on Form 10-Q filed with in Note 10, Commitments and Contingencies, to the SEC on May 12, 2022 (“2022 Q1 Form 10-Q”)Notes to consolidated financial statements, and such information is incorporated herein by reference in our definitive proxy statement/prospectus filed with the SEC on July 28, 2022 (“Proxy”). Asthis Item 1 of the date of this report, therePart II.
Item 1A. Risk Factors
There have been no material changes to the risk factorsprincipal risks that the Company believes are material to the Company’s business, results of operations, and financial condition from those disclosed in ourPart I, “Item 1A. Risk Factors” of the 2023 Annual Report on Form 10-K for the year ended December 31, 2023.
10-K,
2022 Q1 Form 10-Q,
Item 2. Unregistered Sales of Equity Securities and Proxy. We may disclose changesIssuer Purchases of Equity Securities
Sales of Unregistered Equity Securities
There were no unregistered sales of equity securities for the three months ended March 31, 2024.
Purchases of Equity Securities
The Company’s share repurchases, which consisted of shares of Common Stock surrendered to
such factors or disclose additional factors from time to timesatisfy withholding taxes in
our future filingsconnection with the
SEC.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
23
vesting of restricted stock units were as follows during the quarter ended March 31, 2024:
| | | | | | | | | | | | | | |
| 2024 Fiscal Date of Vest | Total Number of Shares Repurchased | Price Per Share Paid | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
| February 1 – February 29 | 66,923 | $10.26 | — | | — | |
The following exhibitsLiveWire Group, Inc. 2022 Incentive Award Plan provides that the withholding obligations be settled by the Company retaining shares that are filed as part of the award. During the first quarter of 2024, the Company retained 66 thousand shares of common stock to satisfy withholding taxes in connection with the vesting of restricted stock units.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None of our directors or
incorporated by reference into, this Quarterly Report on Form 10-Q. |
* Filed herewith
|
** Furnished herewith
|
24
executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the first quarter of 2024.
Item 6. Exhibits
| | | | | | | | | | | | | | | | | | | | | | | |
LiveWire Group, Inc.
Exhibit Index to Form 10-Q |
| Exhibit No. | | Description | Form | File No. | Filing Date | Exhibit Number | Filed/Furnished herewith |
| | Business Combination Agreement, dated as of December 12, 2021, by and among Harley-Davidson, Inc., AEA-Bridges Impact Corp., LW EV Holdings, Inc., LW EV Merger Sub, Inc. and LiveWire EV, LLC | 8-K | 001-39584 | 12/15/2021 | 2.1 | |
| | Amended and Restated Certificate of Incorporation of LiveWire Group, Inc. | 8-K | 001-41511 | 9/30/2022 | 3.1 | |
| | Amended and Restated Bylaws of LiveWire Group, Inc. | 8-K | 001-41511 | 9/30/2022 | 3.2 | |
| | Warrant Agreement, dated as of October 1, 2022, by and between the Company and Continental Stock Transfer & Trust Company, as Warrant Agent | 8-K | 001-39584 | 10/7/2020 | 4.4 | |
| | Specimen Warrant Certificate | S-1 | 333-248785 | 9/14/2020 | 4.3 | |
| | Convertible Delayed Draw Term Loan Agreement, dated as of February 14, 2024, by and among Harley-Davidson, Inc., LiveWire EV, LLC, and LiveWire Group, Inc. | 8-K | 001-41511 | 2/16/2024 | 10.1 | |
| | Chief Executive Officer Certification pursuant to Rule 13a-14(a) | | | | | * |
| | Chief Financial Officer Certification pursuant to Rule 13a-14(a) | | | | | * |
| | Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350 | | | | | ** |
| 101.INS | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | * |
| 101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | * |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | * |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | * |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | | | | * |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document | | | | | * |
| 104 | | Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101 | | | | | * |
* Filed herewith.
** Furnished herewith.
† The annexes, schedules and certain exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the SEC upon request.
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | LIVEWIRE GROUP, INC.LiveWire Group, Inc. |
| | | | | | | |
| Date: | May 6, 2024 | | | | | | /s/ Karim Donnez |
| Date: November 9, 2022 | | | | | | | | | | | | /s/ Jochen Zeitz
Karim Donnez |
| | | | | | | | | | | Name: | | Jochen Zeitz |
| | | | Title: | | Chairman, Chief Executive Officer |
| | | | | | | | |
| | | | | | | | |
Date: November 9, 2022 | May 6, 2024 | | | | | | /s/ Tralisa Maraj |
| | | | | Name: | | | Tralisa Maraj |
| | | | | Title: | | | Chief Financial Officer |
| | | | | | | | (Principal Financial Officer and Principal Accounting Officer) |
25
