As filed with the U.S. Securities and Exchange Commission on January 8, 2025
Registration No. 333-283114
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
AMENDMENT NO. 1
TO
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________________________________
NXU, INC.
(Exact name of registrant as specified in its charter)
__________________________________________
Delaware | | 3711 | | 92-2819012 |
(State or other jurisdiction of
incorporation or organization) | | (Primary Standard Industrial
Classification Code Number) | | (I.R.S. Employer
Identification No.) |
Nxu, Inc.
1828 N Higley Rd., Suite 116
Mesa, Arizona 85205
(602) 309-5425
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________________________________________
Mark Hanchett
Chief Executive Officer
Nxu, Inc.
1828 N. Higley Rd., Suite 116
Mesa, Arizona 85205
(602) 309-5425
(Name, address, including zip code, and telephone number, including area code, of agent for service)
__________________________________________
Copies to:
Michael M. Donahey
Serge V. Pavluk
Eileen K. Vernon
Snell & Wilmer L.L.P.
One East Washington Street, Suite 2700
Phoenix, AZ 85004
(602) 382-6000 | | Daniel Zimmerman
Michael E. Gilligan
Glenn R. Pollner
Victoria M. Peluso
Wilmer Cutler Pickering Hale and Dorr LLP
2600 El Camino Real
Suite 400, Palo Alto, CA 94306
(650) 858-6000 |
__________________________________________
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| | Large accelerated filer | | ☐ | | 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 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of such securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to appropriate registration or qualification under the securities laws of such jurisdiction.
PRELIMINARY — SUBJECT TO COMPLETION — DATED JANUARY 8, 2025
MERGER PROPOSED — PLEASE VOTE, YOUR VOTE IS VERY IMPORTANT
NXU, INC.
1828 N. Higley Rd. Suite 116
Mesa, AZ 85205
Dear Nxu, Inc. Stockholders:
On behalf of the Board of Directors of Nxu, Inc., a Delaware corporation, (“Nxu,” “Parent,” “we,” “our,” “us,” or the “Company”) we cordially invite you to a special meeting of stockholders of Nxu (the “Nxu special meeting”), to be held at Eastern Standard Time on , unless postponed or adjourned to a later date. The Nxu special meeting will be held exclusively through a virtual format. Nxu stockholders will be able to attend and participate in the Nxu special meeting online by visiting www.virtualshareholdermeeting.com/ , where they will be able to listen to the meeting live, submit questions and vote.
Nxu, Verde Bioresins, Inc., a Delaware corporation (“Verde”), Nxu Merger Sub, Inc., a Delaware corporation (“Merger Sub I”), and Nxu Merger Sub, LLC, a Delaware limited liability company (“Merger Sub II”, and together with Merger Sub I, the “Merger Subs”), entered into an Agreement and Plan of Merger on October 23, 2024 (the “Merger Agreement”).
Pursuant to the terms of the Merger Agreement, Merger Sub I will merge with and into Verde (the “First Merger”), with Verde surviving the First Merger and continuing as a wholly-owned subsidiary of Nxu. Promptly following the effective time of the First Merger (the “First Merger Effective Time”), and as part of an integrated plan with the First Merger, Verde will merge with and into Merger Sub II (the “Second Merger”, and together with the First Merger, the “Merger”), whereupon the separate corporate existence of Verde shall cease, and Merger Sub II will survive the Second Merger as a wholly-owned subsidiary of Nxu. Upon completion of the Merger, Nxu is expected to change its corporate name to “Verde Bioresins, Corp.” and trade on the Nasdaq Capital Market under the symbol “VRDE”. The company following the Closing is referred to herein as the “combined company.”
At the First Merger Effective Time, each outstanding share of common stock, par value $0.0001 per share, of Verde (“Verde common stock”) issued and outstanding (excluding shares of Verde common stock to be canceled pursuant to the Merger Agreement and excluding dissenting shares) will be converted solely into the right to receive a number of shares of Nxu common stock equal to the exchange ratio described in more detail in the section entitled “THE MERGER AGREEMENT — Merger Consideration and Exchange Ratio — Exchange Ratio” beginning on page 124 of the accompanying proxy statement/prospectus. Also at the First Merger Effective Time, each outstanding option to purchase shares of Verde common stock will be assumed by Nxu and will be converted into an option to purchase shares of common stock of the combined company, with necessary adjustments to reflect the exchange ratio. Based on Nxu’s capitalization and Verde’s capitalization as of October 23, 2024, the date the Merger Agreement was executed, the exchange ratio is estimated to be approximately 0.0069 shares of Verde common stock for each share of Nxu capital stock, which exchange ratio does not give effect to the proposed reverse stock split described in the accompanying proxy statement/prospectus. The final exchange ratio is subject to adjustment prior to the closing of the Merger (the “Closing”). As Nxu stockholders, you will continue to own your existing shares of Nxu common stock, subject to the proposed elimination of Nxu’s dual class structure of Nxu common stock, $0.0001 par value per share (“Nxu common stock”), by re-designating Nxu’s Class A common stock, par value $0.0001 per share (“Nxu Class A common stock”) as Nxu common stock and cancelling Nxu’s Class B common stock, par value $0.001 per share (“Nxu Class B common stock”) (as described in the accompanying proxy statement/prospectus). At the First Merger Effective Time, (i) each then-outstanding Nxu option to acquire Nxu Class A common stock that has an exercise price that is greater than the closing price of Nxu Class A common stock on the trading day immediately preceding the date on which the Closing occurs (the “Closing Date”) will be surrendered or cancelled for no consideration, (ii) each other Nxu option to acquire Nxu Class A common stock shall remain outstanding and shall remain exercisable subject to the terms and conditions of the applicable Nxu option award agreement and incentive plan under which it was granted, and (iii) each Nxu restricted stock unit will be settled or forfeited in accordance with its terms, such that there shall be no outstanding Nxu restricted stock unit awards as of the First Merger Effective Time. The one share of Nxu’s Series B preferred stock, par value $0.0001 per share (“Nxu Series B preferred stock”) issued and outstanding immediately before the effectiveness of the proposed Amended and Restated Certificate of Incorporation of Nxu will be redeemed, or surrendered for no consideration, upon the Closing. Immediately after the Merger, assuming that Nxu’s aggregate enterprise value is approximately $16.2 million, pre-Merger Nxu stockholders and other pre-Merger Nxu equityholders (including the
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PIPE investors in the Private Placement referred to below) are expected to own approximately 5% of the outstanding shares of capital stock of the combined company and pre-Merger Verde stockholders, after taking into account the conversion of Verde’s outstanding warrants and convertible notes, are expected to own approximately 95% of the outstanding shares of capital stock of the combined company, in each case on a fully-diluted and as-converted basis. Nxu’s assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over Nxu’s cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company.
In connection with the Merger, Humanitario Capital, LLC (“Humanitario”), Verde’s largest stockholder, has agreed to enter into a voting trust agreement, pursuant to which, among other things, the trustee shall vote all shares of common stock of the combined company subject to the voting trust agreement in favor of any vote, consent or other action (subject to certain exceptions) in the same proportion as voted by public stockholders of the combined company that are not affiliates of the combined company with respect to such matter. Please see the section entitled “AGREEMENTS RELATED TO THE MERGER — Support Agreements — Verde Support Agreement” for more information. Following expiration of the voting trust agreement, assuming Humanitario still owns more than 50% of the combined company’s common stock, the combined company may in the future become a “controlled company” within the meaning of the applicable rules of the Nasdaq Stock Market (“Nasdaq”). Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and, as such, can elect to be exempt from certain corporate governance requirements. Though the combined company currently neither anticipates becoming a “controlled company,” nor taking advantage of any “controlled company” exemptions even if deemed to be a “controlled company,” if the combined company were to be deemed to be a “controlled company” and were to elect to be exempt from some or all of these corporate governance requirements, stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
On December 26, 2024, Nxu entered into a Securities Purchase Agreement (the “PIPE Securities Purchase Agreement”) with the purchasers named therein (the “PIPE Investors”), pursuant to which Nxu sold to the PIPE Investors (such transaction, the “Private Placement”) an aggregate of (i) 6,800,000 shares (the “Purchased Shares”) of Class A common stock, (ii) pre-funded warrants to purchase 5,200,000 shares of Class A common stock (the “Pre-Funded Warrants”), (iii) Series A warrants to purchase up to 6,000,000 shares of Class A common stock (the “Series A Warrants”), and (iv) Series B warrants to purchase a number of shares of Class A common stock (the “Series B Warrants” and together with the Pre-Funded Warrants and the Series A Warrants, the “PIPE Warrants”). The Purchased Shares, the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants are collectively referred to herein as the “Securities.” The aggregate offering price for the Purchased Shares and the PIPE Warrants sold in the Private Placement was approximately $3.0 million. Please see “PROPOSAL NO. 10 — THE PIPE PROPOSAL — The Private Placement” for more information on the Private Placement. All dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders. See the section entitled “QUESTIONS AND ANSWERS ABOUT THE MERGER — Q: What equity stake will Nxu current stockholders hold in the combined company following the consummation of the Merger?”
Nxu Class A common stock is currently listed on the Nasdaq Capital Market under the symbol “NXU.” After the Merger, Nxu is expected to be renamed “Verde Bioresins, Corp.” and to trade under the symbol “VRDE.” On January [•], 2025, the last trading day before the date of the accompanying proxy statement/prospectus, the closing sale price of Nxu Class A common stock was $[•] per share.
Each of Nxu and Verde intend for the Merger to qualify as a reorganization for U.S. federal income tax purposes. Please see the section entitled “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” for more information.
The Nxu special meeting is being held to obtain the stockholder approvals necessary to complete the Merger and related matters. As described in the accompanying proxy statement/prospectus, certain Verde stockholders (solely in their respective capacities as Verde stockholders) and certain Nxu stockholders (solely in their respective capacities as Nxu stockholders), are parties to support agreements with Verde and Nxu whereby such stockholders have agreed, subject to the effectiveness of the registration statement on Form S-4, to vote their shares in favor of the transactions contemplated therein, including, with respect to such Verde stockholders, adoption of the Merger Agreement and approval of the Merger and, with respect to such Nxu stockholders, to vote all of their Nxu common stock in favor of the Merger and the related proposal, subject to the terms of the support agreements. Following the effectiveness of the registration statement
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on Form S-4, of which the accompanying proxy statement/prospectus is a part, and pursuant to the Merger Agreement and the support agreements, Verde stockholders holding a sufficient number of shares of Verde capital stock to adopt the Merger Agreement and approve the Merger and related transactions are expected to execute written consents providing for such adoption and approval, subject to the terms and limitations set forth in the support agreements.
More information about Nxu, Verde, the Merger Agreement and the transactions contemplated thereby and the proposals being considered at the Nxu special meeting is contained in the accompanying proxy statement/prospectus. Nxu urges you to read the accompanying proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 15 OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
We look forward to the successful combination of Nxu and Verde.
| | Sincerely, |
| | | |
| | | Mark Hanchett |
| | | Chief Executive Officer and Chairman of the Board of Directors |
| | | Nxu, Inc. |
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS OR THE SECURITIES TO BE ISSUED, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
The accompanying proxy statement/prospectus is dated , and is first being mailed to Nxu’s stockholders on or about .
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NXU, INC.
1828 N. Higley Road, Suite 116
Mesa, AZ 85205
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
TO NXU STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the special meeting of stockholders (the “Nxu special meeting”) of Nxu, Inc. (“Nxu,” “we,” “our,” “us” or the “Company”) will be held exclusively via live webcast at Eastern Time on , unless postponed or adjourned to a later date. The Nxu special meeting will be held exclusively through a virtual format. Nxu stockholders will be able to attend and participate in the Nxu special meeting online by visiting www.virtualshareholdermeeting.com/ , where they will be able to listen to the meeting live, submit questions and vote.
At the Nxu special meeting, in connection with the Merger and as more fully described in the accompanying proxy statement/prospectus, you will vote on the following proposals:
• Proposal No. 1 (the “Transaction Proposal”) to approve (i) the issuance of shares of Nxu common stock, which will represent more than 20% of the shares of Nxu common stock outstanding immediately prior to the Merger, to stockholders of Verde, pursuant to the terms of the Merger Agreement, a copy of which is attached to the accompanying proxy statement/prospectus as Annex A, and (ii) the change of control of Nxu resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively.
• Proposal Nos. 2 – 8 (collectively, the “Charter Proposals”), each presented and voted on separately as required by the Securities and Exchange Commission (the “SEC”) rules, to approve and adopt certain amendments to the Certificate of Incorporation of Nxu, as amended (the “Nxu Charter”). The full text of the proposed Amended and Restated Certificate of Incorporation of Nxu (the “Proposed A&R Charter”) reflecting each of the proposed amendments pursuant to the Charter Proposals is attached to the accompanying proxy statement/prospectus as Annex B.
• Proposal No. 2 (the “Common Stock Declassification Proposal”) to eliminate the dual class structure of the Nxu common stock such that the Nxu Class A common stock will be re-designated as Nxu “common stock” and the Nxu Class B common stock will be cancelled.
• Proposal No. 3 (the “Reverse Stock Split Proposal”) to effect a reverse stock split of Nxu’s issued and outstanding Class A common stock at a ratio of any whole number in the range of 1-for-5 to 1-for-20, inclusive, with the final ratio to be determined in the discretion of the Nxu board of directors and as agreed to by Verde at or prior to the closing of the Merger, or in the sole discretion of the Nxu board of directors if Proposal No. 1 is not approved (the “reverse stock split”).
• Proposal No. 4 (the “Board Classification Proposal”) to classify the board of directors of Nxu.
• Proposal No. 5 (the “Supermajority Stockholder Vote Proposal”) to require approval by at least two-thirds of the voting power of the shares of capital stock of Nxu that would then be entitled to vote in the election of directors at an annual meeting of stockholders in order to amend Article VI (Amendment of the Bylaws), Article VIII (Board of Directors), Article XI (Consent of Stockholders in Lieu of Meeting) and Article XII (Special Meeting of Stockholders) of the Nxu Charter, as amended by the Charter Proposals.
• Proposal No. 6 (the “Director Removal Proposal”) to amend the Nxu Charter to permit the removal of a director only for cause by the affirmative vote of at least two-thirds of the voting power of the shares of capital stock of Nxu that would then be entitled to vote in an election of directors.
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• Proposal No. 7 (the “Officer Exculpation Proposal”) to extend the provisions limiting the personal liability of directors to Nxu or its stockholders for monetary damages for breach of fiduciary duties to include Nxu’s officers.
• Proposal No. 8 (the “Miscellaneous Charter Proposal”) to (i) update provisions governing indemnification and advancement provisions in the Nxu Charter and (ii) change the combined company’s name to “Verde Bioresins, Corp.”
• Proposal No. 9 (the “Equity Plan Proposal”) to approve the Verde Bioresins, Corp. 2025 Equity Incentive Plan, in the form attached to the accompanying proxy statement/prospectus as Annex C.
• Proposal No. 10 (the “PIPE Proposal”) to approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of the shares of Nxu Class A common stock issuable upon exercise of the Series A Warrants and Series B Warrants pursuant to the terms of the PIPE Securities Purchase Agreement.
• Proposal No. 11 (the “Adjournment Proposal”), if necessary, to approve the adjournment of the Nxu special meeting to a later date or dates to permit further solicitation and vote of proxies in the event that there are insufficient votes for any of the above proposals.
Our Board of Directors recommends that you vote “FOR” each Proposal being submitted to a vote of the stockholders at the Nxu special meeting.
The Transaction Proposal (No. 1) requires the affirmative vote of the majority of the votes cast by the holders of all of the outstanding shares of the Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock present in person or represented by proxy at the Nxu special meeting. Abstentions and broker non-votes are not considered votes cast and will have no effect on this proposal.
The Common Stock Declassification Proposal (No. 2) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. In addition, this proposal requires the affirmative vote of the holders of at least two-thirds of the voting power of the Nxu Class B common stock, voting separately as a class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Reverse Stock Split Proposal (No. 3) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Board Classification Proposal (No. 4) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Supermajority Stockholder Vote Proposal (No. 5) requires the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Director Removal Proposal (No. 6) requires the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Officer Exculpation Proposal (No. 7) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
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The Miscellaneous Charter Proposal (No. 8) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Equity Plan Proposal (No. 9), the PIPE Proposal (No. 10) and the Adjournment Proposal (No. 11) each require the affirmative vote of the majority of the votes cast by the holders of all of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock present in person or represented by proxy at the Nxu special meeting. Abstentions and broker non-votes are not considered votes cast and will have no effect on these proposals.
If you hold shares beneficially in “street name” and do not provide your broker, bank or other nominee with voting instructions, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when a bank, broker or other nominee is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-discretionary” or “non-routine” matters. Broker non-votes will not be counted for the purpose of determining the existence of a quorum. We do not expect brokers to have discretionary voting authority for any of the proposals being presented at the Nxu special meeting. Accordingly, broker non-votes will not be counted towards a quorum.
The Closing is conditioned on the approval of the Transaction Proposal, each of the Charter Proposals, and the Equity Plan Proposal (the “Required Proposals”). Except with respect to the Reverse Stock Split Proposal, each Required Proposal is conditioned on the approval of the other Required Proposals. The Reverse Stock Split Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in the accompanying proxy statement/prospectus.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals.
If you fail to return your proxy card or fail to submit your proxy, or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Nxu special meeting, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Nxu special meeting or in favor of any proposal. The presence in person or by proxy of the holders of at least one-third of the total voting power of the shares of capital stock of the Company and entitled to vote at the Nxu special meeting constitutes a quorum. In the absence of a quorum, the stockholders present in person or represented by proxy shall adjourn the meeting, without notice other than announcement at the Nxu special meeting, until a quorum shall be present or represented.
The obligations of Nxu and Verde to complete the Merger are subject to the satisfaction or waiver of several conditions. The accompanying proxy statement/prospectus contains detailed information about Nxu, Verde, the Nxu special meeting, the Merger Agreement, the Merger, and the various proposals.
Nxu is an “emerging growth company” and “smaller reporting company” within the meaning of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Startups Act of 2012, and has elected to take advantage of certain reduced public company reporting requirements. See “SUMMARY OF THE PROXY STATEMENT/PROSPECTUS — Emerging Growth Company” and “SUMMARY OF THE PROXY STATEMENT/PROSPECTUS — Smaller Reporting Company.”
At the Nxu special meeting, Nxu stockholders shall also transact such other business as may properly come before the stockholders at the Nxu special meeting or any adjournment or postponement thereof.
In addition, we may not consummate the Merger if the Transaction Proposal, the Equity Plan Proposal, and each of the Charter Proposals, collectively being the Required Proposals, are not approved at the Nxu special meeting. The Reverse Stock Split Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
Your attention is directed to the proxy statement/prospectus accompanying this notice (including the annexes thereto) for a more complete description of the proposed Merger Agreement and related transactions and each of our proposals.
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Only holders of record of Nxu’s Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock at the close of business on (the “Record Date”) are entitled to notice of the Nxu special meeting and to vote at the Nxu special meeting and any adjournments or postponements thereof. Each share of Nxu Class A common stock is entitled to one vote, each share of Nxu Class B common stock is entitled to ten votes, and the single share of Series B preferred stock is entitled to a number of votes equal to the total number of votes that could be cast by holders of the Nxu Class A common stock and Nxu Class B common stock. A complete list of Nxu’s stockholders of record entitled to vote at the Nxu special meeting will be available for inspection by stockholders at the Nxu special meeting by visiting www.virtualshareholdermeeting.com/ on the meeting day and time, entering your control number and joining the Nxu special meeting as a “Shareholder”, and for ten days before the Nxu special meeting at Nxu’s principal executive offices during regular business hours for any purpose germane to the Nxu special meeting.
Your vote is important. Whether or not you plan to attend the Nxu special meeting, Nxu requests that you sign and return the enclosed proxy or vote by mail or online to ensure that your shares will be represented at the Nxu special meeting if you are unable to virtually attend. You may change or revoke your proxy at any time before it is voted at the Nxu special meeting. If you hold your shares of Nxu common stock in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Nxu special meeting.
NXU’S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS FAIR TO, IN THE BEST INTERESTS OF, AND ADVISABLE TO NXU AND ITS STOCKHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. NXU’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT NXU STOCKHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to be Held on : The joint proxy statement/prospectus is available at www.virtualshareholdermeeting.com/ .
| | By Order of the Board of Directors, |
| | | By: | | /s/ Mark Hanchett |
| | | Name: | | Mark Hanchett |
| | | Title: | | Chief Executive Officer and Chairman of the
Board of Directors of Nxu, Inc. |
| | | Date: | | |
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ABOUT THIS PROXY/REGISTRATION STATEMENT/PROSPECTUS
Unless stated otherwise: all references in this proxy statement/prospectus to “we,” “us,” “Nxu,” or the “Company” refer to Nxu, Inc., a Delaware corporation; all references in this proxy statement/prospectus to “Verde” refer to Verde Bioresins, Inc., a Delaware corporation; all references to “Merger Sub I” refer to Nxu Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Nxu formed for the sole purpose of effecting the First Merger; all references to “Merger Sub II” refer to Nxu Merger Sub, LLC, a Delaware limited liability company formed for the sole purpose of effecting the Second Merger; all references to “Merger Subs” refer collectively to Merger Sub I and Merger Sub II; all references to the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of October 23, 2024, by and among Nxu, Verde, Merger Sub I and Merger Sub II, a copy of which is included as Annex A to this proxy statement/prospectus.
This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Nxu, constitutes a prospectus of Nxu under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Nxu common stock to be issued to Verde stockholders pursuant to the Merger. This proxy statement/prospectus also constitutes a proxy statement/prospectus for Nxu under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the Nxu special meeting, at which Nxu stockholders will be asked to consider and vote on, among other things, a proposal to approve the issuance of shares of Nxu common stock pursuant to the Merger Agreement.
You should rely only on the information contained in this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated . You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date, unless the information specifically indicates that another date applies. Neither our mailing of this proxy statement/prospectus to Nxu stockholders nor the issuance by Nxu of shares of common stock pursuant to the Merger will create any implication to the contrary.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding Nxu has been provided by Nxu and information contained in this proxy statement/prospectus regarding Verde has been provided by Verde.
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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes or incorporates forward-looking statements within the meaning of the federal securities laws regarding, among other things, Nxu, Verde, the Merger, the combined company and the other proposed transactions contemplated thereby, and the following:
• the expected benefits of, and potential value created by, the Merger for the Nxu stockholders and Verde stockholders;
• the likelihood of the satisfaction of certain conditions to the completion of the Merger and whether and when the Merger will be completed;
• any statements of the plans, strategies and objectives of management for future operations, including the execution of integration plans;
• any statements concerning the attraction and retention of highly qualified personnel;
• any statements concerning the ability to protect and enhance the combined company’s businesses;
• any statements concerning developments and projections relating to the combined company’s competitors or industry;
• any statements concerning the combined company’s projected financial performance;
• any statements regarding expectations concerning Nxu’s or Verde’s relationships and actions with third parties; and
• future regulatory, judicial and legislative changes in Nxu’s or Verde’s industry.
These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as Nxu and Verde cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The events and circumstances reflected in forward-looking statements may not be achieved or occur and actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: any statements regarding the strategies, prospects, plans, expectations or objectives of management of Nxu or Verde for future operations of the combined company; the progress, scope or timing of the development of the combined company’s product; the benefits that may be derived from any future products or the commercial or market opportunity with respect to any future products of the combined company; the ability of the combined company to protect its intellectual property rights; the anticipated operations, financial position, ability to raise capital to fund operations, revenues, costs or expenses of Nxu, Verde or the combined company; statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. Forward-looking statements may also include any statements regarding the approval and the Closing, including the timing of the consummation of the Merger, Nxu’s ability to solicit a sufficient number of proxies to approve the proposals, satisfaction of conditions to the completion of the Merger, the expected benefits of the Merger, the ability of Nxu and Verde to complete the Merger and any statement of assumptions underlying any of the foregoing.
The foregoing risks should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere. Nxu and Verde can give no assurance that the conditions to the Merger will be satisfied. For further discussion of the factors that may cause Nxu, Verde or the combined company’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risks associated with the ability of Nxu and Verde to complete the Merger and the effect of the Merger on the business of Nxu, Verde and the combined company, see the section titled “RISK FACTORS” beginning on page 15 of this proxy statement/prospectus.
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Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Nxu. See the section entitled “WHERE YOU CAN FIND MORE INFORMATION” on page 295 of this proxy statement/prospectus.
Certain financial projections of Verde were prepared and delivered to Nxu and its financial advisor in connection with the Merger Agreement (the “Verde Projections”). The Verde Projections should not be viewed as public guidance. The Verde Projections were not prepared with a view toward public disclosure or complying with the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. None of Verde’s independent registered public accounting firm, Nxu’s independent registered accounting firm or any other independent auditors have compiled, examined, or performed any procedures with respect to the Verde Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Verde and Nxu’s independent auditors assume no responsibility for, and disclaim any association with, the Verde Projections. Nonetheless, the Verde Projections included in this proxy statement/prospectus are included because they were made available to the Nxu board of directors and Nxu’s financial advisor in connection with their review of the Merger Agreement and related transactions. No aspect of the Verde Projections is included in this proxy statement/prospectus in order to induce any Nxu stockholders to vote in favor of any of the Proposals at the Nxu special meeting.
If any of these risks or uncertainties materialize or any of these assumptions prove incorrect, the actual results of operations of Nxu, Verde, or the combined company could differ materially from the forward-looking statements. All forward-looking statements in this proxy statement/prospectus are current only as of the date of this proxy statement/prospectus. Nxu and Verde do not undertake any obligation to (and expressly disclaim any such obligation to) publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events or any new information that becomes available in the future.
Before you grant your proxy or instruct how your vote should be cast or you vote on the proposals set forth herein, you should be aware that the occurrence of the events described in the section entitled “RISK FACTORS” and elsewhere in this proxy statement/prospectus may adversely affect Nxu and Verde.
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus but does not contain all of the information that is important to you. To better understand the Merger and the proposals to be considered at the Nxu special meeting, you should read this entire proxy statement/prospectus carefully, including the Merger Agreement and the other annexes to which you are referred in this proxy statement/prospectus. Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to the proposed reverse stock split or the Private Placement.
Parties to the Merger
Nxu, Inc.
Nxu, Inc. (“Nxu”) is a US-based technology company leveraging its intellectual property and innovations to support energy storage and charging solutions for the infrastructure needed to power an electrified future. Nxu historically focused on building megawatt (“MW”) charging stations and developing innovative battery cells and battery packs for use in advanced energy storage systems and mobility products.
Following a shift in focus in the latter half of 2023, Nxu continued developing and producing its NxuOne™ megawatt charging station in its Mesa, Arizona facility. As of March 31, 2024, Nxu successfully launched its first charging station and produced multiple production units ready for deployment. Production costs, including costs of materials and labor, reduced with each unit produced, as Nxu focused on scale and efficiency. Nxu started the second quarter of 2024 centered on developing plans for charging station deployment, continued scaled production of its NxuOne™ megawatt charging station, and initial design of future charging products.
On May 10, 2024, Nxu announced its intention to evaluate strategic alternatives, with the Strategic Planning Committee of its board of directors (the “Strategic Planning Committee”) leading such evaluation with outside assistance from advisors. As Nxu conducted its strategic alternative review process, Nxu focused on reducing costs to maximize the strength of its balance sheet and reduce its use of cash. On May 10, 2024, Nxu significantly reduced its headcount across Product, Engineering, Manufacturing, and General & Administrative functions as a cost saving measure, as Nxu successfully pursued avenues for a business combination with limited access to continued capital funding.
Nxu’s mailing address is 1828 N. Higley Rd., Suite 116, Mesa, Arizona 85205 and Nxu’s telephone number is (602) 309-5425. Nxu’s website is www.nxuenergy.com. There you can find information about Nxu as well as its annual, periodic, current and other reports Nxu files with the SEC. Nxu’s website and the information contained on, or that can be accessed through, its website is not deemed to be incorporated by reference in, and is not part of, this proxy statement/prospectus. The SEC also maintains a website at www.sec.gov where Nxu’s public filings can be found.
Nxu’s existing business, operations and financial condition are described below in this proxy statement/prospectus under the headings “INFORMATION ABOUT NXU” and “NXU’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”
Nxu’s Class A common stock is listed on the Nasdaq Capital Market under the ticker symbol “NXU”. Upon the Closing, Nxu is expected to change its name to “Verde Bioresins, Corp.” The parties will apply to continue the listing of Nxu’s common stock on the Nasdaq Capital Market under the symbol “VRDE” upon the Closing.
Verde Bioresins, Inc.
Verde Bioresins, Inc. (“Verde”) specializes in the development and manufacturing of its proprietary brand of bioresin products known as PolyEarthylene®. PolyEarthylene is a renewable and sustainable, highly scalable and economically feasible, plant based resin that is flexible, temperature tolerant, capable of supporting production of durable goods and single-use items such as packaging and food-service items, and designed specifically for a “drop-in” method with existing plastic manufacturing equipment. In addition, PolyEarthylene is generally curbside and industrial recyclable and landfill biodegradable. Verde believes that PolyEarthylene is one of the best available scalable and durable biobased, biodegradable alternatives to traditional petroleum-based plastics, with the potential to allow for accelerated landfill biodegradation and recyclability without losing optimal properties attributed to traditional petroleum-based plastics, such as strength, temperature tolerance, stable shelf life, and a high processing range. Verde has based this belief on a number of factors, including, Verde’s own assessment based on work performed by Verde’s polymer chemistry and
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chemical and mechanical engineering staff in analyzing Verde’s products and available competitive products, as well as existing and prospective customer perception, adoption and testimonials. Verde’s mission is to achieve widespread commercial adoption of PolyEarthylene, allowing for the elimination of harmful, toxic and permanent plastic waste in the environment.
Verde has developed an extensive intellectual property portfolio in the form of trade secrets, knowhow and trademarks. Verde’s proprietary technology converts sustainable plant-based materials into a portfolio of PolyEarthylene resins, each tailored to a set of specific performance attributes. Verde’s research and development team can match the characteristics of PolyEarthylene to the physical and mechanical properties of traditional petroleum-based plastics to create products according to Verde’s existing and prospective customers’ injection molding, blow molding, blown film and thermoform specifications. Furthermore, Verde’s PolyEarthylene resins can be successfully homogenized with Post-Consumer Recycled (“PCR”) polymers or made electrostatic dissipative up to 10^9th based on Verde’s existing and prospective customers’ needs.
For the nine months ended September 30, 2024 and 2023, Verde’s net loss was $8.2 million and $8.5 million, respectively, and for the year ended December 31, 2023, Verde’s net loss was $12.1 million. As of September 30, 2024, Verde’s accumulated deficit was $34.6 million. Prior to April 2023, Verde had not realized any revenue from product sales since its inception in March 2020. Verde began generating revenue from product sales in April 2023, all of which have been attributable to sales of PolyEarthylene in connection with direct sales and distribution of PolyEarthylene, including in connection with Verde’s distribution partnership with Vinmar Polymers America, LLC (“Vinmar”). For more information about Verde, see the sections entitled “VERDE’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and “INFORMATION ABOUT VERDE.”
Verde’s principal office is located at 1431 East Orangethorpe Avenue, Fullerton, California 92831, and its telephone number is (310) 219-6300. Verde’s corporate website address is www.verdebioserins.com. Verde’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this proxy statement/prospectus.
The Merger Subs
Each Merger Sub is a direct, wholly owned subsidiary of Nxu and was formed solely for the purpose of carrying out the Merger. The principal executive office of each Merger Sub is located at 1828 N Higley Rd., Suite 116, Mesa, Arizona 85205 and the telephone number of each Merger Sub is (602) 309-5425.
The Merger (see page 102)
If the Merger is completed, Merger Sub I will merge with and into Verde (the “First Merger”), with Verde surviving the First Merger and continuing as a wholly-owned subsidiary of Nxu. Promptly following the effective time of the First Merger (the “First Merger Effective Time”), and as part of an integrated plan with the First Merger, Verde shall merge, with and into Merger Sub II (the “Second Merger”, and together with the First Merger, the “Merger”), whereupon the separate corporate existence of Verde shall cease, and Merger Sub II shall be the final surviving entity of the Merger as a wholly-owned subsidiary of Nxu.
Nxu’s Reasons for the Merger (see page 104)
In the course of reaching its decision to approve the Merger, the Nxu board of directors held numerous meetings, consulted with Nxu’s senior management, legal counsel and financial advisors, and reviewed and assessed a significant amount of information. In reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, the Nxu board of directors took into account information presented to it during the process and considered a number of factors that it viewed as supporting its decision to approve the Merger Agreement. For a discussion of the factors that the Nxu board of directors considered, see the section entitled “THE MERGER — Nxu’s Reasons for the Merger.”
Verde’s Reasons for the Merger (see page 106)
In connection with reaching its decision to enter into the Merger Agreement, the Verde board of directors considered a wide variety of factors. Ultimately, the Verde board of directors concluded that a merger with Nxu was the best available option to support the advancement of Verde’s business and growth objectives and provide it with future access to the public capital markets. The Verde board of directors also considered a number of uncertainties and risks
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in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement. For a discussion of the factors that the Verde board of directors considered, see the section entitled “THE MERGER — Verde’s Reasons for the Merger.”
Opinion of Nxu’s Financial Advisor (see page 108)
Nxu has engaged Lake Street Capital Markets, LLC (“Lake Street”) to deliver an opinion in connection with the Merger as to the fairness, from a financial point of view, to Nxu of the Verde Enterprise Value (as defined below) used for the Closing Merger Consideration (as defined below). At a meeting of the Nxu board of directors held on October 19, 2024, Lake Street reviewed with the Nxu board of directors Lake Street’s financial analysis of the Verde Enterprise Value and delivered an oral opinion, confirmed by delivery of a written opinion dated October 19, 2024, to the Nxu board of directors to the effect that, based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Lake Street as set forth in such opinion, as of October 19, 2024, the Verde Enterprise Value used for the Closing Merger Consideration was fair, from a financial point of view, to Nxu. For purposes of Lake Street’s financial analyses and opinion, the term “Verde Enterprise Value” refers to $306,937,395 ascribed to Verde pursuant to the Merger Agreement and “Closing Merger Consideration” refers to the right to receive the number of shares of duly authorized, validly issued, fully paid and nonassessable shares of Nxu common stock equal to an exchange ratio.
The full text of Lake Street’s written opinion, dated October 19, 2024, which sets forth, among other things, the assumptions made, matters considered and qualifications and any limitations on the opinion and the review undertaken by Lake Street in connection with rendering its opinion, is attached to this proxy statement/prospectus as Annex D and is incorporated by reference herein. Stockholders of Nxu are urged to read the entire opinion carefully and in its entirety to learn about the assumptions made, procedures followed, matters considered and limits on the scope of the review undertaken by Lake Street in rendering its opinion. The analysis performed by Lake Street should be viewed in its entirety; none of the methods of analysis should be viewed in isolation when reaching a conclusion on whether the consideration was fair. The opinion addresses only the fairness of the Verde Enterprise Value used for the Closing Merger Consideration, from a financial point of view, to Nxu, as of the date of the opinion, and does not address Nxu’s underlying business decision to proceed with or effect the Merger or the likelihood of consummation of the Merger. Lake Street’s opinion was directed to the Nxu board of directors in connection with its consideration of the Merger and was not intended to be, and does not constitute, a recommendation to any stockholder as to how such stockholder should vote with respect to the Merger or any other matter.
Interests of Nxu’s Directors and Executive Officers in the Merger (see page 118)
In considering the recommendation of the Nxu board of directors with respect to issuing shares of Nxu common stock in the Merger and the other matters to be acted upon by the Nxu stockholders at the Nxu special meeting, the Nxu stockholders should be aware that Nxu’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of Nxu’s stockholders generally. These interests may present with actual or potential conflicts of interest. These interests include the following:
• under the terms of their employment agreements (which, in the case of Nxu’s Chief Executive Officer, Mark Hanchett, and Nxu’s President, Annie Pratt, were amended in connection with the signing of the Merger Agreement and in the case of Nxu’s Chief Financial Officer, Sarah Wyant, was entered into in connection with the signing of the Merger Agreement), each of Mr. Hanchett, Ms. Pratt and Ms. Wyant (collectively, the “Nxu Executives”), are entitled to a financing bonus not to exceed an aggregate amount equal to six months of such executive’s annual base salary as of the Closing in the event that, after the Closing, the combined company raises at least $5 million during 2025 through the sale of the combined company’s equity securities to one or more third parties unaffiliated with either Nxu or Verde, provided that such Nxu Executive is employed by Nxu on the Closing and provided such Nxu Executive executes a general release of claims in connection with any termination of employment (the “Financing Bonus”). Further, under the current terms of Nxu’s employment agreements with each of the Nxu Executives, following the signing of the Merger Agreement, subject to certain conditions, Nxu has agreed to deliver to the Nxu Executives their previously granted Nxu restricted stock units (“Nxu RSUs”), totaling 5,367,874. Nxu RSUs in the aggregate, in installments in such amounts as Nxu determines may be delivered to the Nxu Executives without jeopardizing Nxu’s ability to continue as a going concern;
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• under board of directors agreements (the “Board of Directors Agreements”) with each of Jessica Billingsley and Britt Ide (the “Independent Directors”), each Independent Director (i) will receive a $15,000 per quarter cash stipend and (ii) has been granted 591,715 Nxu RSUs subject to quarterly vesting, under the Nxu, Inc. Amended and Restated 2023 Omnibus Incentive Plan (the “Amended 2023 Omnibus Plan”). Further, following the signing of the Merger Agreement, Nxu has agreed to deliver Nxu RSUs, totaling 411,886 Nxu RSUs in the aggregate, to the Independent Directors as consideration for their prior service as members of the Nxu board of directors, and such Nxu RSUs will be delivered in installments in such amounts as Nxu determines may be delivered to the Independent Directors without jeopardizing Nxu’s ability to continue as a going concern;
• Mr. Hanchett is the holder of the single share of Series B preferred stock issued and outstanding and has entered into a Voting Agreement and Irrevocable Proxy (the “Series B Voting Agreement”) with Nxu, pursuant to which Mr. Hanchett has agreed to, subject to specified exceptions, (i) cast all of the votes to which he is entitled by reason of holding Nxu Series B preferred stock “for” or “against” (as applicable) a special action subject to the votes cast by the holders of Nxu Class A common stock and Nxu Class B common stock; and (ii) irrevocably grant each director of Nxu as Mr. Hanchett’s proxy and attorney-in-fact to vote the Nxu Series B preferred stock on behalf of him if he fails at any time to vote as required in the Series B Voting Agreement;
• Ms. Billingsley is currently a director of Nxu and is anticipated to continue as a director of the combined company after the First Merger Effective Time. Following the First Merger Effective Time, it is expected that the combined company will provide compensation to non-employee directors pursuant to a new non-employee director program that is expected to become effective as of the Closing;
• under the Merger Agreement, Nxu’s directors and executive officers are entitled to continued indemnification, expense advancement and insurance coverage; and
• as of December 2, 2024, Nxu’s directors, executive officers and their respective affiliates beneficially owned, in the aggregate, approximately 2.5% of the shares of Nxu Class A common stock, excluding any shares of Nxu Class A common stock issuable upon exercise or settlement of stock options or Nxu RSUs held by such individuals. This percentage ownership of Nxu Class A common stock as of December 2, 2024 does not give effect to shares of Nxu Class A common stock issued in the Private Placement and shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants.
The Nxu board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Merger Agreement and the Merger, and to recommend that the Nxu stockholders approve the proposals to be presented to the Nxu stockholders for consideration (the “Proposals”) at the Nxu special meeting as contemplated by this proxy statement/prospectus.
Interests of Verde’s Directors and Executive Officers in the Merger (see page 122)
In considering the recommendation of the Verde board of directors with respect to approving the Merger, stockholders should be aware that Verde’s board of directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of Verde stockholders. These interests may present them with actual or potential conflicts of interest. These interests include, but are not limited to, the following:
• Verde’s directors, executive officers and their respective affiliates own, in the aggregate, approximately 12% of the outstanding shares of Verde capital stock;
• Verde’s directors and current executive officers are expected to become directors and executive officers of the combined company upon the Closing; and
• each of Verde’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement.
The Verde board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Merger Agreement and the Merger, and to recommend, that Verde stockholders sign and return the written consent as contemplated by this proxy statement/prospectus.
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The Merger Agreement (see page 132)
Merger Consideration (see page 133)
In accordance with the terms and subject to the conditions of the Merger Agreement, at the Closing, each share of Verde common stock issued and outstanding immediately prior to the First Merger, shall, without any action on the part of the holder thereof, be converted into the right to receive the number of shares of duly authorized, validly issued, fully paid and nonassessable shares of Nxu common stock equal to the exchange ratio as described in more detail in the section entitled “THE MERGER AGREEMENT — Merger Consideration” beginning on page 133 of this proxy statement/prospectus.
Treatment of Verde Options, Verde Notes, and Verde Warrants
Options
Under the terms of the Merger Agreement, each Verde option, whether vested or unvested, that is then outstanding and unexercised, will be assumed by combined company and converted, as of the First Merger Effective Time, into an option to purchase a number of shares of combined company common stock that is equal to (A) the number of shares of Verde common stock that were subject to such Verde option as of immediately prior to the First Merger Effective Time multiplied by (B) the exchange ratio, rounded down to the nearest whole share. Each assumed option will continue to be subject to the same terms and conditions (including with respect to the exercise price and any vesting or forfeiture and exercise provisions) that applied to the Verde option. The combined company will assume Verde’s 2020 Stock Incentive Plan (the “Verde Plan”) solely to govern and administer the assumed options.
Notes and Warrants
Under the terms of the Merger Agreement, all convertible notes of Verde (the “Verde Notes”) shall be converted into common stock of Verde (and any securities under such Verde Notes shall be released), and all outstanding and unexercised warrants to purchase shares of Verde common stock shall be exercised for Verde common stock, in each case, in accordance with their terms.
Treatment of Nxu Common and Preferred Stock, Nxu Options, Nxu RSUs and Nxu Warrants
Common and Preferred Stock
Each share of Nxu common stock issued and outstanding at the time of the Merger will remain issued and outstanding, and, subject to the proposed reverse stock split and any extension to the expiration time provided for in connection with the Merger, will be unaffected by the Merger.
The one share of Nxu Series B preferred stock issued and outstanding immediately before the effectiveness of the Proposed A&R Charter will be redeemed, or surrendered for no consideration, upon the Closing.
Options
Under the terms of the Merger Agreement, each Nxu option that has an exercise price that is greater than the closing price of Nxu Class A common stock on the trading day immediately preceding the date of the Closing (the “Closing Date”) will be surrendered or cancelled for no consideration in accordance with the terms of (1) the Amended 2023 Omnibus Plan, as amended from time to time, (2) the Atlis Motor Vehicles, Inc. Employee Stock Option Plan, effective as of April 27, 2022 and amended from time to time (together with any predecessor plan) and (3) the Atlis Motor Vehicles, Inc. Non-Employee Stock Option Plan, effective as of April 27, 2022 and amended from time to time (together with any predecessor plan) (collectively, the “Nxu Plans”), immediately prior to the First Merger Effective Time. Each other Nxu option shall remain outstanding and shall remain exercisable subject to the terms and conditions of the Nxu option award and the Nxu Plan under which it was granted.
RSUs
Under the terms of the Merger Agreement, each Nxu RSU will be settled or forfeited in accordance with its terms, such that there shall be no outstanding Nxu RSUs (or obligations to deliver shares of Nxu common stock with respect to previously outstanding and vested Nxu RSUs) as of the First Merger Effective Time. The Nxu board of directors and
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the Nxu Executives previously agreed to extend the vesting dates for Nxu RSUs previously granted to such executives until January 31, 2025 (the “Delayed Vesting”). Pursuant to the Employment Agreement Amendments and the Wyant Employment Agreement (each as defined in the section entitled “THE MERGER — Amendments to Equity Awards under the Employment Agreement Amendments and the Wyant Employment Agreement”) with the Nxu Executives, following the signing of the Merger Agreement, Nxu agreed to deliver such Nxu RSUs to the Nxu Executives in installments in such amounts as Nxu determines may be delivered to the Nxu Executives without jeopardizing Nxu’s ability to continue as a going concern. Such Nxu RSUs will be delivered until the earlier of (a) the date all Nxu RSUs subject to Delayed Vesting have been delivered to the Nxu Executive or (b) the date that is no later than five business days prior to the Closing (such earlier date, the “Cut-Off Date”). Any Nxu RSUs that have not been delivered to the Nxu Executives as of the Cut-Off Date will be forfeited for no consideration. No Nxu RSUs will be settled if such settlement would cause the Nxu Executive to be subject to excise taxes imposed by Section 4999 of the Code, provided that, at Nxu’s and the Nxu Executive’s request, Verde may consider permitting such Nxu RSUs to be settled upon receipt of satisfactory evidence, in the sole discretion of Verde’s counsel, that the Nxu Executive has remitted to an escrow account established by Nxu the amount necessary to satisfy Nxu’s tax withholding obligations under Section 4999 of the Code upon the Closing.
Similarly, pursuant to the Board of Directors Agreements with the Independent Directors and a restricted stock unit award agreement with Caryn Nightengale, Nxu’s former director (each agreement as defined in the section entitled “THE MERGER — Non-Employee Director Compensation”), following the signing of the Merger Agreement, Nxu agreed to deliver Nxu RSUs to the Independent Directors and Ms. Nightengale that were granted as consideration for their prior service as members of the Nxu board of directors (the “Director Delayed RSUs”). Such Director Delayed RSUs will be delivered in installments in such amounts as Nxu determines may be delivered to the Independent Directors and Ms. Nightengale without jeopardizing Nxu’s ability to continue as a going concern. Such Director Delayed RSUs will be delivered until the Cut-Off Date. Any Director Delayed RSUs that have not been delivered to the individuals as of the Cut-Off Date will be forfeited for no consideration.
For additional information, see “THE MERGER — Amendments to Equity Awards under the Employment Agreement Amendments and the Wyant Employment Agreement” and “— Non-Employee Director Compensation” beginning on page 122 of this proxy statement/prospectus.
Warrants
All outstanding and unexercised warrants to purchase Nxu Class A common stock (the “Nxu Warrants”) as of the First Merger Effective Time (and which will not include any PIPE Warrants, all of which will be automatically exercised concurrently with the Merger to the extent not previously exercised) will remain in effect pursuant to their terms and will be unaffected by the Merger. Each Nxu warrantholder will have the option to exercise any such Nxu Warrant and receive, for each warrant share that would have been issuable upon such exercise immediately prior to Closing, the same number of shares of Nxu common stock. If such Nxu warrantholder chooses not to exercise any such Nxu Warrant, the Nxu warrantholder will continue to hold onto the Nxu Warrant and it will remain outstanding. Pre-Merger Nxu stockholders’ ownership of approximately 5% of the combined company (on a fully-diluted and as-converted basis) assumes that all the Nxu Warrants will have been exercised prior to Closing. Accordingly, the pre-Merger Nxu stockholders’ ownership of approximately 5% ownership of the combined company will be reduced both to the extent any such outstanding warrants remain outstanding post-Merger and as a result of the automatic exercise concurrently with the Merger of any then remaining unexercised PIPE Warrants.
Conditions to the Completion of the Merger (see page 138)
To complete the Merger, Nxu stockholders must approve Proposal Nos. 1 – 9, and Verde stockholders must adopt the Merger Agreement and approve the Merger and the related transactions contemplated by the Merger Agreement. Additionally, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.
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Exclusivity (see page 141)
The Merger Agreement contains non-solicitation and exclusivity provisions prohibiting Verde and Nxu from inquiring about or seeking a competing transaction. Each of Nxu and Verde have agreed not to, subject to certain exceptions, and to use their reasonable best efforts to cause any of their respective representatives not to, directly or indirectly:
• initiate, solicit or knowingly encourage or knowingly facilitate any inquiries or requests for information with respect to, or the making of, any inquiry regarding, or any proposal or offer that constitutes, or which is otherwise intended or is reasonably likely to result in or lead to, any Competing Proposal or Acquisition Proposal (each as defined in the section of this proxy statement/prospectus entitled “THE MERGER AGREEMENT — Exclusivity”);
• engage in, continue or otherwise participate in any negotiations or discussions concerning, or provide access to its properties, books and records or any confidential information or data to, any third party relating to any proposal, offer, inquiry or request for information that constitutes, or which is otherwise intended or is reasonably likely to result in or lead to, a Competing Proposal or Acquisition Proposal;
• approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Competing Proposal or Acquisition Proposal;
• or execute or enter into, any letter of intent, memorandum of understanding, agreement in principal, confidentiality agreement, merger agreement, acquisition agreement, exchange agreement, joint venture agreement, partnership agreement, option agreement or other similar agreement for or relating to any Competing Proposal or Acquisition Proposal.
Board Recommendation Change (see page 143)
Verde and Nxu agreed (and, with respect to Verde, subject to specified exceptions described in the Merger Agreement and in the section of this proxy statement/prospectus entitled “THE MERGER AGREEMENT — Board Recommendation Change” beginning on page 143) that their boards of directors may not take any of the following actions:
• withhold, amend, withdraw or modify (or publicly propose to withhold, amend, withdraw or modify) the recommendation of their boards of directors in a manner adverse to the other party;
• resolve, or have any committee of their boards of directors resolve, to withdraw or modify their recommendation in a manner adverse to the other party; or
• adopt, approve or recommend (or publicly propose to adopt, approve or recommend) any Acquisition Proposal.
Termination of the Merger Agreement (see page 140)
Either Nxu or Verde may terminate the Merger Agreement under certain circumstances, which would prevent the Merger from being consummated.
Termination Fee (see page 140)
If in certain instances, Nxu or Verde terminate the Merger Agreement, Verde shall pay to Nxu a termination fee of $1,000,000.
Support Agreements (see page 146)
Verde Support Agreement (see page 146)
On October 23, 2024, Humanitario Capital LLC (“Humanitario”), a stockholder of Verde holding shares representing the requisite votes necessary to approve the Merger, entered into a Support Agreement with Nxu and Verde (the “Verde Support Agreement”), pursuant to which Humanitario agreed to (a) from the date of the Verde Support Agreement to the earlier to occur of the (i) First Merger Effective Time, and (ii) such time as the Merger Agreement shall be terminated in accordance with its terms (the “Support Expiration Time”), vote at any meeting or pursuant to any action by written consent of the stockholders of Verde all shares of Verde common stock held of record or thereafter acquired by Humanitario: (i) to approve and adopt the Merger Agreement and the transactions contemplated thereby, including
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the Merger and (ii) against any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by Verde (other than the Merger Agreement and the transactions contemplated thereby, including the Merger); (b) be bound by certain transfer restrictions with respect to such securities, prior to the Closing; and (c) be bound by certain other covenants and agreements related to the Merger, in each case, on the terms and subject to the conditions set forth in the Verde Support Agreement.
Humanitario also agreed to enter into a Voting Trust Agreement with respect to shares of common stock of the combined company (the “Voting Trust Agreement”) with an independent trustee (the “Voting Trustee”) within ten (10) business days after this registration statement is declared effective under the Securities Act. Pursuant to the Voting Trust Agreement, Humanitario will transfer and assign to the Voting Trustee all of the shares of common stock of the combined company received or to be received by Humanitario pursuant to the terms of the Merger Agreement (the “Closing Shares”), effective as of the First Merger Effective Time. Following the Closing, the Voting Trustee will vote all shares of common stock subject to the Voting Trust Agreement in favor of any vote, consent or other action (subject to certain exceptions) in the same proportion as voted by public stockholders of the combined company that are not affiliates of the combined company with respect to such matter.
Nxu Support Agreement (see page 147)
Concurrently with the execution of the Merger Agreement, Nxu entered into a Support Agreement (the “Nxu Support Agreement”) with Verde, Mr. Hanchett and Ms. Pratt (collectively, the “Support Stockholders”) pursuant to which the Support Stockholders agreed to, among other things, (a) from the date of the Nxu Support Agreement to the Support Expiration Time, vote at any meeting or pursuant to any action of written resolution of the stockholders of Nxu all of their Nxu common stock, held of record or thereafter acquired: (i) in favor of the Merger and the other proposals to be presented to the Nxu stockholders for consideration at the Nxu special meeting and (ii) against any competing acquisition proposal; and (b) be bound by certain other covenants and agreements related to the Merger, in each case, on the terms and subject to the conditions set forth in the Nxu Support Agreement.
Registration Rights Agreement (see page 147)
At the Closing, the combined company and Humanitario intend to, and other certain stockholders of Verde may, enter into a Registration Rights Agreement, pursuant to which, among other things, Humanitario and the other stockholders party thereto will be granted certain registration rights, on the terms and subject to the conditions therein.
Verde Lock-up Agreements (see page 148)
Prior to the Closing, Verde shall use reasonable efforts to procure that Humanitario and each other Verde stockholder with greater than five percent (5%) ownership in Verde, if any, enters into the Form of Verde Lock-Up Agreement, pursuant to which such Verde stockholder agrees that it shall not, and shall cause any of its permitted transferees not to, (a) transfer any Nxu common stock received by such stockholder at the Closing pursuant to the Merger Agreement (the “Lock-Up Shares”) during the period beginning on the Closing Date and ending one hundred eighty (180) days thereafter (the “Initial Lock-Up Period”); and (b) transfer any Lock-Up Shares representing more than five percent (5%) of the aggregate Lock-Up Shares held by such Verde stockholder in any calendar month during the twenty-four month period following the Initial Lock-Up Period, in each case, subject to certain exceptions.
Series B Preferred Voting Agreement (see page 148)
Concurrently with the execution of the Merger Agreement, Nxu entered into the Series B Voting Agreement with Mr. Hanchett, related to which Nxu has issued the sole share of Series B preferred stock to Mr. Hanchett, and, in exchange, Mr. Hanchett has agreed to, subject to specified exceptions, (i) cast all of the votes to which he is entitled by reason of holding the Series B preferred stock “for” or “against” (as applicable) a special action subject to the votes cast by the holders of Nxu Class A common stock and Nxu Class B common stock of; and (ii) irrevocably grant each director of Nxu as Mr. Hanchett’s proxy and attorney-in-fact to vote the Series B preferred stock on behalf of Mr. Hanchett if he fails at any time to vote as required in the Series B Voting Agreement.
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Management of the Combined Company Following the Merger (see page 228)
Effective as of the Closing, the combined company’s executive officers are expected to be members of the Verde executive management team prior to the Merger, including:
Name | | Title |
Joseph Paolucci | | Chief Executive Officer |
Brian Gordon | | President and Chief Operating Officer and Director |
Material U.S. Federal Income Tax Consequences of the Merger (see page 149)
The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming the Merger constitutes a reorganization, subject to the qualifications and limitations set forth in the section entitled “MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER,” a Verde stockholder will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of shares of Nxu common stock in exchange for shares of Verde capital stock in the Merger.
If the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then each Verde U.S. holder would recognize gain or loss upon the exchange of shares of Verde capital stock for Nxu common stock in the Merger equal to the difference between (x) the fair market value of the shares of Nxu common stock received in exchange for the shares of Verde capital stock and (y) such U.S. holder’s adjusted tax basis in the shares of Verde capital stock surrendered.
Since the Nxu stockholders will not sell, exchange or dispose of any shares of Nxu common stock as a result of the Merger, there will be no material U.S. federal income tax consequences to Nxu stockholders as a result of the Merger.
See the section entitled “THE MERGER — Material U.S. Federal Income Tax Consequences of the Merger” for a more complete description of the material U.S. federal income tax consequences of the Merger to U.S. holders of Verde capital stock.
The Private Placement
On December 26, 2024, Nxu consummated the Private Placement. Pursuant to the PIPE Securities Purchase Agreement, Nxu sold to the PIPE Investors an aggregate of (i) the 6,800,000 Purchased Shares of Nxu Class A common stock, (ii) the Pre-Funded Warrants to purchase 5,200,000 shares of Nxu Class A common stock, (iii) the Series A Warrants to purchase up to 6,000,000 shares of Nxu Class A common stock, and (iv) the Series B Warrants to purchase a number of shares of Nxu Class A common stock to be determined on the Reset Date (as defined below) in accordance with the terms of the Series B Warrants. The aggregate offering price for the Purchased Shares and the PIPE Warrants sold in the Private Placement was approximately $3.0 million.
The Series A Warrants contain a reset adjustment that is expected to occur on the date (the “Reset Date”) that is the eighth trading day after the effectiveness of the resale registration statement relating to the Private Placement or, if later, the eighth trading day after the PIPE Stockholder Approval is obtained. The reset price means the greater of (i) 80% of the lowest daily weighted average price (as defined therein) and (ii) a floor price of $0.0524 (subject to adjustment). If the exercise price of the Series A Warrants is reduced pursuant to the reset provisions, the number of shares of Nxu Class A common stock for which the Series A Warrants can be exercised will be correspondingly increased. The number of shares of Common Stock for which the Series B Warrants can initially be exercised will be determined on the Reset Date and will equal that number obtained by subtracting (i) the number of Purchased Shares purchased by the PIPE Investors on the closing date of the Private Placement pursuant to the PIPE Securities Purchase Agreement (i.e., 6,800,000 shares of Nxu Class A common stock) from (ii) the quotient obtained by dividing (x) the aggregate purchase price paid the PIPE Investors on the closing date for the Private Placement (approximately $3.0 million) by (y) the applicable reset price determined on the Reset Date.
Because the Reset Date will not occur until the PIPE Stockholder Approval is obtained, the number of shares issuable pursuant to the Series A Warrants and Series B warrants following the Reset Date will not be known until the date of the Nxu Special Meeting. The number of shares of Nxu Class A common stock issuable in respect of the Private Placement, including the number of shares issuable pursuant to the PIPE Warrants, will have a significant impact on the percentage ownership in the post-Merger combined company that will be held by pre-Private Placement Nxu stockholders since all dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders.
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See “PROPOSAL NO. 10 — THE PIPE PROPOSAL — The Private Placement” for more information on the Private Placement, the section entitled “QUESTIONS AND ANSWERS ABOUT THE MERGER — Q: What equity stake will Nxu current stockholders hold in the combined company following the consummation of the Merger?”
Risk Factors (see page 15)
Both Nxu and Verde are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective stockholders, including the following risks:
Risks Related to the Merger
• The Merger consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed since the exchange ratio will not change or otherwise be adjusted based on the market price of Nxu Class A common stock.
• If the conditions to the Merger are not satisfied or waived, the Merger may not occur, which could harm the Nxu Class A common stock price and future business and operations of Nxu and may result in the Nxu board of directors deciding to pursue a dissolution and liquidation of Nxu.
• Some Nxu and Verde directors and executive officers have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.
• Nxu stockholders and Verde stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
• During the pendency of the Merger, each of Nxu and Verde may be limited in its ability to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.
• Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.
• Because the lack of a public market for Verde common stock makes it difficult to evaluate the fair market value of Verde’s capital stock, the value of the Nxu common stock to be issued to Verde stockholders may be more or less than the fair market value of Nxu common stock.
• Lawsuits may be filed against Nxu, the members of the Nxu board of directors, Verde and/or the members of the Verde board of directors arising out of the Merger, which may delay or prevent the Merger.
Risks Related to Nxu
• Nxu has incurred significant losses since its inception, and Nxu expects to continue to incur losses for the foreseeable future. Accordingly, its financial condition raises substantial doubt regarding its ability to continue as a going concern.
• Nxu generated revenue for the first time in 2023, but there is no assurance that it will be able to continue to generate revenue from the operations of the NxuOne™ Charging Network.
• Nxu needs to raise additional capital to meet its future business requirements and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interest.
• If the market price of the Nxu Class A common stock continues to remain under $1.00 per share, the only cure may be to enact a reverse split of the Nxu Class A common stock, such as the one proposed under the Reverse Stock Split Proposal. Failure to maintain compliance with Nasdaq’s Continued Listing Rules could be costly and have material adverse effects.
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Risks Related to Verde
• Verde is an early-stage company with a history of losses, very limited revenues from product sales to date, and its ability to generate meaningful revenues going forward or to become profitable is uncertain.
• Verde will not realize meaningful new capital through the Merger and, accordingly, will need to secure significant additional capital to execute on its business plan, which additional capital may not be available on favorable terms, or at all.
• Verde is currently reliant on a single facility with limited capacity for all of its operations, and Verde’s ability to execute on its business, growth and financial plans is dependent on adding additional manufacturing capacity.
• Construction of Verde’s contemplated manufacturing facilities may not be completed in the expected timeframe or in a cost-effective manner. Any delays in the construction of Verde’s manufacturing facilities could severely impact its business, financial condition, results of operations and prospects. Verde’s ability to pursue its contemplated new manufacturing facility, which is integral to Verde’s ability to execute on its business plan and achieve its growth and financial objectives, will be dependent on the availability of financing necessary to lease and build out the contemplated new facility. The required financing may not be available on favorable terms or at all, in which case Verde may not be able to pursue the new manufacturing facility, and it may be unable to execute on its business plan or achieve its growth and financial objectives.
• Verde expects to rely on a limited number of customers for a significant portion of its near-term revenue.
• Verde produces bioresins from raw materials, including renewable resources, such as biobased polyolefins and other plant based biofillers, whose pricing and availability may be impacted by factors out of its control. Increases or fluctuations in the costs of Verde’s raw materials may affect its cost structure.
• The failure of Verde’s raw material suppliers to perform their obligations under supply agreements, or Verde’s inability to replace or renew these agreements when they expire, could increase Verde’s cost for these materials, interrupt production or otherwise adversely affect its results of operations.
• Maintenance, expansion and refurbishment of Verde’s facilities, the construction of new facilities and the development and implementation of new manufacturing processes involve significant risks.
• Verde’s business and the prices of the combined company’s common stock could suffer from negative publicity and other adverse consequences associated with recent civil and criminal charges brought against Terren Peizer, Verde’s former Executive Chairman and founder and Chairman of Acuitas Group Holdings, LLC, and its successor, Humanitario, Verde’s largest stockholder, by the SEC and the United States Department of Justice.
• Verde may not be able to protect adequately its intellectual property assets, which could adversely affect its competitive position and reduce the value of its products, and litigation to protect its intellectual property could be costly.
Risks Related to the Combined Company
• Upon completion of the Merger, the combined company will have limited cash or other liquid assets, and will need to complete one or more significant financings to execute on its business plan.
• Upon or following completion of the Merger, failure by the combined company to comply with the initial listing standards or continued listing standards of Nasdaq will prevent its stock from being listed on Nasdaq or may result in delisting from Nasdaq.
• The market price of the combined company’s common stock is expected to be volatile, and the market price of the combined company’s common stock may drop following the Merger.
• Following the Merger, the combined company may be unable to integrate successfully the businesses of Nxu and Verde and realize the anticipated benefits of the Merger.
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• Following the Closing, the combined company will continue to be an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make the combined company’s common stock less attractive to investors.
• Provisions that will be in the combined company’s certificate of incorporation and bylaws and provisions under Delaware law could make an acquisition of the combined company, which may be beneficial to its stockholders, more difficult and may prevent attempts by its stockholders to replace or remove its management.
• After completion of the Merger, assuming that Nxu’s aggregate enterprise value is approximately $16.2 million, Verde’s stockholders are expected to own approximately 95% of the combined company’s stock, and these stockholders and the combined company’s executive officers, directors and principal stockholders may have the ability to control or significantly influence matters submitted to the combined company’s stockholders for approval. Nxu’s assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over Nxu’s cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company. Furthermore, all dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders. On December 30, 2024, Nxu filed a registration statement on Form S-1 (File No. 333-284086) to register for resale by the PIPE Investors up to 114,503,816 shares of Nxu Class A common stock, consisting of (1) 6,800,000 Purchased Shares, (2) 5,200,000 shares of Nxu Class A common stock issuable upon exercise of the Pre-Funded Warrants, (3) up to 57,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series A Warrants, and (4) up to 45,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series B Warrants. The number of shares of Nxu Class A common stock ultimately offered for resale by the selling stockholders is dependent on the issued number of (i) Purchased Shares, (ii) the PIPE Warrants and (iii) shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants. Depending on a variety of factors, including market liquidity of the Nxu Class A common stock, the issuance of shares to the selling stockholders may cause the trading price of Nxu Class A common stock to decline.
• The combined company may in the future become a “controlled company” within the meaning of the applicable Nasdaq rules and, as a result, the combined company may qualify for exemptions from certain corporate governance requirements. If the combined company relies on these exemptions, the stockholders of the combined company will not have the same protections afforded to stockholders of companies that are subject to such requirements.
• The combined company will be disqualified from certain private placement safe harbor exemptions otherwise available under the federal securities laws, which may adversely affect the combined company’s ability to offer and sell its securities and raise capital in an efficient manner.
These risks and other risks are discussed in greater detail under the section entitled “RISK FACTORS” beginning on page 15 of this proxy statement/prospectus. Nxu and Verde both encourage you to read and consider all of these risks carefully.
Nasdaq Stock Market Listing (see page 126)
Nxu has filed an initial listing application for the combined company common stock with the Nasdaq Stock Market LLC. If such application is accepted, Nxu anticipates that the common stock of the combined company will be listed on Nasdaq following the Closing under the trading symbol “VRDE.”
Under the Merger Agreement, each of Nxu’s and Verde’s obligation to complete the Merger is subject to the satisfaction or waiver by each of the parties, at or prior to the Merger, of various conditions, including that the shares of Nxu common stock to be issued in the Merger have been approved for listing on Nasdaq as of the Closing. The ability of the combined company to satisfy Nasdaq’s listing conditions will be dependent upon, among other things, the combined company meeting certain quantitative standards with respect to the combined company’s stock price, the market value of its common stock held by unaffiliated stockholders and minimum round lot stockholders. There can be no assurance that the combined company will be able to satisfy these or other listing requirements.
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Anticipated Accounting Treatment (see page 126)
It is anticipated that the Merger will be treated as a reverse acquisition and accounted for as a business combination in accordance with accounting principles generally accepted in the United States (“GAAP”). As the accounting acquirer, Verde will record the net assets of Nxu at their fair values as of the acquisition date. See the section titled “UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS” elsewhere in this proxy statement/prospectus for additional information.
Appraisal Rights and Dissenters’ Rights (see page 127)
Holders of Nxu common stock are not entitled to appraisal rights in connection with the Merger under Delaware law. Holders of Verde capital stock are entitled to appraisal rights in connection with the Merger under Delaware law.
Comparison of Stockholder Rights (see page 280)
Both Nxu and Verde are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the Delaware General Corporation Law (“DGCL”). If the Merger is completed, Verde stockholders will become stockholders of the combined company, and their rights will be governed by the DGCL, the Proposed A&R Charter if approved by the Nxu stockholders at the Nxu special meeting, and the bylaws of Nxu, as amended from time to time (the “Nxu Bylaws”). The proposed rights of stockholders of the combined company contained in the Proposed A&R Charter and the Nxu Bylaws differ from the rights of Verde stockholders under the certificate of incorporation of Verde, as amended (the “Verde Charter”), and the bylaws of Verde (the “Verde Bylaws”), as more fully described under the section entitled “COMPARISON OF RIGHTS OF HOLDERS OF NXU CAPITAL STOCK AND VERDE CAPITAL STOCK” beginning on page 280 of this proxy statement/prospectus.
Emerging Growth Company
Nxu 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 (the “Sarbanes-Oxley Act”), 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.
Nxu will remain an emerging growth company until the earlier of: (i) December 31, 2027, the last day of the fiscal year (a) following the fifth anniversary of the closing of Nxu’s initial public offering, (b) in which Nxu has total annual gross revenue of at least $1.235 billion, or (c) in which Nxu is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which Nxu has issued more than $1 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Smaller Reporting Company
Additionally, Nxu is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. Nxu will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of its common equity held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) its annual revenues exceeded $100 million during such completed fiscal year and the market value of its common equity held by non-affiliates exceeds $700 million as of the prior June 30.
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Certain Legal Proceedings
As of the date of this proxy statement/prospectus, Nxu has, to its knowledge, received six letters from purported Nxu stockholders alleging certain disclosure deficiencies in the proxy statement/prospectus filed by Nxu on November 12, 2024, two of which also sought to inspect certain books and records of Nxu related to the Merger and related matters pursuant to Section 220 of the DGCL.
The outcome of the matters described above cannot be predicted with certainty. Additional demands may be received or complaints may be filed in connection with the Merger and the transactions contemplated by the Merger Agreement and this proxy statement/prospectus. If such additional demands are made or complaints are filed, absent new or different allegations that are material, Nxu and/or Verde will not necessarily announce such additional demands or complaints.
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RISK FACTORS
The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Nxu common stock. You should also read and consider the other information in this proxy statement/prospectus.
Risks Related to the Merger
The exchange ratio will not change or otherwise be adjusted based on the market price of Nxu Class A common stock as the exchange ratio depends on whether there are certain lease payments remaining unpaid at the Closing in excess of Nxu’s cash balance at the Closing and not the market price of Nxu Class A common stock. Therefore, the Merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.
At the First Merger Effective Time, as set forth in the Merger Agreement, (i) each then-outstanding share of Verde’s common stock, other than any cancelled shares and dissenting shares, will be converted into the right to receive a number of shares of Nxu common stock, and (ii) each then-outstanding and unexercised Verde option to purchase shares of Verde common stock, whether vested or unvested, will be assumed by us and converted into an option to purchase a number of Nxu common stock. The number of shares of Nxu common stock that will be issued to Verde stockholders and the number of shares of Nxu common stock underlying options that will be issuable to Verde optionholders will be calculated using a formula in the Merger Agreement based on the enterprise value of each of Verde and Nxu. Verde has been ascribed an aggregate enterprise value of approximately $306.9 million, and Nxu aggregate enterprise value will be an amount equal to approximately $16.2 million less an amount equal to the excess of certain lease payments remaining unpaid at the Closing over Nxu cash balance at the Closing. Upon the Closing, assuming our aggregate enterprise value is approximately $16.2 million, pre-Merger Verde stockholders and other pre-Merger Nxu equityholders (including the PIPE investors in the Private Placement referred to below) will own approximately 95% of the combined company and pre-Merger Nxu stockholders will own approximately 5% of the combined company, in each case, on a fully-diluted and as-converted basis. The approximately 5% of the combined company that will be owned by pre-Merger Nxu equityholders will be inclusive of the shares of Nxu Class A common stock issued to PIPE Investors in the Private Placement, as well as additional shares of Nxu Class A common stock that may be issued in connection with the exercise of the PIPE Warrants. Accordingly, all dilution from the Private Placement will be borne by Nxu pre-Private Placement stockholders, and the approximately 95% combined company ownership by Pre-Merger Verde stockholders will not be diluted as a result of the Nxu Class A common stock and the PIPE Warrants issued (or shares of Nxu Class A common stock issuable upon exercise thereof) in the Private Placement. In the event certain lease payments remaining unpaid at closing exceeds Nxu cash balance at the Closing, the exchange ratio will be adjusted such that the number of shares issued to Verde’s pre-closing stockholders will be increased, and Nxu’s pre-closing stockholders will own a smaller percentage of the combined company following the Merger. The amount of certain lease payments that remain unpaid at closing may be impacted based on the amount of time required to complete the preconditions to the Merger, among other factors.
Any changes in the market price of Nxu Class A common stock before the completion of the Merger will not affect the number of shares Verde stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Nxu Class A common stock increases from the market price on the date of the Merger Agreement, then Verde stockholders could receive Merger consideration with substantially more value for their ownership in Verde than the parties had negotiated when they established the exchange ratio. Similarly, if before the completion of the Merger the market price of Nxu Class A common stock declines from the market price on the date of the Merger Agreement, then Verde stockholders could receive Merger consideration with substantially lower value. The Merger Agreement does not include a price-based termination right. Moreover, in the event certain lease payments that remain unpaid at closing exceeds Nxu cash balance at the Closing, the exchange ratio will be adjusted such that the number of shares issued (or reserved for issuance in the case of options) to Verde’s pre-Merger stockholders and option holders will be increased and Nxu stockholders will own a smaller percentage of the combined company following the Merger.
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Stock price changes may result from a variety of factors, including change in Nxu’s or Verde’s respective businesses, operations and prospects, reductions or changes in U.S. government spending or budgetary policies, market assessments of the likelihood that the Merger will be completed, interest rates, federal, state and local legislation, government regulation, legal developments in the industry segments in which Nxu or Verde operate, the timing of the Merger, and general market, industry and economic conditions.
Failure to complete the Merger could harm the Nxu Class A common stock price and future business and operations of Nxu.
If the Merger is not completed, the price of Nxu Class A common stock may decline and could fluctuate significantly, and Nxu will still incur costs related to the Merger, such as financial advisor, legal and accounting fees, a majority of which must be paid even if the Merger is not completed. If the Merger Agreement is terminated and the Nxu board of directors determines to seek another business combination, there can be no assurance that Nxu will be able to find another third party to transact a business combination with, yielding comparable or greater benefits.
The price of Nxu’s Class A common stock may also fluctuate significantly based on announcements by Verde, other third parties, or Nxu regarding the Merger or based on market perceptions of the likelihood of the satisfaction of the conditions to the consummation of the Merger. Such announcements may lead to perceptions in the market that the Merger may not be completed, which could cause Nxu’s share price to fluctuate or decline.
If the parties do not consummate the Merger, the price of Nxu’s Class A common stock may decline significantly from the current market price, which may reflect a market assumption that the Merger will be consummated. Any of these events could have a material adverse effect on Nxu’s business, operating results and financial condition and could cause a decline in the price of Nxu’s Class A common stock.
If the parties do not successfully consummate the Merger or another strategic transaction, the Nxu board of directors may decide to pursue a dissolution and liquidation of Nxu. In such an event, the amount of cash available for distribution to the Nxu stockholders will depend heavily on the costs and timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which Nxu can give no assurance.
The completion of the Merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the Merger could have material adverse effects on Nxu.
Even if the Required Proposals are approved by the stockholders of Nxu, specified conditions must be satisfied or, to the extent permitted by applicable law, waived to complete the Merger. These conditions are set forth in the Merger Agreement and each material condition to the completion of the Merger is described in the section entitled “THE MERGER AGREEMENT — Closing Conditions” beginning on page 138 of this proxy statement/prospectus. Neither Nxu nor Verde can assure you that all of the conditions to the consummation of the Merger will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or the Closing may be delayed.
The parties cannot predict whether and when the conditions to the Merger will be satisfied, including but not limited to the requirement that Nxu stockholders approve the issuance of adequate shares to complete the Merger and effect a change of control pursuant to certain approval requirements of the Nasdaq Capital Market as well as approval of certain other proposals to be submitted to Nxu stockholders. If one or more of these conditions are not satisfied, and as a result, the parties do not complete the Merger, the parties would remain liable for significant transaction costs, and the focus of each party’s management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the Merger. Certain costs associated with the Merger have already been incurred or may be payable even if the Merger is not consummated. Finally, any disruptions to each party’s business resulting from the announcement and pendency of the Merger, including any adverse changes in each party’s relationships with customers, clients, suppliers and employees, could continue or accelerate in the event that the parties fail to consummate the Merger.
In addition, the Merger Agreement generally requires Nxu to operate in the ordinary course of business consistent with past practice, pending consummation of the Merger, and restricts Nxu from taking certain actions with respect to Nxu business and financial affairs without Verde’s consent. Such restrictions will be in place until either the Merger is consummated or the Merger Agreement is terminated. These restrictions could restrict Nxu’s ability to, or prevent Nxu from, pursuing attractive business opportunities (if any) that arise prior to the consummation of the Merger. For these and other reasons, the pendency of the Merger could adversely affect Nxu’s business, operating results and financial condition.
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The Merger may be completed even though a material adverse effect may result from the announcement of the Merger, industry-wide changes or other causes.
In general, neither Nxu nor Verde is obligated to complete the Merger if there is a material adverse effect affecting the other party between October 23, 2024, the date of the Merger Agreement, and the Closing. However, certain types of causes are generally excluded from the concept of a “material adverse effect.” Such exclusions include but are not limited to changes in applicable laws, changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the Merger, natural disasters, pandemics, other force majeure events, acts or threat of terrorism or war and any failure of Verde or Nxu to meet any projections, forecasts or budgets. Therefore, if any of these events were to occur and adversely affect Nxu or Verde, the other party would still be obliged to consummate the Closing notwithstanding such material adverse effect. If any such adverse effects occur and Nxu and Verde consummate the Closing, the stock price of the combined company may suffer. This in turn may reduce the value of the Merger to the stockholders of Nxu, Verde or both. For a more complete discussion of what constitutes a material adverse effect on Nxu or Verde, see the section entitled “THE MERGER AGREEMENT — Representations and Warranties” beginning on page 133 of this proxy statement/prospectus.
Some Nxu and Verde directors and executive officers have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.
Directors and executive officers of Nxu and Verde may have interests in the Merger that are different from, or in addition to, the interests of other Nxu stockholders generally. These interests with respect to Nxu’s directors and executive officers may include, among others, bonus payments, continued indemnification, insurance coverage, and the expectation that one member of the Nxu board of directors will continue as a director of the combined company after the First Merger Effective Time. These interests with respect to Verde’s directors and executive officers may include, among others, the conversion of options to purchase shares of Verde common stock held by certain of Verde’s directors and executive officers into options to purchase shares of the common stock of the combined company at the First Merger Effective Time; the expected continuation of Verde’s directors and current executive officers as directors and executive officers of the combined company after the First Merger Effective Time, and the provision to all of Verde’s directors and executive officers of certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. Nxu’s continuing director on the combined company’s board of directors will be eligible to be compensated as a non-employee director of the combined company pursuant to the non-employee director compensation program that is expected to become effective as of the closing of the Merger.
The Nxu and Verde boards of directors were aware of and considered those interests, among other matters, in reaching their decisions to approve and adopt the Merger Agreement, approve the Merger, and recommend the approval of the Merger Agreement to Nxu and Verde stockholders. These interests, among other factors, may have influenced the directors and executive officers of Nxu and Verde to support or approve the Merger.
For more information regarding the interests of Nxu and Verde directors and executive officers in the Merger, please see the sections entitled “THE MERGER — Interests of Nxu’s Directors and Executive Officers in the Merger” beginning on page 118 and “THE MERGER — Interests of Verde’s Directors and Executive Officers in the Merger” beginning on page 122 of this proxy statement/prospectus.
Nxu stockholders and Verde stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Nxu stockholders and Verde stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.
If the Merger is not completed, Nxu’s stock price may decline significantly.
The market price of Nxu common stock is subject to significant fluctuations. Market prices for securities of technology companies have historically been particularly volatile. In addition, the market price of Nxu common stock will likely be volatile based on whether stockholders and other investors believe that Nxu can complete the Merger or otherwise raise additional capital to support Nxu’s operations if the Merger is not consummated and another strategic transaction
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cannot be identified, negotiated and consummated in a timely manner, or at all. The volatility of the market price of Nxu common stock has been and may be exacerbated by low trading volume. Additional factors that may cause the market price of Nxu common stock to fluctuate include:
• the loss of key employees;
• future sales of its common stock;
• general and industry-specific economic conditions that may affect its research and development expenditures;
• the failure to meet industry analyst expectations; and
• period-to-period fluctuations in financial results.
Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of Nxu common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies.
Nxu and Verde stockholders will generally have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Merger as compared to their current ownership and voting interests in the respective companies.
After the completion of the Merger, the current stockholders of Nxu and Verde will generally own a smaller percentage of the combined company than their ownership of their respective companies prior to the Merger. Immediately after the Merger, Nxu stockholders as of immediately prior to the Merger are expected to own approximately 5% of the outstanding shares of capital stock of the combined company and former Verde stockholders are expected to own approximately 95% of the outstanding shares of capital stock of the combined company, in each case, on a fully-diluted and as-converted basis. Nxu’s assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over Nxu’s cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company. Furthermore, all dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders. As a result, some stockholders will hold a smaller pro rata share and, therefore, a lower percentage of the voting stock of the combined company than such stockholder currently holds in Nxu or Verde as a stand-alone company, respectively.
In addition, Nxu registered for resale by the selling stockholders in the Private Placement up to 114,503,816 shares of Nxu Class A common stock, consisting of (1) 6,800,000 Purchased Shares, (2) 5,200,000 shares of Nxu Class A common stock issuable upon exercise of the Pre-Funded Warrants, (3) up to 57,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series A Warrants, and (4) up to 45,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series B Warrants. The number of shares of Nxu Class A common stock ultimately offered for resale by the selling stockholders is dependent on the issued number of (i) Purchased Shares, (ii) the PIPE Warrants and (iii) shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants. Depending on a variety of factors, including market liquidity of the Nxu Class A common stock, the issuance of shares to the selling stockholders may cause the trading price of Nxu Class A common stock to decline.
During the pendency of the Merger, each of Nxu and Verde may be limited in its ability to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.
Covenants in the Merger Agreement impede the ability of each of Nxu and Verde to solicit proposals or offers relating to acquisitions or similar transactions during the pendency of the Merger, subject to specified exceptions. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, seeking, initiating or knowingly encouraging, inducing or facilitating the communication, making, submission or announcement of any acquisition or competing proposal or taking any action that could reasonably be expected to lead to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified exceptions.
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Any such transactions could be favorable to such party’s stockholders, but the parties may be unable to pursue them. For more information, see the section entitled “THE MERGER AGREEMENT — Exclusivity” beginning on page 141 of this proxy statement/prospectus.
Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.
The terms of the Merger Agreement prohibit each of Nxu and Verde from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances as described in further detail in the section entitled “THE MERGER AGREEMENT — Exclusivity” beginning on page 141 of this proxy statement/prospectus. Any such proposals could be favorable to Nxu stockholders of Verde stockholders, as applicable. In addition, if Nxu or Verde terminates the Merger Agreement under specified circumstances, Verde could be required to pay Nxu a termination fee of $1.0 million. This termination fee may discourage third parties from submitting competing proposals to Nxu, Verde or their respective stockholders, and may cause the Nxu or Verde board of directors to be less inclined to recommend a competing proposal.
Because the lack of a public market for Verde’s common stock makes it difficult to evaluate the fair market value of Verde’s capital stock, the value of the Nxu common stock to be issued to Verde stockholders may be more or less than the fair market value of Nxu’s common stock.
The outstanding capital stock of Verde is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Verde’s capital stock. Because the percentage of Nxu equity to be issued to Verde stockholders was determined based on negotiations between the parties, it is possible that the value of the Nxu common stock to be issued to Verde stockholders will be more or less than the fair market value of Verde’s capital stock.
The Merger may fail to qualify as a “reorganization” for U.S. federal income tax purposes, resulting in recognition of taxable gain or loss by Verde’s U.S. holders in respect of their Verde capital stock.
Nxu and Verde intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, as described in the section entitled “THE MERGER — Material U.S. Federal Income Tax Considerations of the Merger” beginning on page 149 of this proxy statement/prospectus. Assuming the Merger so qualifies, no gain will be recognized by U.S. holders (as defined in the section entitled “THE MERGER — Material U.S. Federal Income Tax Considerations of the Merger”) of Verde capital stock who receive only Nxu common stock in the merger. It is not, however, a condition to Verde’s obligation or Nxu’s obligation to complete the transactions that the Merger so qualifies. Verde and Nxu have not sought and will not seek any ruling from the IRS regarding any matters relating to the transactions and, as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein. In the event that the Merger does not qualify as a “reorganization,” the Merger would result in taxable gain or loss for each Verde U.S. holder, with the amount of such gain or loss determined by the amount that (x) each Verde U.S. holder’s adjusted tax basis in the Verde capital stock surrendered is less or more than (y) the fair market value of the Nxu common stock received in exchange therefor. Each Verde stockholder is urged to consult with his, her or its own tax advisor with respect to the tax consequences of the Merger.
Stockholder litigation could prevent or delay the consummation of the Merger or otherwise negatively impact Nxu’s, Verde’s or the combined company’s business, operating results and conditions.
Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against Nxu, the Nxu board of directors, Verde, and/or the Verde board of directors in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is uncertain, and Nxu and Verde may not be successful in defending against any such future claims. Nxu or Verde could incur significant costs in connection with any such litigation, including costs associated with the indemnification of Nxu’s or Verde’s directors and officers. Lawsuits may be filed against Nxu, the, Nxu board of directors, Verde, and the Verde board of directors and could delay or prevent the Merger, divert the attention of the management teams and employees of Nxu and Verde from day-to-day business and otherwise adversely affect the business and financial condition of Nxu, Verde, or the combined company.
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As of the date of this proxy statement/prospectus, Nxu has, to its knowledge, received six letters from purported Nxu stockholders alleging certain disclosure deficiencies in the proxy statement/prospectus filed by Nxu on November 12, 2024, two of which also sought to inspect certain books and records of Nxu related to the Merger and related matters pursuant to Section 220 of the DGCL.
The outcome of the matters described above cannot be predicted with certainty. Additional demands may be received or complaints may be filed in connection with the Merger and the transactions contemplated by the Merger Agreement and this proxy statement/prospectus. If such additional demands are made or complaints are filed, absent new or different allegations that are material, Nxu and/or Verde will not necessarily announce such additional demands or complaints.
Furthermore, one of the conditions to the consummation of the Merger is the absence of any governmental order or law preventing the consummation of the Merger or making the consummation of the Merger illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting Nxu’s or Verde’s ability to complete the consummation of the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.
The issuance of Nxu common stock to Verde stockholders pursuant to the Merger Agreement and the resulting change in control from the Merger must be approved by Nxu stockholders, and the Merger Agreement and the transactions contemplated thereby must be approved by the Verde stockholders. Failure to obtain these approvals would prevent the closing of the Merger.
Before the Merger can be completed, the Nxu stockholders must approve, among other things, the issuance of Nxu common stock to Verde stockholders pursuant to the Merger Agreement and the resulting change in control from the Merger, and Verde stockholders must adopt the Merger Agreement and approve the Merger and the related transactions. Concurrently with the execution of the Merger Agreement, Nxu entered into the Support Agreement with the Support Stockholders pursuant to which the Support Stockholders agreed to, among other things, (a) from the date of the Nxu Support Agreement to the Support Expiration Time, vote at any meeting or pursuant to any action of written resolution of the stockholders of Nxu all of their Nxu common stock, held of record or thereafter acquired: (i) in favor of the Merger and the other Proposals and (ii) against any competing acquisition proposal; and (b) be bound by certain other covenants and agreements related to the Merger, in each case, on the terms and subject to the conditions set forth in the Nxu Support Agreement. However, failure to obtain the required stockholder approvals may result in a material delay in, or the abandonment of, the Merger. Any delay in completing the Merger may materially adversely affect the timing and benefits that are expected to be achieved from the Merger.
The Merger will involve substantial costs and will require substantial management resources.
In connection with the consummation of the Merger, management and financial resources of the parties have been diverted and will continue to be diverted towards the completion of the Merger. The parties expect to incur substantial costs and expenses relating to, as well as the direction of management resources towards, the Merger. Such costs, fees and expenses include fees and expenses payable to financial advisors, other professional fees and expenses, fees and costs relating to regulatory filings and filings with the SEC and notices and other transaction-related costs, fees and expenses. If the Merger is not completed, the parties will have incurred substantial expenses and expended substantial management resources for which the parties will have received little to no benefit if the Closing does not occur.
Another attractive strategic transaction may not be available if the Merger is not completed.
If the Merger is not completed and is terminated, there can be no assurance that Nxu or Verde will be able to find a party willing to pay equivalent or more attractive consideration than the consideration to be provided under the Merger Agreement or be willing to proceed at all with a similar transaction or any alternative transaction.
Risks Related to Proposed Reverse Stock Split
The proposed reverse stock split may not increase the combined company’s stock price over the long-term.
The principal purposes of the proposed reverse stock split are to (i) increase the per-share market price of Nxu’s common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of Nxu as the combined company and the shares of Nxu common stock being issued in the Merger on Nasdaq will be approved and (ii) increase the number of authorized and unissued shares available for future issuance in connection with the Merger.
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It cannot be assured, however, that the proposed reverse stock split will accomplish any increase in the per-share market price of the combined company’s common stock for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of the combined company’s common stock, it cannot be assured that the proposed reverse stock split will increase the market price of its common stock by a multiple of the proposed reverse stock split ratio mutually agreed by Nxu and Verde, or result in any permanent or sustained increase in the market price of Nxu’s common stock, which is dependent upon many factors, including the combined company’s business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of the combined company might meet the listing requirements for Nasdaq initially after the proposed reverse stock split, it cannot be assured that it will continue to do so.
The proposed reverse stock split may decrease the liquidity of the combined company’s common stock.
Although the Nxu board of directors believes that the anticipated increase in the market price of the combined company’s common stock resulting from the proposed reverse stock split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the proposed reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock. In addition, the proposed reverse stock split may not result in an increase in the combined company’s stock price necessary to satisfy Nasdaq’s initial listing requirements for the combined company.
The proposed reverse stock split may lead to a decrease in the combined company’s overall market capitalization.
Should the market price of the combined company’s common stock decline after the proposed reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the proposed reverse stock split. The proposed reverse stock split may be viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the proposed reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same after the proposed reverse stock split is effected, or that the proposed reverse stock split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the proposed reverse stock split.
Risks Related to Nxu’s Strategic Alternative Process and Potential Strategic Transaction
Nxu cannot be sure if or when the Merger will be completed.
The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by Nxu’s stockholders and Verde’s stockholders. Nxu cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If Nxu is unable to satisfy certain closing conditions or if other mutual closing conditions are not satisfied, Verde will not be obligated to complete the Merger. Under certain circumstances, Verde would be required to pay Nxu a termination fee of $1.0 million.
If the Merger is not completed, the Nxu board of directors, in discharging its fiduciary obligations to Nxu’s stockholders, would evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to Nxu’s stockholders as the Merger, including a liquidation and dissolution. Any future sale or merger, financing or other transaction, including a liquidation or dissolution, may be subject to further stockholder approval. Nxu may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect on Nxu’s business.
Until the Merger is completed, the Merger Agreement restricts Nxu from taking specified actions without the consent of Verde and requires Nxu to operate in the ordinary course of business consistent with past practice. These restrictions may prevent Nxu from making appropriate changes to its business or pursuing attractive business opportunities that may arise prior to the completion of the Merger. Further, if certain of Nxu’s lease payments remaining unpaid at the Closing exceed Nxu’s cash balance at the Closing, then the pre-Merger stockholders of Nxu will own less of the combined company pursuant to the exchange ratio adjustment set forth in the Merger Agreement.
Any delay in completing the Merger may materially and adversely affect the timing and benefits that are expected to be achieved from the Merger.
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If Nxu does not successfully consummate the Merger or another strategic transaction, Nxu’s board of directors may decide to pursue a dissolution and liquidation of Nxu. In such an event, the amount of cash available for distribution to Nxu’s stockholders will depend heavily on the costs and timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which Nxu can give you no assurance.
There can be no assurance that the Merger will be completed. If the Merger is not completed, Nxu’s board of directors may decide to pursue a dissolution and liquidation of Nxu. In such an event, the amount of cash available for distribution to Nxu’s stockholders will depend heavily on the costs related to and timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as Nxu funds its operations while pursuing the Merger. In addition, if Nxu’s board of directors were to approve and recommend, and Nxu’s stockholders were to approve, a dissolution and liquidation of Nxu, Nxu would be required under Delaware corporate law to pay Nxu’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. Nxu’s commitments and contingent liabilities may include obligations under Nxu’s employment and related agreements with certain employees that provide for certain payments following a termination of employment occurring for various reasons, including a change in control of Nxu, which may include a dissolution of Nxu, litigation against Nxu, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of Nxu’s assets would need to be reserved pending the resolution of such obligations.
In addition, Nxu may be subject to litigation or other claims related to a dissolution and liquidation of Nxu. If a dissolution and liquidation were to be pursued, Nxu’s board of directors, in consultation with Nxu’s advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Nxu’s common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up of Nxu. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to Nxu’s stockholders.
Nxu is substantially dependent on Nxu’s remaining employees to facilitate the consummation of the Merger.
Nxu’s ability to consummate a strategic transaction depends upon its ability to retain its employees required to consummate such a transaction, the loss of whose services may adversely impact the ability to consummate such transaction. In May 2024, Nxu undertook an organizational restructuring that significantly reduced its workforce in order to conserve its capital resources. As of December 30, 2024, Nxu had only four full-time employees. Nxu’s ability to successfully complete the Merger depends in large part on Nxu’s ability to retain certain remaining personnel. Despite Nxu’s efforts to retain these employees, one or more may terminate their employment with Nxu on short notice. Nxu’s cash conservation activities may yield other unintended consequences, such as attrition beyond its planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment. The loss of the services of certain employees could potentially harm Nxu’s ability to consummate the Merger, to run Nxu’s day-to-day business operations, as well as to fulfill Nxu’s reporting obligations as a public company.
Risks Related to Nxu
Risks Related to Nxu’s Business
Nxu is an early-stage company with a limited operating history that has never turned a profit and there are no assurances that Nxu will ever be profitable.
Nxu is a relatively new company that was incorporated on November 9, 2016. If you are investing in Nxu, it is because you think Nxu’s business model is a good idea, and Nxu will be able to successfully grow its business and become profitable.
Currently, Nxu’s efforts are focused on operating its megawatt charging stations. Nxu has never turned a profit and there is no assurance that it will ever be profitable.
Nxu also has limited brand awareness and operating history in the charging industry. Although Nxu has taken significant steps in developing brand awareness, Nxu is a new company and currently has no experience developing or selling electric vehicle charging to customers. As such, it is possible that Nxu’s lack of history in the industry may impact its brand, business, financial goals, operation performance, and products.
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Nxu should be considered a “Development Stage Company,” and its operations will be subject to all the risks inherent in the establishment of a new business enterprise, including, but not limited to, hurdles or barriers to the implementation of its business plans. Further, because there is no history of operations there is also no operating history from which to evaluate Nxu’s executive management’s ability to manage its business and operations and achieve Nxu’s goals or the likely performance of Nxu. Prospective investors should also consider the fact that Nxu’s management team has not previously developed or managed similar companies. No assurances can be given that Nxu will be able to achieve or sustain profitability.
Nxu has incurred significant losses since its inception, and Nxu expects to continue to incur losses for the foreseeable future. Accordingly, its financial condition raises substantial doubt regarding its ability to continue as a going concern.
During the nine-month period ended September 30, 2024, Nxu incurred a net loss of $18.1 million and had net cash used in operating activities of $10.2 million. As of September 30, 2024, Nxu had $2.2 million in cash and an accumulated deficit of $277.7 million. Nxu cannot provide any assurance that unforeseen circumstances that could occur at any time within the next twelve months or thereafter will not increase the need for Nxu to raise additional capital on an immediate basis. Additionally, Nxu cannot provide any assurance that access to capital will be readily available when needed. These matters, among others, raise substantial doubt about Nxu’s ability to continue as a going concern for a period of one year after the date hereof. The report of Nxu’s independent registered public accountant on its financial statements as of and for the years ended December 31, 2023 and 2022 also includes explanatory language describing the existence of substantial doubt about Nxu’s ability to continue as a going concern. See Note 1 — Organization and Basis of Presentation of its accompanying unaudited condensed consolidated financial statements included in “NXU, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS” in this proxy statement/prospectus and “— Liquidity and Capital Resources” in “NXU’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of this proxy statement/prospectus for further information.
If Nxu is unable to satisfy its capital requirements, Nxu could be required to adopt one or more of the following alternatives: delaying the implementation of or revising certain aspects of its business strategy; reducing or delaying the development of its products; reducing or delaying capital spending, product development spending and marketing and promotional spending; entering into financing agreements on unattractive terms; significantly curtailing or discontinuing operations, or dissolving and liquidating its assets under the bankruptcy laws or otherwise.
There can be no assurance that Nxu would be able to take any of the actions referred to above because of a variety of commercial or market factors, including, without limitation, market conditions being unfavorable for an equity or debt issuance or similar transactions. In addition, such actions, if taken, may not enable Nxu to satisfy its capital requirements if the actions that Nxu is able to consummate do not generate a sufficient amount of additional capital. If Nxu is ultimately unable to satisfy its capital requirements, Nxu would likely need to dissolve and liquidate its assets under the bankruptcy laws or otherwise.
Nxu may not achieve its projected goals in the time frames it announces and expects due to unforeseen factors, including rising interest rates and inflation increasing the cost to do business.
Any prospective valuation of Nxu at this stage is pure speculation. Nxu’s business success, timeline, and milestones are estimated. Nxu’s sales volume and cost models are only estimates. Nxu produced these valuations based on existing business models of successful and unsuccessful efforts of other companies within the technology and automotive industries. All such projections and timeline estimations may change as Nxu continues in the development of electric vehicle technology.
Nxu has only started limited manufacture and sales. Cost overruns, scheduling delays, and failure to meet product performance goals may be caused by, but not limited to, unidentified technical hurdles and regulatory hurdles, which could materially damage Nxu’s brand, business, financial goals, operation and results.
Nxu’s limited operating history makes it difficult for Nxu to evaluate its future business prospects.
Nxu is a company with an extremely limited operating history and has not generated material revenue from sales of its products and services to date. It is difficult, if not impossible, for Nxu to forecast its future results, and Nxu has limited insight into trends that may emerge and affect its business. In addition, Nxu has engaged in limited marketing
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activities to date, so there can be no assurance that customers will embrace its services in significant numbers at the prices Nxu establishes. Market and geopolitical conditions, many of which are outside of its control and subject to change, including general economic conditions, the availability and terms of financing, the conflict in Ukraine, Middle East, and Taiwan fuel and energy prices, regulatory requirements and incentives, competition, and the pace and extent of vehicle electrification generally, will impact demand for Nxu’s services, and ultimately its success.
Nxu may not be able to successfully manage growth.
Nxu could experience growth over a short period of time, which could put a significant strain on its managerial, operational and financial resources. Nxu must implement and constantly improve its certification processes and hire, train and manage qualified personnel to manage such growth. Nxu has limited resources and may be unable to manage its growth. Its business strategy is based on the assumption that its customer base, geographic coverage and service offerings will increase. If this occurs, it will place a significant strain on Nxu’s managerial, operational, and financial resources. If Nxu is unable to manage its growth effectively, its business will be adversely affected. As part of this growth, Nxu may have to implement new operational, manufacturing, and financial systems and procedures and controls to expand, train and manage its employees, especially in the areas of manufacturing and sales. If Nxu fails to develop and maintain its people and processes, demand for its products and services and its revenues could decrease.
Nxu’s business is currently entirely dependent on the success of the NxuOne™ Charging Network. Nxu’s lack of business diversification could cause its stockholders to lose all or some of their investment if Nxu is unable to generate revenues from the NxuOne™ Charging Network.
Nxu’s business is currently entirely dependent on the success of the NxuOne™ Charging Network and related products. Nxu does not have any other lines of business or other sources of revenue if it is unable to compete effectively in the marketplace. Nxu cannot guarantee that the NxuOne™ Charging Network will be able to achieve profitability alone. Nxu’s ability to be profitable will depend on a number of factors, many of which are beyond Nxu’s control. This lack of business diversification could cause you to lose all or some of your investment if Nxu is unable to generate revenues since Nxu does not expect to have any other lines of business or alternative revenue sources.
Nxu’s estimates of market opportunity and forecasts of market growth may prove to be inaccurate.
Estimates of future electric vehicle (“EV”) adoption in the U.S., the total addressable market, serviceable addressable market for Nxu’s products and services and the EV market in general are included in this proxy statement/prospectus. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. Such uncertainty is enhanced by the prevailing geopolitical and macroeconomic environment. Nxu’s internal estimates relating to the size and expected growth of the target market, market demand, EV adoption across individual market verticals and use cases, capacity of automotive and battery original equipment manufacturers (“OEMs”) and ability of charging infrastructure to address this demand and related pricing may also prove to be inaccurate. In particular, estimates regarding the current and projected market opportunity for public and commercial fast charging and future fast charging throughput or Nxu market share capture are difficult to predict. The estimated addressable market may not materialize in the timeframe of Nxu’s internal projections, if ever and even if the markets meet the size estimates and growth estimates presented, Nxu’s business could fail to grow at similar rates.
The success of Nxu’s business depends on attracting and retaining a large number of customers. If Nxu is unable to do so, Nxu will not be able to achieve profitability.
Nxu’s success depends on attracting a large number of potential customers to purchase services Nxu provides to its customers. If Nxu’s customers do not perceive its services to be of sufficiently high value and quality, cost competitive and appealing in performance, Nxu may not be able to retain or attract new customers, and its business, prospects, financial condition, results of operations, and cash flows would suffer as a result. In addition, Nxu may incur significantly higher and more sustained advertising and promotional expenditures than it has previously incurred to attract customers. Nxu may not be successful in attracting and retaining a large number of customers. If Nxu is not able to attract and maintain customers, its business, prospects, financial condition, results of operations, and cash flows would be materially harmed.
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Nxu’s growth and success are highly correlated with and thus dependent upon the continuing rapid adoption of and demand for EVs and OEMs’ ability to supply such EVs to the market.
Nxu’s future growth is highly dependent upon the adoption of EVs by businesses and consumers. The market for EVs is still rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards and changing consumer demands and behaviors, changing levels of concern related to environmental issues and governmental initiatives related to energy independence, climate change and the environment generally. Although demand for EVs has grown in recent years, there is no guarantee of continuing future demand. If the market for EVs develops more slowly than expected, or if demand for EVs decreases, Nxu’s business, prospects, financial condition and operating results would be harmed. The market for EVs could be affected by numerous factors, such as:
• perceptions about EV features, quality, safety, performance and cost;
• perceptions about the limited range over which EVs may be driven on a single battery charge;
• competition, including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy internal combustion engine vehicles;
• volatility in the cost of oil and gasoline, including as a result of trade restrictions;
• concerns regarding the reliability and stability of the electrical grid;
• the change in an EV battery’s ability to hold a charge over time;
• the availability and reliability of a national electric vehicle charging network or infrastructure;
• availability of maintenance and repair services for EVs;
• consumers’ perception about the convenience and cost of charging EVs;
• increases in fuel efficiency of non-electric vehicles;
• government regulations and economic incentives, including adverse changes in, or expiration of, favorable tax incentives related to EVs, EV charging stations or decarbonization generally;
• relaxation of government mandates or quotas regarding the sale of EVs; and
• concerns about the future viability of EV manufacturers.
In addition, sales of vehicles in the automotive industry can be cyclical, which may affect growth in acceptance of EVs. It is uncertain how macroeconomic factors will impact demand for EVs, particularly since EVs can be more expensive than traditional gasoline-powered vehicles, when the automotive industry globally has been experiencing a recent decline in sales. Furthermore, because fleet operators often make large purchases of EVs, this cyclicality and volatility in the automotive industry may be more pronounced with commercial purchasers, and any significant decline in demand from these customers could reduce demand for EV charging and Nxu’s products and services in particular.
Demand for EVs may also be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Further, the automotive industry in general and EV manufacturing have experienced substantial supply chain interruptions, resulting in reduced EV production schedules and sales. Volatility in demand or delays in EV production due to global supply chain constraints may lead to lower vehicle unit sales, which may result in reduced demand for EV charging solutions and therefore adversely affect Nxu’s business, financial condition and operating results.
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Nxu generated revenue for the first time in 2023, but there is no assurance that it will be able to continue to generate revenue from the sale or deployment of the NxuOne™ Charging Network or from the sale of other proprietary products.
In 2023, Nxu generated revenue for the first time in its history. The 2023 revenue was largely related to product deliveries from its proprietary battery cell and pack division. Nxu has since ceased electric vehicle battery development as it focuses its efforts on the NxuOne™ Charging Network. As such, the bulk of its revenue in 2023 was non-recurring. Nxu expects that any source of revenue in 2024 will be solely from the operation or sale of NxuOne™ Charging Stations. If it is unable to find customers to purchase its NxuOne™ Charging Stations, it will not likely be able to meet or exceed its 2024 revenue estimates.
Nxu has losses which it expects to continue into the future. There is no assurance its future operations will result in a profit. If Nxu cannot generate sufficient revenues to operate profitably or Nxu is unable to raise enough additional funds for operations, the stockholders will experience a decrease in value, and Nxu may have to cease operations.
Nxu is a development-stage technology company that began operating and commenced research and development activities in 2016. As a recently formed “Development Stage Company”, it is subject to all of the risks and uncertainties of a new business, including the risk that it may never generate product or services related revenues. Accordingly, it has only a limited history upon which an evaluation of its prospects and future performance can be made. If Nxu is unable to generate revenue, it will not become profitable, and it may be unable to continue its operations. Furthermore, its proposed operations are subject to all business risks associated with new enterprises. The likelihood of its success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There can be no assurances that Nxu will operate profitably.
Nxu entered into the Merger Agreement in order to, among other things, potentially increase its liquidity. Assuming the Merger closes, the combined company may ultimately fail, decreasing the liquidity of Nxu and stockholder value or cause Nxu to cease operations, and investors would be at risk of losing all or part of their investment in Nxu.
If Nxu does not successfully establish and maintain itself as a highly trusted and respected name for electric vehicle-related technology, Nxu may not be able to retain quality talent or achieve future revenue goals, which could significantly affect its business, financial condition and results of operations.
In order to attract and retain a client base and increase business, Nxu must establish, maintain and strengthen its name and the services it provides. In order to be successful in establishing its reputation, clients must perceive Nxu as a trusted source for quality services. If Nxu is unable to attract and retain clients with its current marketing plans, it may not be able to successfully establish its name and reputation, which could significantly affect its business, financial condition and results of operations.
Nxu’s ability to utilize loss carry forwards may be limited.
Generally, a change of more than fifty percent (50%) in the ownership of a company’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. An ownership change may limit Nxu’s ability to use its net operating loss carryforwards attributable to the period prior to the change. As a result, if Nxu earns net taxable income, its ability to use its pre-change net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations.
Nxu’s business could be adversely affected by a downturn in the economy and/or manufacturing.
Nxu is dependent upon the continued demand for electric vehicles and electric vehicle charging capacity, making its business susceptible to a downturn in the economy or in manufacturing. For example, a decrease in the number of individuals investing their money in the equity markets could result in a decrease in the number of companies deciding to become or remain public. This downturn could have a material adverse effect on its business, its ability to raise funds, and ultimately its overall financial condition.
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The preparation of Nxu’s financial statements requires estimates, judgments and assumptions that are inherently uncertain.
Financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) typically require the use of estimates, judgments and assumptions that affect the reported amounts. Often, different estimates, judgments and assumptions could reasonably be used that would have a material effect on such financial statements, and changes in these estimates, judgments and assumptions may occur from period to period over time. These estimates, judgments and assumptions are inherently uncertain and, if Nxu’s estimates were to prove to be wrong, Nxu would face the risk that charges to income or other financial statement changes or adjustments would be required. Any such charges or changes could harm its business, including its financial condition and results of operations and the price of its securities. For a discussion of the accounting estimates, judgments and assumptions that Nxu believes are the most critical to an understanding of its consolidated financial statements and its business, see Part II, Item 7 of Nxu’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Failure to maintain internal controls over financial reporting would have an adverse impact on Nxu.
Nxu is required to establish and maintain appropriate internal controls over financial reporting. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required by Nxu as a privately held company. Management may not be able to effectively maintain adequate compliance, and Nxu’s internal controls over financial reporting may not be effective, which may subject Nxu to adverse regulatory consequences and could harm investor confidence. Failure to maintain controls could also adversely impact its public disclosures regarding Nxu’s business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify deficiencies and conditions that need to be addressed in Nxu’s internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived deficiencies and conditions that need to be addressed in Nxu’s internal control over financial reporting, or disclosure of management’s assessment of its internal controls over financial reporting may have an adverse impact on the price of the Nxu Class A common stock.
Continuing or worsening inflationary issues and associated changes in monetary policy may result in increases to the cost of charging equipment, other goods, services and personnel, which in turn could cause capital expenditures and operating costs to rise.
The U.S. inflation rate increased during 2021, 2022, and 2023 and has remained elevated in 2024. These inflationary pressures have resulted in and may continue to result in, increases to the costs of charging equipment and personnel, which could in turn cause capital expenditures and operating costs to rise. Sustained levels of high inflation have likewise caused the U.S. Federal Reserve and other central banks to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which — or the combination thereof — could hurt the financial and operating results of Nxu’s business.
Nxu needs to raise additional capital to meet its future business requirements and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interest.
Nxu has relied upon cash from financing activities and in the future, Nxu expects to rely on the proceeds from future debt and/or equity financings, and Nxu hopes to rely on revenues generated from operations to fund all of the cash requirements of its activities. However, there can be no assurance that Nxu will be able to generate any significant cash from its operating activities in the future. Future financing may not be available on a timely basis, in sufficient amounts or on terms acceptable to Nxu, if at all. Any debt financing or other financing of securities senior to the Class A common stock will likely include financial and other covenants that will restrict Nxu’s flexibility.
Any failure to comply with these covenants would have a material adverse effect on Nxu’s business, prospects, financial condition, and results of operations because Nxu could lose its existing sources of funding and impair its ability to secure new sources of funding. However, there can be no assurance that Nxu will be able to generate any investor interest in its securities. If Nxu does not obtain additional financing, you could lose the entirety of your investment in Nxu.
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At this time, Nxu has not secured or identified any additional financing. Nxu does not have any firm commitments or other identified sources of additional capital from third parties or from its officers, directors or other stockholders. There can be no assurance that additional capital will be available to Nxu, or that, if available, it will be on terms satisfactory to Nxu. Any additional financing will involve dilution to Nxu’s existing stockholders. If Nxu does not obtain additional capital on terms satisfactory to Nxu, or at all, it may cause Nxu to delay, curtail, scale back or forgo some or all of its product development and/or business operations, or dissolve and liquidate its assets under bankruptcy laws or otherwise. In such a scenario, investors would be at risk of losing all or a part of any investment in Nxu.
Nxu relies on a limited number of suppliers and manufacturers for its charging stations. A loss of any of these partners could negatively affect its business or ability to manufacture and deliver NxuOne™ Charging Stations.
Nxu relies on a limited number of suppliers to manufacture its charging stations, including in some cases only a single supplier for some products and components. This reliance on a limited number of manufacturers increases Nxu’s risks, since it does not currently have proven reliable alternatives or replacement manufacturers beyond these key parties. In the event of interruption, including or resulting in a sudden failure by a supplier to meet its obligation, Nxu may not be able to increase capacity from other sources or develop alternate or secondary sources without incurring material additional costs and substantial delays. Thus, Nxu’s business could be adversely affected if one or more of its suppliers is impacted by any interruption at a particular location.
As the demand for EV charging increases, Nxu’s suppliers and manufacturers may not be able to dedicate sufficient supply chain, production or sales channel capacity to keep up with the required pace of charging infrastructure expansion. By relying on contract manufacturing, Nxu is dependent upon the manufacturer, whose interests may be different from Nxu’s. For example, Nxu’s suppliers and contract manufacturers may have other customers with demand for the same components or manufacturing services and may allocate their resources based on the supplier’s or manufacturer’s interests or needs to maximize their revenue or relationships with other customers rather than Nxu’s interest. As a result, Nxu may not be able to assure itself that it will have sufficient control over the supply of key components, inventory or finished goods in a timely manner or with acceptable cost and expense, which may adversely affect Nxu’s revenue, cost of goods and gross margins. If Nxu experiences a significant increase in demand for its charging stations in future periods, or if it needs to replace an existing supplier, it may not be possible to supplement or replace them on acceptable terms, which may undermine its ability to deliver products to customers in a timely manner. For example, it may take a significant amount of time to identify a manufacturer that has the capability and resources to build charging stations in sufficient volume. Identifying suitable suppliers and manufacturers could be an extensive process that requires Nxu to become satisfied with such party’s quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. Accordingly, a loss of any significant suppliers or manufacturers could have an adverse effect on Nxu’s business, financial condition and operating results. In addition, Nxu’s suppliers may face supply chain risks and constraints of their own, which may impact the availability and pricing of its products. For example, supply chain challenges related to global chip shortages have impacted companies worldwide both within and outside of Nxu’s industry and may continue to have adverse effects on Nxu’s suppliers and, as a result, Nxu.
In addition, in fiscal year 2023, Nxu became subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) to diligence, disclose and report whether or not its products contain minerals originating from the Democratic Republic of the Congo and adjoining countries, or conflict minerals. Nxu may incur additional costs to comply with these disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in Nxu’s products. These requirements could adversely affect the sourcing, availability and pricing of minerals used in the components used in Nxu’s products. It is also possible that Nxu’s reputation may be adversely affected if it determines that certain of its products contain minerals not determined to be conflict-free or if it is unable to alter its products, processes or sources of supply to avoid use of such materials. Nxu may also encounter end-customers who require that all of the components of the products be certified as conflict free. If Nxu is not able to meet this requirement, such end-customers may choose to purchase products from a different company.
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Unknown costs and risks may exist with the prolonged use of NxuOne™ Charging Network equipment and related systems, as the technology is recently developed and has not been widely deployed.
As the NxuOne™ Charging Station field trials commenced in the third quarter of 2023, Nxu does not know how its products will hold up over prolonged use. Since Nxu’s products have only been in use since September 2023, Nxu does not have any way to predict whether its charging stations will remain functional under heavy, persistent use. If the NxuOne™ Charging stations malfunction under heavy use, Nxu will be forced to bear the costs of repairing or replacing the equipment, and such costs could be substantial.
Nxu is dependent upon the availability of electricity at Nxu’s current and future charging stations. Cost increases, delays and/or other restrictions on the availability of electricity would adversely affect Nxu’s business and results of Nxu’s operations.
The operation and development of Nxu’s charging stations is dependent upon the availability of electricity, which is beyond Nxu’s control. Nxu’s charging stations are affected by problems accessing electricity sources, such as planned or unplanned power outages. In recent years, shortages of electricity have resulted in increased costs to users and interruptions in service. In particular, California has experienced rolling blackouts due to excessive demands on the electrical grid or as precautionary measures against the risk of wildfire. In the event of a power outage, Nxu will be dependent on the utility company to restore power. Any prolonged power outage could adversely affect customer experience and Nxu’s business and results of operations.
Changes in utility electricity pricing or new and restrictive constructs from regulations applicable to pricing may adversely impact future operating results. For example, some jurisdictions have required Nxu to switch from pricing on a per-minute basis to a per-kWh basis and other jurisdictions may follow suit. Utility rates may change in a way that adversely affects fast charging or in a way that may limit Nxu’s ability to access certain beneficial rate schedules. In addition, utilities or other regulated entities with monopoly power may receive authority to provide charging services that result in an anti-competitive advantage relative to Nxu and other private sector operators.
Nxu’s business is subject to risks associated with construction, cost overruns and delays and other contingencies that may arise in the course of completing installations and such risks may increase in the future as Nxu expands the scope of such services with other parties.
Charger installation and construction is typically performed by third-party contractors managed by Nxu. The installation and construction of charging stations at a particular site is generally subject to oversight and regulation in accordance with state and local laws and ordinances relating to building codes, safety, environmental protection and related matters and typically requires local utility cooperation in design and interconnection request approval and commissioning, as well as various local and other governmental approvals and permits that vary by jurisdiction. In addition, building codes, accessibility requirements, utility interconnect specifications, review, approval or study lead time or regulations may hinder EV charger installation and construction because they end up costing the developer or installer more in order to meet the code requirements. In addition, increased demand for the components necessary to install and construct charging stations could lead to higher installed costs. Meaningful delays or cost overruns caused by Nxu’s vendor supply chains, contractors, utility upgrades scope and delays, or inability of local utilities and approving agencies to cope with heightened levels of activity, may impact Nxu’s ability to satisfy the requirements under the build schedule and Nxu’s other contractual commitments, and may impact revenue recognition in certain cases and/or impact Nxu’s relationships, any of which could impact Nxu’s business and profitability, pace of growth and prospects.
Working with contractors may require Nxu to obtain licenses or require Nxu or Nxu’s customers to comply with additional rules, working conditions and other union requirements, which can add costs and complexity to an installation and construction project. If these contractors are unable to provide timely, thorough and quality installation-related services, Nxu could fall behind Nxu’s construction schedules or cause customers to become dissatisfied with the solutions Nxu offers. As the demand for public fast charging increases and qualification requirements for contractors become more stringent, Nxu may encounter shortages in the number of qualified contractors available to complete all of Nxu’s desired installations. If Nxu fails to timely pay Nxu’s contractors, they may file liens against Nxu’s owned or leased properties, putting Nxu’s occupancy or operations at risk.
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Nxu’s business model is predicated on the presence of qualified and capable electrical and civil contractors and subcontractors in the new markets Nxu intends to enter. There is no guarantee that there will be an adequate supply of such partners. A shortage in the number of qualified contractors may impact the viability of the business plan, increase risks related to the quality of work performed and increase costs if outside contractors are brought into a new market.
In addition, Nxu’s business is exposed to risks associated with receiving site control and access necessary for the construction of the charging station and operation of the charging equipment, electrical interconnection and power supply at identified locations sufficient to host chargers on a timely basis. Nxu generally does not own the land at the charging sites and relies on site licenses with site hosts that convey the right to build, own and operate the charging equipment on the site. Nxu may not be able to renew the site licenses or retain site control. The process of establishing or extending site control and access could take longer or become more competitive. As the EV market grows, competition for premium sites may intensify, the power distribution grid may require upgrading, and electrical interconnection with local utilities may become more competitive, all of which may lead to delays in construction and/or commissioning. As a result, Nxu may be exposed to increased interconnection costs and utility fees, as well as delays, which may slow the pace of Nxu’s network expansion.
Nxu’s charging stations may be located in areas that are publicly accessible and may be exposed to vandalism or misuse by customers or other individuals, which would increase Nxu’s replacement and maintenance costs.
Nxu’s public chargers may be exposed to vandalism or misuse by customers and other individuals, increasing wear and tear of the charging equipment. Such damage could shorten the usable lifespan of the chargers and require Nxu to increase its spending on replacement, maintenance and insurance costs and could result in site hosts reconsidering the value of hosting Nxu’s charging stations at their sites. In addition, the cost of any such damage may not be covered by Nxu’s insurance in full or at all and, in the event of repeated damage to Nxu’s charging equipment, Nxu’s insurance premiums could increase and it could be subject to additional insurance costs or may not be able to obtain insurance at all, any of which could have an adverse effect on its business.
Nxu does not own a transportation fleet, nor any fleet vehicles, and so may not be able to transport NxuOne™ Charging Stations once produced. Cost of third-party transport may be high and the risk of loss surrounding transport may be high or hard to predict.
Nxu’s charging stations weigh several thousand pounds. There are inherent transportation risks associated with deployment and operation of its charging network. Nxu does not own a transportation fleet, so Nxu will have to hire a transportation company to transport the NxuOne™ Charging stations to deployment sites. Such transport may be incredibly costly, and Nxu has not been able to accurately predict or project transportation costs. In addition to the risk of losing control of the method of transportation, Nxu may not be able to adequately insure against loss during transport. There is a chance the NxuOne™ charging stations are irrevocably damaged in transit. If Nxu is unable to insure the NxuOne™ Charging Stations for transit, Nxu may be forced to bear the full risk of loss.
A significant interruption of Nxu’s information technology systems or the loss of confidential or other sensitive data, including cybersecurity risks, could have a material adverse impact on its operations and financial results.
Given Nxu’s reliance on information technology (its own and its third-party providers’), a significant interruption in the availability of information technology, regardless of the cause, or the loss of confidential, personal, or proprietary information (whether Nxu’s, its employees’, its suppliers’, or its customers’), regardless of the cause, could negatively impact its operations. While Nxu has invested in the protection of its data and information technology to reduce these risks and routinely test the security of its information systems network, Nxu cannot be assured that its efforts will prevent breakdowns or breaches in its systems that could adversely affect its business. Management is not aware of a cybersecurity incident that has had a material adverse impact on Nxu’s financial condition or results of operations; however, Nxu could suffer material financial or other losses in the future and Nxu is not able to predict the severity of these attacks. The occurrence of a cyber-attack, breach, unauthorized access, misuse, computer virus or other malicious code or other cybersecurity event could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, loss or destruction of confidential and other information that belongs to Nxu, its customers, its counterparties, or third-party suppliers and providers that is processed and stored in, and transmitted through, Nxu’s computer systems and networks. The occurrence of such
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an event could also result in damage to Nxu’s software, computers or systems, or otherwise cause interruptions or malfunctions in Nxu’s, its customers’, its counterparties’ or third parties’ operations. This could result in loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect Nxu’s business, financial condition or results of operations. As part of Nxu’s regular review of potential risks, Nxu analyzes emerging cybersecurity threats to Nxu and its third-party suppliers and providers as well as Nxu’s plans and strategies to address them. The Nxu board of directors, which has oversight responsibility for cybersecurity risks, is regularly briefed by management on such analyses.
Nxu is highly reliant on its networked charging solution and information technology systems and data, and those of its service providers and component suppliers, any of which systems and data may be subject to cyber-attacks, service disruptions or other security incidents, which could result in data breaches, loss or interruption of services, intellectual property theft, claims, litigation, regulatory investigations, significant liability, reputational damage and other adverse consequences.
The implementation, maintenance, segregation and improvement of Nxu’s information technology systems in the form of its networked charging solution and internal information technology systems, such as product data management, procurement, inventory management, production planning and execution, sales, service and logistics, financial, tax and regulatory compliance systems, require significant management time, support and cost, and there are inherent risks associated with developing, improving and expanding Nxu’s core systems as well as implementing new systems and updating current systems, including disruptions to the related areas of business operations. These risks may affect Nxu’s ability to manage its data and inventory, procure parts or supplies or manufacture, sell, deliver and service products, adequately protect its intellectual property or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations.
While Nxu maintains information technology measures designed to protect it against intellectual property theft, data breaches, sabotage and other external or internal cyber-attacks or misappropriation, its systems and those of its service providers are potentially vulnerable to malware, ransomware, viruses, denial-of-service attacks, phishing attacks, social engineering, computer hacking, unauthorized access, exploitation of bugs, defects and vulnerabilities, breakdowns, damage, interruptions, system malfunctions, power outages, terrorism, acts of vandalism, security breaches, security incidents, inadvertent or intentional actions by employees or other third parties, and other cyber-attacks. To the extent any security incident results in unauthorized access or damage to or acquisition, use, corruption, loss, destruction, alteration or dissemination of Nxu data, including intellectual property and personal information, or Nxu products, or for it to be believed or reported that any of these occurred, it could disrupt Nxu’s business, harm its reputation, compel it to comply with applicable data breach notification laws, subject it to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require it to verify the correctness of database contents, or otherwise subject it to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to Nxu and result in significant legal and financial exposure and/or reputational harm.
Because Nxu also relies on third-party service providers, it cannot guarantee that its service providers’ and component suppliers’ systems have not been breached or that they do not contain exploitable defects, bugs, or vulnerabilities that could result in a security incident, or other disruption to, Nxu’s or Nxu’s service providers’ or component suppliers’ systems. Nxu’s ability to monitor its service providers’ and component suppliers’ security measures is limited, and, in any event, malicious third parties may be able to circumvent those security measures.
If Nxu does not successfully implement, maintain or expand its information technology systems as planned, its operations may be disrupted, its ability to accurately and/or timely report its financial results could be impaired and deficiencies may arise in its internal control over financial reporting, which may impact its ability to certify its financial results. If Nxu identifies material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may result in material misstatements contained within Nxu’s consolidated financial statements or cause Nxu to fail to meet its periodic reporting obligations. Moreover, Nxu’s proprietary information, including intellectual property and personal information, could be compromised or misappropriated, its reputation may be adversely affected if these systems or their functionality do not operate as expected and Nxu may be required to expend significant resources to make corrections or find alternative sources for performing these functions.
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Nxu may have difficulty protecting its intellectual property.
Nxu’s pending patents and other intellectual property could be unenforceable or ineffective once patent reviews are completed. Nxu anticipates patent review completion and patents issued in calendar years 2021, 2022, 2023, and 2024 based on the typical two-year process between filing and issuing. Nxu has continued to file patent applications throughout 2024 and plans to continue filing new patents over time. Nxu has filed these patents privately and the scope of what they cover remains confidential until they are issued. For any company creating brand new products, it is imperative to protect the proprietary intellectual property to maintain a competitive advantage. There is no doubt that a significant portion of Nxu’s current value depends on the strength and imperviousness of these pending patents. Nxu intends to continue to file additional patent applications and build its intellectual property portfolio as it discovers new technologies related to the development of plug-in electric vehicles.
Nxu believes that intellectual property will be critical to its success, and that Nxu will rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements to protect its proprietary rights. If Nxu is not successful in protecting its intellectual property, it could have a material adverse effect on its business, results of operations and financial condition. While Nxu believes that it will be issued trademarks, patents and pending patent applications help to protect its business, there can be no assurance that its operations do not, or will not, infringe valid, enforceable third-party patents of third parties or that competitors will not devise new methods of competing with Nxu that are not covered by its anticipated patent applications. There can also be no assurance that Nxu’s patent applications will be approved, that any patents issued will adequately protect its intellectual property, or that such patents will not be challenged by third parties or found to be invalid or unenforceable or that Nxu’s patents will be effective in preventing third parties from utilizing a copycat business model to offer the same service in one or more categories. Moreover, it is intended that Nxu will rely on intellectual property and technology developed or licensed by third parties, and Nxu may not be able to obtain or continue to obtain licenses and technologies from these third parties at all or on reasonable terms. Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which Nxu’s intended services will be provided. The laws of certain countries do not protect proprietary rights to the same extent as the laws of the U.S. and, therefore, in certain jurisdictions, Nxu may be unable to protect its proprietary technology adequately against unauthorized third party copying or use, which could adversely affect its competitive position. Nxu expects to license in the future, certain proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that might diminish the value of its proprietary rights or harm its reputation, even if Nxu has agreements prohibiting such activity. Also, to the extent third parties are obligated to indemnify Nxu for breaches of its intellectual property rights, these third parties may be unable to meet these obligations. Any of these events could have a material adverse effect on Nxu’s business, results of operations or financial condition.
The U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case, which could have a material adverse effect on its business, results of operations and financial condition.
Intellectual property protection is costly.
Filing, prosecuting and defending patents related to Nxu’s products and software throughout the world is prohibitively expensive. Competitors may use Nxu’s technologies in jurisdictions where Nxu has not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where Nxu has patent protection, but where enforcement is not as strong as that in the U.S. These products may compete with Nxu’s products in jurisdictions where Nxu does not have any issued or licensed patents and Nxu’s patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to technology, which could make it difficult for Nxu to stop the infringement of Nxu’s patents or marketing of competing products in violation of Nxu’s proprietary rights generally. Proceedings to enforce Nxu’s patent rights in foreign jurisdictions could result in substantial cost and divert Nxu’s efforts and attention from other aspects of Nxu’s business.
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Nxu may face state and federal regulatory challenges, including environmental and safety regulations.
Nxu is subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials. There are significant capital, operating and other costs associated with compliance with these environmental laws and regulations. Environmental laws and regulations may become more stringent in the future, which could increase costs of compliance or require Nxu to manufacture with alternative technologies and materials.
Federal, state and local authorities also regulate a variety of matters, including, but not limited to, health, safety and permitting in addition to the environmental matters discussed above. New legislation and regulations may require Nxu to make material changes to Nxu’s operations, resulting in significant increases in the cost of production.
Nxu’s manufacturing process will have hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or products, slow or stop production, or harm employees. Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact Nxu’s company brand, finances, or ability to operate.
Nxu is susceptible to risks associated with an increased focus by stakeholders and regulators on climate change, which may adversely affect its business and results of operations.
Climate-related events, including the increasing frequency of extreme weather events and their impact on critical infrastructure in the United States and elsewhere, have the potential to disrupt Nxu’s business and those of its third-party suppliers, and customers, and may cause Nxu to experience higher attrition, losses and additional costs to maintain or resume operations. In addition, Nxu’s customers may begin to establish sourcing requirements related to sustainability. As a result, Nxu may receive requests for sustainability related information about its products, business operations, use of sustainable materials and packaging. Nxu’s inability to comply with these and other sustainability requirements in the future could adversely affect sales of and demand for its products.
Further, there is an increased focus, including by governmental and nongovernmental organizations, investors, customers, and other stakeholders, on climate change matters, including increased pressure to expand disclosures related to material physical and transition risks related to climate change or to establish sustainability goals, such as the reduction of greenhouse gas emissions, which could expose Nxu to market, operational and execution costs or risks. Nxu’s failure to establish such sustainability targets or targets that are perceived to be appropriate, as well as to achieve progress on those targets on a timely basis, or at all, could adversely affect the reputation of its brand and sales of and demand for its products. To the extent legislation is passed, such as the final rules recently adopted by the SEC with respect to enhanced and standardized climate-related disclosures, Nxu would incur significant additional costs of compliance due to the need for expanded data collection, analysis, and certification with respect to greenhouse gas emissions and other climate change related risks. Nxu may also incur additional costs or require additional resources to monitor, report and comply with such stakeholder expectations and standards and legislation, and to meet climate change targets and commitments if established.
Risks Related to the Electric Vehicle Industry
The automotive market, specifically with respect to electric vehicles, is highly competitive, and Nxu may not be successful in competing in this industry.
Both the automobile industry generally, and the electric vehicle segment in particular, are highly competitive, and Nxu will be competing for sales with both electric vehicle manufacturers and traditional automotive companies. Many of Nxu’s current and potential competitors may have significantly greater financial, technical, manufacturing, marketing, or other resources than Nxu does and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale, and support of their products than Nxu may devote to its products. Nxu expects competition for electric vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry, as well as the recent significant increase in oil and gasoline prices. In addition, as fleet operators begin transitioning to electric vehicles on a mass scale, Nxu expects that more competitors will enter the commercial fleet electric vehicle market. Further, as a result of new entrants in the commercial fleet electric vehicle market, Nxu may experience increased competition for components and other parts of our vehicles, which may have limited or single-source supply.
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Factors affecting competition include product performance and quality, technological innovation, customer experience, brand differentiation, product design, pricing and total cost of ownership, and manufacturing scale and efficiency. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect Nxu’s business, prospects, financial condition, results of operations, and cash flows.
The EV charging market is characterized by rapid technological change, which requires Nxu to continue to develop new products and product innovations. Any delays in such development could adversely affect market adoption of Nxu’s products and financial results.
Continuing technological changes in battery and other EV technologies could adversely affect adoption of current EV charging technology, continuing and increasing reliance on EV charging infrastructure and/or the use of Nxu’s products and services. Nxu’s future success will depend in part upon Nxu’s ability to address the changing needs of the EV charging market. If Nxu is unable keep pace with changes in technology, Nxu’s gross margins will be adversely affected and Nxu’s prior products could become obsolete more quickly than expected.
If Nxu is unable to meet customer requirements on a timely basis or remain competitive with technological alternatives, Nxu’s products and services could lose market share, Nxu’s revenue will decline, Nxu may experience higher operating losses and Nxu’s business and prospects will be adversely affected.
Changes to fuel economy standards or the success of alternative fuels may negatively impact the EV market and thus the demand for Nxu’s products and services.
Regulatory initiatives that required an increase in the mileage capabilities of cars and consumption of renewable transportation fuels, such as ethanol and biodiesel, have helped increase consumer acceptance of EVs and other alternative vehicles. However, the EV fueling model is different from gasoline and other fuel models, requiring behavior changes and education of businesses, consumers, regulatory bodies, local utilities and other stakeholders. Further developments in and improvements in the affordability of, alternative technologies, such as renewable diesel, biodiesel, ethanol, hydrogen fuel cells or compressed natural gas, proliferation of hybrid powertrains involving such alternative fuels, or improvements in the fuel economy of internal combustion engine (“ICE”) vehicles, whether as the result of regulation or otherwise, may materially and adversely affect demand for EVs and EV charging stations in some market verticals. Regulatory bodies may also adopt rules that substantially favor certain alternatives to petroleum-based propulsion over others, which may not necessarily be EVs. Local jurisdictions may also impose restrictions on urban driving due to congestion, which may prioritize and accelerate micromobility trends and slow EV adoption growth. If any of the above cause or contribute to automakers reducing the availability of EV models or cause or contribute to consumers or businesses no longer purchasing EVs or purchasing fewer of them, it would materially and adversely affect Nxu’s business, operating results, financial condition and prospects.
Nxu has relied on complex machinery for its operations, and production involves a significant degree of risk and uncertainty in terms of operational performance, safety, security, and costs.
Nxu has relied heavily on complex machinery for its operations and its production involved a significant degree of uncertainty and risk in terms of operational performance, safety, security, and costs. Nxu’s manufacturing plant consists of large-scale machinery combining many components, including complex software to operate such machinery and to coordinate operating activities across the manufacturing plant. The manufacturing plant components are likely to suffer unexpected malfunctions from time to time, and will depend on repairs, spare parts, and IT solutions to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of Nxu’s control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems including the software used to control or operate them, industrial accidents, pandemics, fire, seismic activity, and natural disasters.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, products, supplies, tools and materials, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs, and potential legal liabilities, all which could have a material adverse effect on Nxu’s business, prospects, financial condition, results of operations, and cash flows. Although Nxu generally carries insurance
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to cover such operational risks, Nxu cannot be certain that its insurance coverage will be sufficient to cover potential costs and liabilities arising therefrom. A loss that is uninsured or exceeds policy limits may require Nxu to pay substantial amounts, which could adversely affect its business, prospects, financial condition, results of operations, and cash flows.
The electric vehicle technology industry is rapidly evolving and may be subject to unforeseen changes which could adversely affect the demand for Nxu’s chargers or other products and may increase its operating costs.
Nxu may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source and, as a result, its competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, hydrogen, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the ICE or the cost of gasoline, may materially and adversely affect Nxu’s business and prospects in ways Nxu does not currently anticipate.
The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations. The reduction, modification or elimination of such benefits could adversely affect Nxu’s financial results and ability to continue to grow.
The U.S. federal government and some state and local governments provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits and other financial incentives, such as payments for regulatory credits. The EV market relies on these governmental rebates, tax credits and other financial incentives to significantly lower the effective price of EVs and EV charging stations. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or may be reduced or terminated as a matter of regulatory or legislative policy. In particular, Nxu has historically benefitted from the availability of federal tax credits under Section 30C of the Code, which effectively subsidized the cost of placing in service Nxu’s charging stations. The Inflation Reduction Act revised the credits under Section 30C of the Code to (i) retroactively extend the expiration of the credit as of December 31, 2021 (with such credit continuing to be capped at $30,000 per location for EV charging stations placed in service before January 1, 2023) until December 31, 2032, (ii) revised the credit structure, availability and requirements for EV charging stations placed in service after December 31, 2022 and (iii) introduced the concept of transferability of tax credits, providing an additional option to monetize such credits. As part of the revised credit structure and requirements for EV charging stations placed in service after December 31, 2022, the available Section 30C credit was expanded such that it is capped at $100,000 per item; however, in order to be eligible for such tax credit, EV charging stations must be installed in rural or low-income census tracts. Additionally, in order to receive the full tax credit, labor for EV charging station construction and maintenance must meet prevailing wage and apprenticeship requirements unless an exception applies. There can be no assurance that the EV charging stations placed in service by Nxu will meet the revised requirements for the Section 30C credits and compliance with such requirements could increase Nxu’s labor and other costs. Any reduction in rebates, tax credits or other financial incentives available to EVs or EV charging stations, could negatively affect the EV market and adversely impact Nxu’s business operations and expansion potential. In addition, there is no assurance Nxu will have the necessary tax attributes to utilize any such credits that are available and may not be able to monetize such credits on favorable terms.
Federal guidance on Buy America requirements (effective as of March 23, 2023) applicable to the National Electric Vehicle Infrastructure (“NEVI”) Program, which was established by the Bipartisan Infrastructure Law, requires immediate domestic assembly and U.S. steel requirements for chargers to qualify for funding under the NEVI program, with higher domestic content percentages required in 2024. Nxu’s suppliers may experience delays in bringing their U.S. facilities online, and Nxu may be unable to source Buy America-compliant chargers in time to take advantage of early NEVI funding opportunities or only at increased costs. Nxu may be at a disadvantage to competitors that have already implemented domestic assembly and content standards into their supply chain. Nxu’s customers may request delays or adjustments to their build-out plans in order to accommodate these added Buy America requirements, which could result in delays in receipt of revenue from customers.
New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of Nxu’s stations. Furthermore, new tariffs and policy incentives could be put in place that favor equipment manufactured by or assembled at American factories, which may put Nxu’s fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or delaying Nxu’s ability to apply or qualify for grants and other government incentives, or for certain charging infrastructure build-out solicitations and programs, including those initiated by federal government agencies.
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Moreover, a variety of incentives and rebates offered by the U.S. federal government as well as state and local governments in order to encourage the use of EVs may be limited or reduced. In particular, the U.S. federal government offers a tax credit, the maximum amount of which is $7,500, for qualified new plug-in EVs. The Inflation Reduction Act modified the tax credit for new plug-in EVs and added new tax credits for used and commercial EVs. The Inflation Reduction Act removed the phase-out of tax credits for new plug-in EVs with respect to vehicle manufacturers that reached certain production levels beginning in 2023. However, the tax credit is subject to additional requirements and limitations, such as certain adjusted gross income limits for consumers claiming the credit, domestic content requirements for critical minerals and batteries and a requirement for final assembly to occur in North America. Such additional requirements and limitations for such tax credits may reduce incentives available to encourage the adoption of EVs; favor competitors whose production chains enable them to more readily take advantage of such incentives; delay purchases and installations of charging equipment by Nxu as manufacturing of charging equipment is moved to the U.S. in order to expand eligibility for such incentives (which, in turn, could delay Nxu’s recognition of revenue in connection with such stalls); increase the cost of procurement of some inputs in the construction of charging infrastructure; and negatively affect the EV market and adversely impact Nxu’s business operations and expansion potential. Any such developments could have an adverse effect on Nxu’s business, financial condition and results of operations.
Nxu has minimal experience servicing and repairing its charging stations. If Nxu or its partners are unable to adequately service its charging stations, Nxu’s business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.
Nxu has minimal experience servicing and repairing its charging stations. Servicing its products requires specialized skills, including high voltage training and servicing techniques. Although Nxu is planning to internalize most aspects of vehicle service over time, initially Nxu plans to partner with third parties to enable nationwide coverage for its network. There can be no assurance that Nxu will be able to enter into an acceptable arrangement with any such third-party providers. There can be no assurance that Nxu’s service arrangements will adequately address the service requirements of its customers to their satisfaction, or that Nxu and its servicing partners will have sufficient resources, experience, or inventory to meet these service requirements in a timely manner as the volume of charging stations it deploys increases.
As Nxu continues to grow, additional pressure may be placed on its customer support team or partners, and Nxu may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. Customer behavior and usage may result in higher than expected maintenance and repair costs, which may negatively affect its business, prospects, financial condition, results of operations, and cash flows. Nxu also could be unable to modify the future scope and delivery of its technical support to compete with changes in the technical support provided by its competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect Nxu’s results of operations. If Nxu is unable to successfully address the service requirements of its customers or establish a market perception that it does not maintain high-quality support, Nxu may be subject to claims from its customers, including loss of revenue or damages, and its business, prospects, financial condition, results of operations, and cash flows could be materially and adversely affected.
Product recall could hinder growth and product liability or other claims could have a material adverse effect on Nxu’s business.
If the NxuOne™ Charging Station is unable to meet performance and quality criteria, Nxu may be required to perform product recalls to address said concerns. A product recall can have a substantial cost related to performing such corrective actions. Although Nxu will perform significant internal testing and qualifications, as well as external qualifications through approved third-party vendors against industry standards and regulatory requirements, there will be unperceived conditions which may negatively impact the customer or Nxu expected performance. As such, Nxu may perform a corrective action such as a recall of products, mandatory repairs of defective components, or litigation settlements which can materially affect its financial goals, operation results, brand, business, and products. If Nxu is unable to provide significant charging stations, its business success may be substantially affected.
A significant portion of Nxu’s success is its ability to deploy the appropriate number of charging stations, in strategic locations relative to its customers and customer behaviors. If Nxu is unable to deploy charging stations to specified locations, this may negatively affect Nxu’s brand, business, financial goals, operational results, and product success in the market. As such, to meet said availability requirements, Nxu will require significant capital investments to
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rapidly deploy said NxuOne™ Charging Stations, as well as development of relationships with third party members who can assist in deployment of said charging stations. If Nxu is unable to address service requirements, Nxu may negatively affect its customer experience. Nxu’s ability to engage with third party operating service stations, as well as its ability to establish company operated locations, will be critical to the success of developing a positive customer experience.
While Nxu will work diligently to meet all company and regulatory safety requirements, there is a chance that a component catastrophically fails. It is possible that through unknown circumstances or conditions out of Nxu’s control, some person is injured by its product.
A successful product liability claim against Nxu could require Nxu to pay a substantial monetary award. Moreover, a product recall could generate substantial negative publicity about its products and business. Nxu cannot provide assurance that such claims and/or recalls will not be made in the future.
Nxu is subject to substantial regulations and unfavorable changes to, or failure by Nxu to comply with, these regulations could substantially harm its business and operating results.
Nxu’s charging stations are subject to regulation under international, federal, state, and local laws. Nxu expects to incur significant costs in complying with these regulations. Regulations related to the battery and electric vehicle industry are currently evolving and Nxu faces risks associated with these changing regulations.
To the extent that a law changes, Nxu’s products may not comply with applicable international, federal, state, and local laws, which would have an adverse effect on its business. Compliance with changing regulations could be time consuming, burdensome, and expensive. To the extent compliance with new and existing regulations is cost prohibitive, its business prospects, financial condition, and operating results would be adversely affected.
Internationally, there may be laws and jurisdictions Nxu has not yet entered or laws Nxu is unaware of in jurisdictions Nxu has entered that may restrict its sales or other business practices. These laws may be complex, difficult to interpret and may change over time. Continued regulatory limitations and obstacles that may interfere with Nxu’s ability to commercialize its products could have a negative and material impact on its business, prospects, financial condition, and results of its operation.
Nxu is subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect its business, results of operation and reputation.
Nxu is subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials. There are significant capital, operating and other costs associated with compliance with these environmental laws and regulations. Environmental laws and regulations may become more stringent in the future, which could increase costs of compliance.
Federal, state and local authorities also regulate a variety of matters, including, but not limited to, health, safety and permitting in addition to the environmental matters discussed above. New legislation and regulations may require Nxu to make material changes to its operations, resulting in significant increases in the cost of production.
Nxu’s manufacturing process will have hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents. There may be safety incidents that damage machinery or products, slow or stop production, or harm employees. Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact its company brand, finances, or ability to operate.
Future administrations at the federal and state level may create regulatory uncertainty for the alternative energy sector and may have an adverse effect on Nxu’s business, prospects, financial condition and operating results.
The United States automotive industry is subject to certain federal and state regulations, and new regulations continue to be proposed to address concerns regarding the environment, vehicle safety, and energy independence. Consequently, the regulatory landscape can change on short notice.
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Available government funding and economic incentives are subject to change for a variety of reasons that are beyond Nxu’s control, including budget and policy initiatives and priorities of current and future administrations at the federal and state level. Considering the waning government support for adoption of electric vehicle and clean energy initiatives during the first Trump Administration, the incoming second Trump Administration could adversely affect the growth of the commercial electric vehicle market and alternative energy sector, which could adversely impact Nxu’s business, prospects, financial condition and operating results.
The following risk factor does not take into account the proposed Merger and assumes that Nxu remains a stand-alone company except as otherwise noted.
There can be no assurance that Nxu’s evaluation of strategic alternatives will enhance stockholder value or result in any transaction being consummated, and speculation and uncertainty regarding the outcome of its evaluation of strategic alternatives may adversely impact its business, financial condition and results of operations.
On May 10, 2024, Nxu announced its intention to evaluate strategic alternatives. There can be no assurance of the terms, timing or structure of any transaction, or whether any such transaction will take place at all, and any such transaction is subject to risks and uncertainties. The process of reviewing strategic alternatives may involve significant resources and costs. In addition, the announced evaluation of strategic alternatives may cause or result in:
• disruption of its business;
• diversion of the attention of management;
• increased stock price volatility;
• increased costs and advisory fees; and
• challenges in retaining key employees
If Nxu is unable to mitigate these or other potential risks related to the uncertainty caused by its exploration of strategic alternatives, it may disrupt Nxu’s business or could have a material adverse effect on its financial condition and results of operations in future periods.
Nxu’s ability to complete a transaction, will depend on numerous factors, some of which are outside of its control. A merger of independent businesses is complex, costly and time-consuming. To consummate a merger, Nxu may incur asset write-offs and restructuring costs and other related expenses that could have a material adverse impact on its operating results. Mergers also involve numerous other risks, including potential exposure to assumed litigation and unknown environmental and other liabilities, as well as undetected internal control, regulatory or other issues, or additional costs not anticipated at the time of a transaction.
Even if a merger transaction is completed, there can be no assurance that it will be successful or have a positive effect on stockholder value. Further, it is not certain what impact any potential transaction may have on Nxu’s stock price, its current stockholders’ percentage ownership, business, financial condition, and results of operations.
Risks Related to Nxu’s Management
Nxu is dependent upon its executives for their services and the loss of personnel may have a material adverse effect on Nxu’s business and operations.
The loss of the services of Nxu’s CEO, CFO, or President, Mr. Mark Hanchett, Ms. Sarah Wyant, or Mrs. Annie Pratt, respectively, could have a material adverse effect on Nxu. Nxu does not maintain any key man life insurance on its executives. The loss of any of its executives’ services could cause investors to lose all or a part of their investment. Its future success will also depend on Nxu’s ability to retain and motivate other highly skilled employees. Competition for personnel in Nxu’s industry is intense. Nxu may not be able to retain its key employees or attract, assimilate or retain other highly qualified employees in the future. If Nxu does not succeed in attracting new personnel or retaining and motivating its current personnel, its business will be adversely affected.
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Nxu’s management team does not have experience running a public company.
While Nxu’s management team has a wide breadth of business experience, none of its executive officers have held an executive position at a publicly traded company. Given the onerous compliance requirements to which public companies are subject, there is a chance its executive officers will fail to perform at a level expected of public company officers. In such an event, Nxu’s share price could be adversely affected. The management team’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of Nxu. Nxu may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the United States. Nxu may upgrade its systems to an enterprise resource management system, and a delay could impact its ability or prevent it from timely reporting its operating results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act. The development of the standards and controls necessary for Nxu to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected.
Management’s judgment, estimates and assumptions have a significant impact on business decisions and accounting policies.
Nxu’s management team is not infallible. Nxu relies heavily on its management team’s judgment in formulating the estimates and assumptions that govern its business decisions and accounting policies. Despite their best intentions, errors in Nxu’s management team’s judgment may result in significant negative impacts to Nxu’s financial performance.
Nxu relies on human resources, the loss of services of any of such personnel may have a material adverse effect on its business and operations.
Nxu relies on its management team, its advisors, third-party consultants, third-party developers, service providers, technology partners, outside attorneys, advisors, accountants, auditors, and other administrators. The loss of services of any of such personnel may have a material adverse effect on its business and operations.
Limitations of director liability and director and officer indemnification.
Nxu’s Charter limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
• breach of their duty of loyalty to Nxu or its stockholders;
• act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
• unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
• transactions for which the directors derived an improper personal benefit.
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission. The Nxu Bylaws provide that Nxu will indemnify its directors, officers and employees to the fullest extent permitted by law. The Nxu Bylaws also provide that Nxu is obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding. Nxu believes that the Nxu Bylaw provisions are necessary to attract and retain qualified persons as directors and officers. The limitation of liability in the Nxu Bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to Nxu and its stockholders. Nxu’s results of operations and financial condition may be harmed to the extent Nxu pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
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Limitations on remedies; indemnification.
Nxu’s Charter, as amended from time to time, provides that officers, directors, employees and other agents and their affiliates shall only be liable to Nxu and its stockholders for losses, judgments, liabilities and expenses that result from fraud or other breach of fiduciary obligations. Additionally, Nxu assumed certain indemnification agreements with each of its officers and directors consistent with industry practice. Thus, certain alleged errors or omissions might not be actionable by Nxu. Nxu’s governing instruments also provide that, under the broadest circumstances allowed under law, Nxu must indemnify its officers, directors, employees and other agents and their affiliates for losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with Nxu, including liabilities under applicable securities laws.
Risks Related to Nxu’s Capital Structure and Ownership of Nxu Class A Common Stock
Nxu cannot predict the impact its dual class structure may have on its stock price.
Nxu cannot predict whether its dual class structure will result in a lower or more volatile market price of the Nxu Class A common stock or in adverse publicity or other adverse consequences. For example, because of its dual class structure, Nxu will likely be excluded from certain indexes, and Nxu cannot assure you that other stock indexes will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make the Nxu Class A common stock less attractive to other investors. As a result, the market price of the Nxu Class A common stock could be adversely affected.
The market price of the Nxu Class A common stock has fluctuated, and may continue to fluctuate, significantly.
The market price of the Nxu Class A common stock has fluctuated, and may continue to fluctuate, significantly and Nxu’s stockholders may lose all or part of their investment.
The market prices for securities of startup companies have historically been highly volatile, and the market has from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. The market price of the Nxu Class A common stock has fluctuated, and may continue to fluctuate, significantly in response to numerous factors, some of which are beyond its control, such as:
• actual or anticipated adverse results or delays in its research and development efforts;
• its failure to commercialize its Nxu Platform and Nxu Truck;
• unanticipated serious safety concerns related to the use of its products;
• adverse regulatory decisions;
• legal disputes or other developments relating to proprietary rights, including patents, litigation matters and its ability to obtain patent protection for its intellectual property, government investigations and the results of any proceedings or lawsuits, including patent or stockholder litigation;
• changes in laws or regulations applicable to the electric vehicle industry;
• Nxu’s dependence on third party suppliers;
• announcements of the introduction of new products by its competitors;
• market conditions in the electric vehicle industry;
• announcements concerning product development results or intellectual property rights of others;
• future issuances of Nxu’s common stock or other securities;
• the addition or departure of key personnel;
• actual or anticipated variations in quarterly operating results;
• announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by Nxu or Nxu’s competitors;
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• its failure to meet or exceed the estimates and projections of the investment community;
• issuances of debt or equity securities;
• trading volume of Nxu common stock;
• sales of the Nxu Class A common stock by Nxu or its stockholders in the future;
• overall performance of the equity markets and other factors that may be unrelated to its operating performance or the operating performance of its competitors, including changes in market valuations of similar companies;
• failure to meet or exceed any financial guidance or expectations regarding development milestones that Nxu may provide to the public;
• ineffectiveness of Nxu’s internal controls;
• general political and economic conditions;
• effects of natural or man-made catastrophic events;
• scarcity of raw materials necessary for battery production; and
• other events or factors, many of which are beyond Nxu’s control.
Further, price and volume fluctuations may result in volatility in the price of the Nxu Class A common stock, which could cause a decline in the value of Nxu’s common stock. Price volatility of the Nxu Class A common stock might worsen if the trading volume of its shares is low. The realization of any of the above risks or any of a broad range of other risks, including those described in these “RISK FACTORS,” could have a dramatic and material adverse impact on the market price of the Nxu Class A common stock.
The Nxu Class A common stock may be delisted from Nasdaq if Nxu does not maintain compliance with Nasdaq’s continued listing requirements. If the Nxu Class A common stock is delisted, it could negatively impact Nxu.
Continued listing of a security on Nasdaq is conditioned upon compliance with various continued listing standards. On April 2, 2024, Nxu received a notice from Nasdaq stating that Nxu is not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on Nasdaq (the “Minimum Bid Requirement”). On October 1, 2024, Nxu received a second notice from Nasdaq confirming that Nxu is still not in compliance with the Minimum Bid Requirement as of September 30, 2024 and granting Nxu an additional 180 days, or until March 31, 2025, to regain compliance. Nasdaq’s determination is based on Nxu meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the bid price requirement, and Nxu’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.
On September 4, 2024, Nxu received a notice from Nasdaq notifying Nxu that, due to Ms. Nightengale not standing for re-election as a director of Nxu at Nxu’s 2024 annual meeting of stockholders held on August 14, 2024, Nxu was no longer in compliance with Nasdaq’s audit committee requirements as set forth in Nasdaq Listing Rule 5605. Nxu intends to appoint an additional independent director to the Nxu board of directors and the audit committee of its board of directors as soon as practicable and prior to the earlier of Nxu’s next annual meeting of stockholders or August 14, 2025, or, if Nxu’s next annual meeting of stockholders is held before February 10, 2025, by February 10, 2025.
If the market price of the Nxu Class A common stock continues to remain under $1.00 per share, the only cure may be to enact a reverse split of the stock. Failure to maintain compliance with Nasdaq’s Continued Listing Rules could be costly and have material adverse effects.
Nxu will continue to monitor the closing bid price of the Nxu Class A Common Stock and seek to maintain compliance with all applicable Nasdaq requirements within the allotted compliance periods and may, if appropriate, consider available options, including implementation of an additional reverse stock split if the Reverse Stock Split Proposal is approved, to regain compliance with the Minimum Bid Requirement.
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On December 27, 2023, Nxu completed a reverse stock split at a ratio of 1-for-150. If Nxu does not maintain compliance with the Minimum Bid Requirement, Nxu may be forced to complete another reverse stock split, which could negatively affect the price of its the Nxu Class A common stock.
Further, while Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the Minimum Bid Requirement, Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, Nasdaq may determine that it is not in the public interest to maintain Nxu’s listing, even if Nxu regains compliance with the Minimum Bid Requirement.
In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that if a listed company that fails to meet the Minimum Bid Requirement after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for a compliance period. Nxu has effected a reverse stock split with a cumulative ratio of 150 shares to one. A subsequent reverse stock split could cause Nxu to exceed the 1-for-250 ratio. If such ratio is exceeded, Nxu would no longer be eligible for a compliance period and may be subject to an immediate delisting notification in the event it cannot comply with the Minimum Bid Requirement in the future.
Any future non-compliance may be costly, divert management’s time and attention, and could have a material adverse effect on Nxu’s business, reputation, financing, and results of operation. A delisting could substantially decrease trading in the Nxu Class A Common Stock, adversely affect the market liquidity of the Nxu Class A common as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, materially adversely affect its ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of the Nxu Class A Common Stock may decline further and stockholders may lose some or all of their investment.
Nxu does not anticipate dividends to be paid on the Nxu Class A common stock and investors may lose the entire amount of their investment.
A dividend has never been declared or paid in cash on the Nxu Class A common stock and Nxu does not anticipate such a declaration or payment for the foreseeable future. Nxu expects to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their Nxu Class A common stock. Nxu cannot assure stockholders of a positive return on their investment when they sell their Nxu Class A common stock, nor can Nxu assure that stockholders will not lose the entire amount of their investment. Any payment of dividends on its capital stock will depend on Nxu’s earnings, financial condition and other business and economic factors affecting Nxu at such a time as the Nxu board of directors may consider it relevant. If Nxu does not pay dividends, the Nxu Class A common stock may be less valuable because a return on its stockholders’ investment will only occur if the Nxu Class A common stock price appreciates.
Nxu is an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if Nxu takes advantage of certain exemptions from disclosure requirements available to emerging growth companies and smaller reporting companies, this could make its securities less attractive to investors and may make it more difficult to compare its performance with other public companies.
Nxu is an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and Nxu 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, 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. As a result, Nxu’s stockholders may not have access to certain information they may deem important. Nxu could be an emerging growth company for up to five years, although circumstances could cause Nxu to lose that status earlier, including if the market value of the Nxu Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case Nxu would no longer be an emerging growth company as of the following December 31. Nxu cannot predict whether investors will find its securities less attractive because Nxu will rely on these exemptions. If some investors find Nxu’s securities less attractive as a result of its reliance on these exemptions, the trading prices of its securities may be lower than they otherwise would be, there may be a less active trading market for its securities and the trading prices of its securities may be more volatile.
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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 to non-emerging growth companies but any such an election to opt out is irrevocable. Nxu 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, Nxu, 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 Nxu’s financial statements 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 accountant standards used.
Additionally, Nxu is a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. Nxu will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of Nxu’s common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) Nxu’s annual revenues exceeded $100 million during such completed fiscal year and the market value of Nxu’s common stock held by non-affiliates exceeds $700 million as of the prior June 30. To the extent Nxu takes advantage of such reduced disclosure obligations, it may also make the comparison of Nxu’s financial statements with other public companies difficult or impossible.
Nxu will incur significant additional costs as a result of being a public company, and its management will be required to devote substantial time to compliance with its public company responsibilities and corporate governance practices.
Nxu expects to incur increased costs associated with corporate governance requirements that are applicable to it as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, and the Exchange Act, as well as the rules of Nasdaq. These rules and regulations are expected to significantly increase its accounting, legal and financial compliance costs and make some activities more time consuming, including due to increased training of its current employees and increased assistance from consultants. Nxu expects such expenses to further increase after it is no longer an “emerging growth company.” Nxu also expects these rules and regulations to make it more expensive for it to maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for Nxu to attract and retain qualified persons to serve on the Nxu board of directors or as executive officers. Furthermore, these rules and regulations will increase its legal and financial compliance costs and will make some activities more time-consuming and costly. Nxu cannot predict or estimate the amount of additional costs it will incur as a public company or the timing of such costs. In addition, its management team will need to devote substantial attention to transitioning to interacting with public company analysts and investors and complying with the increasingly complex laws pertaining to public companies, which may divert attention away from the day-to-day management of Nxu’s business, including operational and sales and marketing activities. Increases in costs incurred or diversion of management’s attention as a result of becoming a publicly traded company may adversely affect its business, prospects, financial condition, results of operations, and cash flows.
Small public companies are inherently risky and Nxu may be exposed to market factors beyond Nxu’s control. If such events were to occur it may impact its operating results.
Managing a small public company involves a high degree of risk. Few small public companies ever reach market stability and Nxu will be subject to oversight from governing bodies and regulations that will be costly to meet. Nxu’s present officers have limited experience in managing a fully reporting public company, so Nxu may be forced to obtain outside consultants to assist it with meeting these requirements. These outside consultants are expensive and can have a direct impact on Nxu’s ability to be profitable. This will make an investment in Nxu a highly speculative and risky investment.
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The Nxu Bylaws include forum selection provisions, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Nxu.
The Nxu Bylaws require that, unless Nxu consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of its business, (ii) any action asserting a claim of breach of a duty owed by any director, officer, employee, agent or stockholder of Nxu to Nxu or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine. In addition, the Nxu Bylaws require that, unless Nxu consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act. Any person or entity purchasing or otherwise acquiring any interest in shares of Nxu’s capital stock is deemed to have notice of and consented to the foregoing provisions.
These forum selection provisions in the Nxu Bylaws may limit its stockholders’ ability to obtain a favorable judicial forum for disputes with Nxu, which may discourage such lawsuits against Nxu. Nxu cannot be certain as to whether a court would enforce these provisions, and if a court were to find the forum selection provisions contained in the Nxu Bylaws to be inapplicable or unenforceable in an action, Nxu may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, operating results and financial condition. Furthermore, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
Nxu may use equity incentives for employees, advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights will result in the dilution of the ownership interests of its existing stockholders.
Nxu may use equity incentives for employees, advisors, directors, key consultants and select affiliates. Any issuance of stock upon the conversion of options and/or incentive rights, including settlement or exercise of incentive awards prior to or concurrently with the Merger, will result in the dilution of the ownership interests of its existing stockholders.
Nxu is subject to general securities investment risks.
All investments in securities involve the risk of loss of capital. No guarantee or representation is made that an investor will receive a return of its capital. The value of the Nxu Class A common stock can be adversely affected by a variety of factors, including development problems, regulatory issues, technical issues, commercial challenges, competition, legislation, government intervention, industry developments and trends, and general business and economic conditions.
A sale, or the perception of future sales, of a substantial number of shares of Nxu Class A common stock may cause the share prices to decline.
If Nxu’s stockholders sell, or the market perceives that Nxu’s stockholders intend to sell for various reasons, substantial amounts of the Nxu Class A common stock in the public market, including shares issued in connection with the exercise of outstanding options, the market price of its shares could fall. Sales of a substantial number of shares of the Nxu Class A common stock may make it more difficult for Nxu to sell equity or equity-related securities in the future at a time and price that Nxu deems reasonable or appropriate. Nxu may become involved in securities class action litigation that could divert management’s attention and harm its business. The stock markets have from time-to-time experienced significant price and volume fluctuations that have affected the market prices for the common stock of automotive companies. These broad market fluctuations may cause the market price of the Nxu Class A common stock to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of a company’s securities. Nxu may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect its business.
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Nxu’s quarterly operating results may fluctuate.
Nxu expects its operating results to be subject to quarterly fluctuations. Nxu’s net loss and other operating results will be affected by numerous factors, including:
• any intellectual property infringement lawsuit in which Nxu may become involved;
• regulatory developments affecting its products and related services; and
• Nxu’s execution of any collaborative, licensing or similar arrangements, and the timing of payments Nxu may make or receive under these arrangements.
If Nxu’s quarterly operating results fall below the expectations of investors or securities analysts, the price of the Nxu Class A common stock could decline substantially. Furthermore, any quarterly fluctuations in its operating results may, in turn, cause the price of the Nxu Class A common stock to fluctuate substantially.
Unfavorable securities industry reports could have a negative effect on Nxu’s share price.
Any trading market for the Nxu Class A common stock will be influenced in part by any research reports that securities industry analysts publish about Nxu. Should one or more of such analysts downgrade Nxu’s securities, or otherwise reports on Nxu unfavorably, or discontinues coverage, the market price and market trading volume of the Nxu Class A common stock could be negatively affected.
Risks Related to Verde
Risks Related to Verde’s Financial Position and Need for Capital
Verde is an early stage company with a history of net losses and negative cash flow from operations, very limited revenues from product sales to date, and its ability to generate meaningful revenues going forward or to become profitable is uncertain.
Verde has recorded losses since 2020, and its future profitability is uncertain. Verde has been engaged primarily in research and development and early-stage commercial activities. For the nine months ended September 30, 2024 and 2023, Verde’s net loss was $8.2 million and $8.5 million, respectively, and for the year ended December 31, 2023, Verde’s net loss was $12.1 million. As of September 30, 2024, Verde’s accumulated deficit was $34.6 million. Verde expects that its net losses and negative cash flow from operations could continue for the foreseeable future. Based on Verde’s estimates and projections, which are subject to significant risks and uncertainties, Verde does not expect to reach commercial scale production and generate Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA’’) until at least the fourth quarter of 2025. Even if Verde is able to commercialize its products and generate revenue from product sales, it may not generate sufficient revenue to operate its business and become profitable, if at all.
Verde did not generate any product revenue prior to April 2023, and has generated only a very small amount of product revenue from a very limited number of customers to date. Verde’s ability to generate revenues in the near-term is highly dependent on the successful commercialization of its products, which is subject to many risks and uncertainties as described below. Verde expects that it will take time for production of its products to ramp up to an economical scale while the market for its products expands. As a result, Verde expects to experience losses and negative cash flow from operations for at least the next six months, as it incurs additional costs and expenses for the continued development and expansion of its business, including the costs of continuing to build out its manufacturing capacity and ongoing expenses of research and product development. Because Verde will incur the capital costs and expenses from these efforts before receiving meaningful revenue, its losses in future periods could be significant. Verde may find that these efforts are more expensive than it currently estimates or that these efforts may not result in revenues, which would further increase its losses. The amount Verde spends will impact its ability to become profitable and this will depend, in part, on the number of new products that it attempts to develop. Verde may not achieve any or all of these goals and, thus, it cannot provide assurances that it will ever be profitable or achieve significant revenues.
Even if Verde can successfully manufacture and sell its products, whether Verde will be able to generate a profit on any of these products is highly uncertain and depends on a number of factors including the cost of production, the price it is able to charge for these products, and the emergence of competing products.
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Verde’s operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of its control.
Verde is subject to, among other things, the following factors that may negatively affect its operating results:
• fluctuating prices of biopolymers due to availability of raw materials, skepticism on biodegradable materials, and uncertain rise and fall of current market demands;
• the announcement or introduction of new products by Verde’s competitors;
• Verde’s ability to supply to a significantly growing market within the next 2 – 5 years;
• Verde’s ability to attract and retain key personnel in a timely and cost-effective manner;
• Verde’s ability to attract customers for its products;
• technical difficulties;
• the amount and timing of operating costs and capital expenditures relating to the expansion of Verde’s business, operations and infrastructure;
• Verde’s ability to identify and enter into relationships with appropriate and qualified third-party providers of necessary testing and manufacturing services;
• regulations by federal state or local governments; and
• general economic conditions, as well as general economic conditions specific to the ethanol production and bioplastics industry, and other industries related to compostable or biodegradable substitutes from non-biodegradable plastics.
As a result of Verde’s limited operating history and the nature of the markets in which it competes, it is difficult for Verde to forecast its revenues or earnings accurately. Verde has based its anticipated future expense levels largely on its investment plans and estimates of future events, although certain of its expense levels will, to a large extent, become fixed. As a strategic response to changes in the competitive environment, Verde may from time to time make certain decisions concerning expenditures, pricing, service or marketing that could have a material adverse effect on its business, results of operations and financial condition. Due to the foregoing factors, Verde’s revenues and operating results are difficult to forecast.
Verde’s business is not diversified.
Verde’s initial commercial success depends on its ability to complete construction and profitably and successfully operate its research and development and manufacturing facility in Fullerton, California (the “Fullerton Facility”). Other than the future production and sale of products, Verde does not have significant other lines of business or other sources of revenue. Such lack of diversification may limit Verde’s ability to adapt to changing business conditions and could have an adverse effect on Verde’s business, financial condition, results of operations and prospects.
Verde may be unable to manage rapid growth effectively.
Verde’s failure to manage growth effectively could have a material and adverse effect on its business, results of operations and financial condition. Verde anticipates that a period of significant expansion will be required to address potential growth, including securing adequate supplies of raw materials and equipment, and moving large quantities of raw materials, work-in-progress and finished goods. This expansion will place a significant strain on Verde’s management, operational and financial resources. While Verde’s key suppliers have informed it that they believe they will be able to supply necessary raw materials and equipment to meet its plans, there is no guarantee they will be able to meet their commitments. Additionally, to manage the expected growth of Verde’s operations and personnel, Verde must establish appropriate and scalable operational and financial systems, procedures and controls and must establish a qualified finance, administrative and operations staff. Verde has made key hires experienced in manufacturing and logistics to scale and has implemented an EPICOR ERP system to maintain finance and accounting, raw materials, WIP, finished goods and logistics. Verde’s management may be unable to continue to hire, train, retain and manage the necessary personnel or to identify, manage and exploit potential strategic relationships and market opportunities.
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Verde will not realize meaningful new capital through the Merger and, accordingly, will need to secure additional capital to execute on its business plan, which additional capital may not be available on favorable terms, or at all.
Verde expects that it will have sufficient capital to fund its planned operations through the completion of its ongoing current planned capacity buildout at the Fullerton Facility. Thereafter, Verde will need to raise additional working capital and capital to scale its PolyEarthylene resin warehouse capacity in the Fullerton Facility and establish its contemplated high-volume manufacturing facility, which Verde expects will be located in the Midwestern or Southwestern United States. The Merger is not expected to result in any new meaningful capital to Verde to fund its growth. Verde will be dependent in large part on completing a financing in connection with or following the completion of the Merger in order to fund its contemplated growth, including its planned new high-volume manufacturing facility. There can be no assurance that any such financing will be available to Verde at all or in the desired amounts or on favorable terms. If Verde or the combined company cannot raise sufficient capital in a timely manner and in a sufficient amount and on favorable terms, Verde will be delayed and could potentially be prevented from executing its growth plans, and its business, results of operations and financial condition may be materially adversely affected.
To the extent that Verde raises additional funds in connection with or after the Merger through the sale of equity or debt securities, (i) it may incur fees associated with such issuance, (ii) its existing stockholders will experience dilution from the issuance of new equity securities, (iii) it may incur ongoing interest expense and be required to grant a security interest in its assets in connection with any debt issuance and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of its existing stockholders. Debt financing and preferred equity financing, if available, may also involve agreements that include covenants limiting or restricting Verde’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. In addition, utilization of Verde’s net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Code due to ownership changes resulting from future equity financing transactions.
If Verde raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies or grant licenses on terms that are not favorable to Verde. In the event Verde is unable to obtain additional financing, Verde may be unable to successfully implement its business plan, which could have a material and adverse impact on its business, including you losing your entire investment.
Verde’s independent registered public accounting firm’s report for Verde contains an explanatory paragraph that expresses substantial doubt about its ability to continue as a “going concern” without significant revenue or additional capital.
Verde’s existence is dependent upon Verde’s management’s ability to obtain additional funding sources, enter into strategic alliances or generate significant revenues, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products. Verde cannot assure you that adequate additional financing will be available to Verde on acceptable terms, or at all. If Verde is unable to raise additional capital and/or enter into strategic alliances when needed or on attractive terms, it would be forced to delay or reduce any commercialization efforts. Verde anticipates incurring additional losses until such time, if ever, that it can generate significant sales. These circumstances raise substantial doubt about Verde’s ability to continue as a going concern within one year after the date that the financial statements of Verde included elsewhere in this proxy statement/prospectus were issued. Additional working capital will be required to continue operations and scale its products. The financial statements of Verde included elsewhere in this proxy statement/prospectus do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result should Verde be unable to continue as a going concern.
Verde’s independent registered public accounting firm identified a material weakness in its internal control over financial reporting as of December 31, 2023. If Verde is unable to develop and maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in Verde and materially and adversely affect Verde’s business and operating results.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of Verde’s annual or interim financial statements will not be prevented, or detected or corrected on a timely basis.
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Effective internal controls are necessary to provide reliable financial reports and reduce the risk of fraud. Verde continues to evaluate measures to remediate the material weaknesses. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If any new material weaknesses are identified in the future, any such newly identified material weakness could limit Verde’s ability to prevent or detect a misstatement of its accounts or disclosures that could result in a material misstatement of Verde’s annual or interim financial statements. In such case, Verde may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable Nasdaq listing requirements, investors may lose confidence in Verde’s financial reporting and Verde’s share price may decline as a result. Verde cannot assure you that the measures it has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses.
Additionally, if Verde’s revenue and other accounting, auditing or tax systems do not operate as intended or do not scale with anticipated growth in Verde’s business, the effectiveness of its internal controls over financial reporting could be adversely affected. Any failure to develop, implement, or maintain effective internal controls related to Verde’s revenue and other accounting, auditing or tax systems and associated reporting could materially adversely affect its business, results of operations, and financial condition or cause Verde to fail to meet its reporting obligations.
Verde has encountered difficulties with growth and change. If Verde fails to address these difficulties in assessing data usage, if the personnel handling its accounting, auditing or finance function fail to perform at an appropriate level for a public company, or if other weaknesses in internal controls are detected, it may be determined that Verde has a material weakness. In addition, most of Verde’s employees who work within its accounting, auditing and financial reporting functions have limited to no experience managing a publicly traded company and have limited to no experience implementing, monitoring and enforcing the internal financial, auditing and accounting controls for a publicly traded company. The identification of a material weakness could result in regulatory scrutiny and cause investors to lose confidence in Verde’s reported financial condition and otherwise have a material adverse effect on its business, financial condition, cash flow or results of operations.
Verde is in the process of designing and implementing measures to improve its internal control over financial reporting to remediate any possible material weaknesses, primarily by implementing additional review procedures within its accounting, auditing and finance department, hiring additional staff, designing and implementing information technology and application controls in its financially significant systems, and, if appropriate, engaging external auditing and accounting experts to supplement its internal resources in its computation and review processes. While Verde is designing and implementing measures to remediate the material weaknesses, Verde cannot predict the success of such measures or the outcome of its assessment of these measures at this time. Verde can give no assurance that these measures will remediate either of the deficiencies in internal control or that additional material weaknesses or significant deficiencies in its internal control over financial reporting will not be identified in the future. Verde’s failure to implement and maintain effective internal control over financial reporting could result in errors in its financial statements that may lead to a restatement of its financial statements or cause it to fail to meet its reporting obligations.
As a public company, Verde will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of Verde’s internal control over financial reporting for each annual report on Form 10-K to be filed with the SEC. This assessment will need to include disclosure of any material weaknesses identified by Verde’s management in its internal control over financial reporting. Verde will be required to disclose changes made in its internal controls and procedures on a quarterly basis. To comply with the requirements of being a public company, Verde expects to need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. Failure to comply with the Sarbanes-Oxley Act could potentially subject Verde to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities, which would require additional financial and management resources. Verde has begun the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, but Verde may not be able to complete its evaluation, testing and any required remediation in a timely fashion.
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Changes in tax law may adversely affect Verde or its investors.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect Verde or holders of Verde’s stock. In recent years, many such changes have been made, and changes are likely to continue to occur in the future. It cannot be predicted whether, when, in what form or with what effective dates tax laws, regulations and rulings may be enacted, promulgated or issued, which could result in an increase in Verde’s or its stockholders’ tax liability or require changes in the manner in which Verde operates in order to minimize or mitigate any adverse effects of changes in tax law. Investors should consult their tax advisors regarding the potential consequences of changes in tax law on Verde’s business and on the ownership and disposition of Verde stock.
Verde’s ability to utilize its net operating loss carryforwards and tax credit carryforwards to offset future taxable income may be subject to certain limitations.
Verde has a history of cumulative losses and anticipates that it will continue to incur significant losses in the near future; thus, Verde does not know whether or when it will generate taxable income necessary to use its net operating loss (“NOL”) carryforwards or tax credit carryforwards. As of December 31, 2023, Verde had federal NOL carryforwards of $23.2 million. Verde’s federal NOL carryforwards do not expire, but the deductibility of such federal NOL carryforwards in a taxable year is limited to 80% of Verde’s taxable income for such year.
In general, under Sections 382 and 383 of the Code and corresponding provisions of state law, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage point change (by value) in the ownership of its equity by certain stockholders over a three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income is subject to limitations. Verde may have experienced such ownership changes in the past and may experience such ownership changes in the future as a result of the Merger or subsequent shifts in its stock ownership (some of which may be outside its control). As a result, if and to the extent Verde earns net taxable income, its ability to use its pre-change NOLs and other pre-change tax attributes to offset such taxable income may be subject to limitations.
Risks Related to Verde’s Operations and Industry
Construction of Verde’s contemplated new manufacturing facilities may not be completed in the expected timeframe or in a cost-effective manner. Any delays in the construction of Verde’s manufacturing facilities could severely impact its business, financial condition, results of operations and prospects. Verde’s ability to pursue its contemplated new manufacturing facility, which is integral to Verde’s ability to execute on its business plan and achieve its growth and financial objectives, will be dependent on the availability of financing necessary to lease and build out the contemplated new facility. The required financing may not be available on favorable terms or at all, in which case Verde may not be able to pursue the new manufacturing facility, and it may be unable to execute on its business plan or achieve its growth and financial objectives.
Verde’s projected financial performance and results of operations, including its ability to achieve commercial scale production, depends on its ability to construct several commercial scale plants. Verde expects the Fullerton Facility to have production capacity of approximately 50 million pounds of PolyEarthylene per year in California by the end of January 2025 or beginning of February 2025. Verde expects to enter into a lease agreement for and begin buildout of its large volume manufacturing facility, which Verde expects to be located in the Midwestern or Southwestern United States, following the Closing, subject to the availability of financing necessary to fund this project. Unless it can raise financing sooner, Verde intends to pursue a financing for this project following completion of the Merger. Verde believes that it will take approximately ten months to complete buildout of this facility once it leases facility space and commences the buildout and Verde expects to begin commercial scale production of PolyEarthylene as soon as it is complete. If the Merger is completed and the necessary financing is obtained in the first quarter of 2025, Verde believes that it would be able to complete the buildout and commence production at this facility by the end of the first quarter of 2026. Verde expects to have selected the site for this large volume manufacturing facility by the Closing. Verde may have difficulty finding sites with appropriate infrastructure and access to raw materials. With respect to these future facilities, Verde does not have agreements with architecture or construction firms to build out any necessary infrastructure. Consequently, Verde cannot predict on what terms such firms may agree to
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design and fit-up its future facilities. If Verde is unable to fit-up these facilities within the planned timeframes, in a cost-effective manner or at all due to a variety of factors, including, but not limited to, a failure to lease its facilities, unexpected construction problems, permitting and other regulatory issues, severe weather, inflationary pressures, labor disputes, and issues with subcontractors or vendors, including payment disputes, Verde’s business, financial condition, results of operations and prospects could be severely impacted.
The buildout, fit-up and commission of any new project is dependent on a number of contingencies some of which are beyond Verde’s control. There is a risk that significant unanticipated costs or delays could arise due to, among other things, errors or omissions, unanticipated or concealed project site conditions, including subsurface conditions and changes to such conditions, unforeseen technical issues or increases in facility equipment costs, insufficiency of water supply and other utility infrastructure, or inadequate contractual arrangements. Should these or other significant unanticipated costs arise, this could have a material adverse impact on Verde’s business, financial performance and operations. No assurances can be given that construction can be completed on time or at all, or as to whether Verde will have sufficient funds available to complete construction.
Verde is currently reliant on a single facility with limited capacity for all of its operations, and Verde’s ability to execute on its business, growth and financial plans is dependent on adding additional manufacturing capacity.
Verde is currently reliant solely on the operations at the Fullerton Facility. Adverse changes or developments affecting the Fullerton Facility could impair Verde’s ability to produce its products and its business, prospects, financial condition and results of operations. Any shutdown or period of reduced production at the Fullerton Facility, which may be caused by regulatory noncompliance or other issues, as well as other factors beyond its control, such as severe weather conditions, natural disaster, fire, power interruption, work stoppage, disease outbreaks or pandemics, equipment failure, delay in supply delivery, or shortages of material, equipment, or labor, would significantly disrupt Verde’s ability to produce its products in a timely manner, meet its contractual obligations and operate its business. Verde’s equipment is costly to replace or repair, and Verde’s equipment supply chains may be disrupted in connection with pandemics, trade wars and other factors. If any material amount of Verde’s machinery were damaged, it would be unable to predict when, if at all, it could replace or repair such machinery or find co-manufacturers with suitable alternative machinery, which could adversely affect Verde’s business, financial condition, results of operations and prospects. Performance guarantees may not be sufficient to cover damages or losses, or the guarantors under such guarantees may not have the ability to pay. Any insurance coverage Verde has may not be sufficient to cover all of its potential losses and may not continue to be available to Verde on acceptable terms, or at all. In addition, Verde will need to obtain additional warehousing space upon increasing the production capacity of the Fullerton Facility to its full 50 million pound contemplated capacity and, absent availability of additional financing it may not have the financial ability to procure any such additional needed warehousing space.
Verde may be delayed in or unable to procure necessary capital equipment.
While the equipment Verde uses to produce its products is currently available, Verde must rely on outside companies to continue to manufacture the equipment necessary to produce its products. If Verde’s primary suppliers and secondary sources of capital equipment are unable or unwilling to provide it with necessary capital equipment to manufacture its products or if Verde experiences significant delays in obtaining the necessary manufacturing equipment, its business, results of operations, and financial condition could be adversely affected. In addition, the buildout of Verde’s facilities may require a substantial portion of certain materials and supplies relative to the overall global supply of such materials and supplies. If Verde is unable to secure an adequate supply of such materials and supplies on commercially reasonable terms, or at all, the construction of Verde’s facilities may be delayed or terminated.
Verde has not produced its products in large commercial quantities.
While members of Verde’s team have experience producing resins at scale, and while Verde has produced thousands of pounds of its PolyEarthylene resins per day using two of its production level machines in the Fullerton Facility, Verde has no experience in producing large quantities of its products. Verde may not be able to cost effectively produce its products at a scale consistent with existing and prospective customer demand in a timely or economical manner, and the quality of the commercial product may not be acceptable on a consistent basis. There are significant technological and logistical challenges associated with producing, marketing, selling and distributing products in the plastics industry, including Verde’s products, and Verde may not be able to resolve all of the difficulties that may arise in a timely or cost-effective manner, or at all.
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Verde expects to rely on a limited number of customers for a significant portion of its near-term revenue.
Since most of Verde’s existing and prospective customers are global brands and large plastic converters looking for several million pounds per year, Verde expects a few significant existing and prospective customers may account for a significant portion of its revenues in any one year or over a period of several consecutive years in the next few years. The loss of one or more of these prospective significant customers, a substantial reduction in their orders, their failure to exercise customer options, their unwillingness to extend contractual deadlines if Verde is unable to meet production deadlines, their inability to perform under their contracts, or a significant deterioration in their financial condition could have a material adverse effect on Verde’s business, results of operations, and financial condition.
Verde may be unable to obtain testing and/or certifications required by its existing and prospective customers.
Verde performs in-house testing and certain third-party testing of its resins depending on the nature of the product and potential demand. Verde’s existing and prospective customers may require bioresin formulations to undergo biodegradability testing to address physical property deterioration in specific environmental conditions. Biodegradation testing ensures products can be effectively marketed and sold and meet prospective customer demands on environmental protection. While Verde does offer in-house testing, many existing and prospective customers require third-party testing which may take six to 12 months and cost thousands of dollars per formula. If Verde’s products do not achieve the third-party results required by existing and prospective customers in a timely manner, it may experience a delay in going to market with the applicable resin. Such a delay could result in Verde not achieving its financial forecasts and not fulfilling prospective customer demand. Furthermore, end-product testing may be required to appeal to existing and prospective customers.
As rates of biodegradation vary between thickness of the “end-product”, Verde cannot guarantee that biodegradation rates in finished goods will match those of its bioresins, which poses a risk for ASTM testing results of end-products. This factor is particularly challenging in the California market as it prohibits the sale of single use plastic goods labeled “biodegradable” or “degradable.”
Verde’s products may not achieve market success. If Verde’s products do not achieve market success, it may be unable to generate significant revenues, if any.
Some of Verde’s existing and prospective customers are currently evaluating and testing Verde’s products prior to placing orders to purchase such products. The successful commercialization of Verde’s products is also dependent on its existing and prospective customers’ ability to commercialize the end-products that they make from such products, which may never gain market acceptance.
Market acceptance of Verde’s products will depend on numerous factors, many of which are outside of its control, including among others:
• public acceptance of such products;
• Verde’s ability to produce products of consistent quality that offer functionality comparable or superior to existing or new polymer products;
• Verde’s ability to demonstrate the benefits of its products in terms of safety, efficacy, convenience, biodegradability and environmental friendliness;
• Verde’s ability to produce products fit for their intended purpose;
• Verde’s ability to produce new products or customizations of existing products to match changes in public demand;
• Verde’s ability to obtain necessary regulatory approvals for its products;
• the speed at which existing and prospective customers qualify Verde’s products for use in their products including any required third party testing;
• the pricing of Verde’s products compared to petroleum-based plastics and other bio-polymers;
• the effectiveness of Verde’s market strategy;
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• ease of administration of Verde’s products;
• the strategic reaction of companies that market competitive products;
• the time it takes for Verde’s commercial-scale volume to be established;
• Verde’s reliance on third parties who support or control distribution channels; and
• general market conditions, including fluctuating demand for Verde’s products.
Verde faces and will face substantial competition.
Verde faces and will face substantial competition from a variety of companies in the biodegradable, renewable resource-based plastic segment, as well as from companies in the conventional, non-biodegradable petroleum-based industry segment. Some of their products may be offered at a lower price than Verde’s product offerings. Many of these companies have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than Verde. Verde’s competitors may be able to adapt more quickly to new or emerging technologies, changes in customer requirements and changes in laws and regulations. There can be no assurance that Verde can develop products that are more effective or achieve greater market acceptance than competitive products, or that Verde’s competitors will not succeed in developing products and technologies that are more effective than those being developed by Verde and that would therefore render Verde’s products and technologies less competitive or even obsolete. Verde cannot assure you that it will be able to compete successfully against current or new competitors.
Verde produces bioresins from raw materials, including renewable resources, such as biobased polyolefins and other plant based biofillers, whose pricing and availability may be impacted by factors out of its control. Increases or fluctuations in the costs of Verde’s raw materials may affect its cost structure.
Verde’s products use raw materials purchased from third parties, such as biobased polyolefins and other plant based biofillers. Pricing and availability of raw materials, including renewable resources, for use in Verde’s businesses can be volatile due to numerous factors beyond its control, including general, domestic and international economic conditions, labor costs, production levels, competition, and consumer demand. Drought, pestilence, severe weather or other “acts of God” may limit Verde’s ability to procure raw materials if crops are lost. This volatility and fluctuation can significantly affect the availability and cost of raw materials for Verde and may therefore have a material adverse effect on its business, results of operations, and financial condition.
Verde’s results of operations will be directly affected by the cost of raw materials. The costs of raw materials comprises a significant amount of Verde’s total cost of goods sold and, as a result, movements in the cost of raw materials, and in the cost of other inputs, will impact Verde’s profitability. Because a significant portion of Verde’s costs of goods sold is represented by these raw materials, Verde’s gross profit margins could be adversely affected by changes in the cost of these raw materials if Verde is unable to pass the increases to its existing and prospective customers.
Due to the high rate of growth in the bioplastics market, the demand for raw materials used in Verde’s products may outpace supply, which could result in price increases and deficits in the supply necessary to meet prospective customer demand. Furthermore, if Verde’s raw material prices experience volatility, there can be no assurances that Verde can continue to recover raw materials costs or retain customers in the future. If Verde is unable to secure the required quantities of raw materials, it may not be able to achieve its financial forecasts and fulfill existing and prospective customer demand, and existing and prospective customers may become more likely to consider competitors’ products, some of which may be available at lower costs. Significant loss of existing and prospective customers could adversely impact Verde’s results of operations, financial condition and cash flows.
Verde’s success will be influenced by the price of petroleum relative to the price of bio-based feedstocks.
Verde’s success may be influenced by the cost of its products relative to petroleum-based polymers. The cost of petroleum-based polymers is in part based on the price of petroleum. To date, Verde’s products have been primarily manufactured using sugar cane, an agricultural feedstock. As the price of bio-based feedstocks increases and/or the price of petroleum decreases, Verde’s products may be less competitive relative to petroleum-based polymers. A material decrease in the cost of conventional petroleum-based polymers may require a reduction in the prices of Verde’s products for them to remain attractive in the marketplace and/or reduce the size of Verde’s addressable market.
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The failure of Verde’s raw material suppliers to perform their obligations under supply agreements, or Verde’s inability to replace or renew these agreements when they expire, could increase Verde’s cost for these materials, interrupt production or otherwise adversely affect its results of operations.
Verde’s manufacturing process uses biodegradable materials as its primary raw materials. However, Verde may be unable to secure agreements with suppliers for the necessary amount of raw materials in certain circumstances. If Verde is required to obtain alternate sources for raw materials because a supplier is unwilling or unable to execute or perform under raw material supply agreements, if a supplier terminates its agreements with Verde, if a supplier is unable to meet increased demand as Verde’s commercial scale production expands, if Verde is unable to renew its contracts or if Verde is unable to obtain new long-term supply agreements to meet changing demand, Verde may not be able to obtain these raw materials in sufficient quantities, on economic terms, or in a timely manner, and Verde may not be able to enter into long-term supply agreements on terms as favorable to it, if at all. A lack of availability of raw materials could limit Verde’s production capabilities and prevent it from fulfilling prospective customer orders, and therefore harm its results of operations and financial condition.
Maintenance, expansion and refurbishment of Verde’s facilities, the construction of new facilities and the development and implementation of new manufacturing processes involve significant risks.
Verde’s current and any future facilities may require regular or periodic maintenance, upgrading, expansion, refurbishment or improvement. Any unexpected operation or mechanical failure, including failure associated with breakdowns and forced outages, could reduce Verde’s facilities’ production capacity below expected levels, which would reduce its production capabilities and ultimately its revenues. Unanticipated capital expenditures associated with maintaining, upgrading, expanding, repairing, refurbishing, or improving Verde’s facilities may also reduce its profitability. Verde’s facilities may also be subject to unanticipated damage as a result of natural disasters, terrorist attacks and other events.
If Verde makes any major modifications to its current and any future facilities, such modifications would likely result in substantial additional capital expenditures and could prolong the time necessary to bring the facility online. Verde may also choose to refurbish or upgrade its facilities based on its assessment that such activity will provide adequate financial returns. However, such activities require time for development and capital expenditures before commencement of commercial operations, and key assumptions underpinning a decision to make sure an investment may prove incorrect, including assumptions regarding construction costs and timing, which could harm Verde’s business, financial condition, results of operations and cash flows.
The construction of new manufacturing facilities entails a number of risks and assumptions, including the ability to begin production within the cost and timeframe estimated and to attract a number of skilled workers to meet the needs of the new facility. Additionally, Verde’s assessment of the projected benefits associated with the construction of new manufacturing facilities is subject to a number of estimates and assumptions, which in turn are subject to significant economic, competitive and other uncertainties beyond Verde’s control. If Verde experiences delays or increased costs, its estimates and assumption are incorrect, or other unforeseen events occur, its business, ability to supply existing and prospective customers, financial condition, results of operations and cash flows could be adversely impacted.
Finally, Verde may not be successful or efficient in developing or implementing new production processes. Innovation in production processes involves significant expense and carries inherent risks, including difficulties in designing and developing new process technologies, development and production timing delays, lower than anticipated manufacturing yields, and product defects. Disruptions in the production process can also result from errors, defects in materials, delays in obtaining or revising operating permits and licenses, returns of product from existing and prospective customers, interruption in Verde’s supply of materials or resources, and disruptions at Verde’s facilities due to accidents or maintenance issues, all of which could affect the timing and production ramps and yields. Production issues can lead to increased costs and may affect Verde’s ability to meet product demand, which could adversely impact its business and results from operations.
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Verde may not be successful in finding future strategic partners for continuing development of additional feedstock opportunities or tolling and downstream conversion of Verde’s products.
Verde may seek to develop additional strategic partnerships to increase feedstock supply due to manufacturing constraints or capital costs required to develop Verde’s products. For example, Braskem is currently the only supplier of biobased polyethylene, and is expected to be the only supplier of biobased polypropylene, which Braskem expects to begin manufacturing in the next several years. However, Verde expects additional suppliers of green polyethylene to enter the market and begin production and manufacture of green polyethylene in the next several years, for example, Dow Chemical, which would increase the supply and availability of green polyethylene in the market. Verde may not be successful in its efforts to establish such additional strategic partnerships.
If Verde is unable to reach additional agreements with suitable feedstock suppliers on a timely basis, on acceptable terms, or at all, Verde may be unable to obtain needed raw materials in sufficient quantities, or on economic terms, in a timely manner, or at all, and may have to limit its planned production capacity beyond its five year plan or fund bioplastic olefin capacity to toll Verde’s own bioplastic feedstocks necessary to make PolyEarthylene. For example, Verde has developed a strategic relationship with Braskem for biobased polyethylene as well as biobased polypropylene and may enter into a long-term supply agreement with Braskem for such raw materials in the future. However, there can be no assurances that Braskem will be willing or able to supply Verde with sufficient product in the absence of a definitive agreement. A lack of availability of the raw materials provided by Braskem could result in Verde’s products having a lower biobased content, which could make PolyEarthylene much less attractive as an alternative to traditional plastics and have a material adverse impact on Verde’s product sales and revenues.
If Verde elects to fund development or commercialization activities on its own, Verde may need to obtain additional expertise and additional capital, which may not be available to Verde on acceptable terms or at all. If Verde fails to enter into additional feedstock offtake agreements and does not have sufficient funds or expertise to undertake the necessary development and commercialization activities, Verde may not be able to develop additional products and its business, financial condition, results of operations and prospects may be materially affected.
Verde may rely heavily on future collaborative and supply chain partners.
Verde has entered into, and may enter into, strategic partnerships to develop and commercialize its PolyEarthylene resins to accomplish one or more of the following:
• obtain capital, equipment and facilities;
• obtain funding for commercialization activities;
• obtain expertise in relevant markets;
• obtain access to raw materials;
• obtain sales and marketing services or support; and/or
• obtain conversion services and other supply chain support.
Verde may not be successful in establishing or maintaining suitable partnerships, and it may not be able to negotiate collaboration agreements having terms satisfactory to Verde, or at all. Failure to make or maintain these arrangements or a delay or failure in a collaborative partner’s performance under any such arrangements could harm Verde’s business and financial condition.
Climate change may impact the availability of Verde’s facilities and, in addition, Verde may incur substantial costs to comply with climate change legislation and related regulatory initiatives.
Changing weather patterns and natural disasters could cause disruptions or the complete loss of Verde’s facilities. In addition, climate change concerns, and changes in the regulation of such concerns, including greenhouse gas emissions, could also subject Verde to additional costs and restrictions, including increased energy and raw materials costs which could negatively impact Verde’s financial condition and results of operations. The effects of climate change can have an adverse effect not only to Verde’s operations, but also that of its suppliers and existing and prospective customers, and can lead to increased regulations and changes in consumer preferences, which could adversely affect Verde’s business, results of operations, and financial condition.
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Risks Related to Government Regulation and Legal Compliance
Compliance with extensive environmental, health and safety laws could require material expenditures, changes in Verde’s operations or site remediation.
Verde’s operations are subject to environmental, health and safety laws and regulations at the international, national, state and local level in multiple jurisdictions. These laws and regulations govern, among other things, air emissions, wastewater discharges, solid and hazardous waste management and disposal, occupational health and safety, including dust and noise control, site remediation programs and chemical use and management. Many of these laws and regulations have become more stringent over time and the costs of compliance with these requirements may increase, including costs associated with any necessary capital investments. In addition, Verde’s facilities will require operating permits that are subject to renewal and, in some circumstances, revocation. The necessary permits may not be issued or continue in effect, and renewals of any issued permits may contain significant new requirements or restrictions. The nature of the specialty chemicals industry exposes Verde to risks of liability due to the use, management and storage of materials that are heavily regulated or hazardous and can cause contamination or personal injury or damage if released into the environment.
Compliance with environmental laws and regulations generally increases the costs of transportation and storage of raw materials and finished products, as well as the costs of storage and disposal of wastes. Verde may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in Verde’s operations for violations arising under environmental laws, regulations or permit requirements. In addition, the market for bioplastics is heavily influenced by applicable federal, state and local government laws, regulations and policies as well as public perception. For example, some states, such as California, have implemented stringent prohibition and regulation on the facilitation of sales and marketing that utilize the word “biodegradable” for single use products sold in California or other implied degradable terms. Such prohibition and regulation may impact Verde’s ability to convey one of the greatest unique selling points of its products despite the fact that its resins degrade in several years as opposed to several hundred years. Changes in these laws, regulations and policies or how these laws, regulations and policies are implemented and enforced could cause the demand for bioplastics to decline and deter investment in the research and development of bioplastics. Concerns associated with bioplastics, including land usage, national security interests, deforestation, food crop usage and other environmental concerns, continue to receive legislative, industry and public attention. This attention could result in future legislation, regulation and/or administrative action that could adversely affect Verde’s business.
Furthermore, petrochemical products, including plastic, have recently faced increasingly negative public sentiment and scrutiny. In addition, state and local governments have increasingly proposed, or in some cases implemented, restrictions or bans on plastic-based products, including single-use plastics, plastic straws and utensils. Notwithstanding the fact that Verde’s products are intended to address many of the concerns regarding traditional petroleum-based plastics, increased regulation of, or prohibition on, the use of plastics generally, as well as negative public sentiment regarding such products, could increase the costs incurred by Verde’s existing and prospective customers to use such products or otherwise limit the use of these products, and could lead to a decrease in demand for the products Verde makes or an increase in the cost of production of such products. Such a decrease in demand could adversely affect Verde’s business, operating results and financial condition.
Verde may be subject to product liability claims that may not be covered by insurance and could require Verde to pay substantial sums.
If Verde is successful in marketing and selling its products, it will become subject to an inherent risk of, and adverse publicity associated with, product liability and other liability claims, whether or not such claims are valid. Verde has product liability insurance coverage in amounts and scope that it believes to be adequate. However, product liability insurance may not be available on commercially acceptable terms, or at all. Even if such insurance is available, product liability or other claims may exceed Verde’s insurance coverage limits. A successful product liability claim that exceeds Verde’s insurance coverage limits could require Verde to pay substantial sums and could have a material adverse effect on Verde.
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Verde’s operating plan may require it to source feedstock and supplies internationally, and foreign currency exchange rate fluctuations and changes to international trade agreements, tariffs, import and excise duties, taxes or other governmental rules and regulations could adversely affect Verde’s business, financial condition, results of operations and prospects.
Verde’s expansion model is global and Verde may need to source feedstock and supplies from suppliers around the world. The U.S. federal government or other governmental bodies may propose changes to international trade agreements, tariffs, taxes and other government rules and regulations. If foreign currency exchange rates fluctuate or any restrictions or significant increases in costs or tariffs are imposed related to feedstock and supplies sourced to Verde’s facilities as a result of amendments to existing trade agreements or otherwise, this may increase Verde’s supply and shipping costs, resulting in potential decreased margins.
Verde may expand its operations to countries with unstable governments that are subject to instability, corruption, changes in rules and regulations and other potential uncertainties that could harm Verde’s business, financial condition, results of operations and prospects. The extent to which Verde’s margins could decrease in response to any future tariffs is uncertain. Verde continues to evaluate the impact of trade agreements, as well as foreign currency exchange rate fluctuations and other recent changes in foreign trade policy on its supply chain, costs, sales and profitability.
From time to time, Verde may be involved in litigation, regulatory actions or government investigations and inquiries, which could have an adverse impact on Verde’s profitability and financial position.
Verde may be involved in a variety of litigation, other claims, suits, regulatory actions or government investigations and inquiries and commercial or contractual disputes that, from time to time, are significant.
In addition, from time to time, Verde may also be involved in legal proceedings and investigations arising in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with existing and prospective customers, former employees and suppliers, intellectual property matters, personal injury claims, environmental issues, tax matters, and employment matters. It is difficult to predict the outcome or ultimate financial exposure, if any, represented by these matters, and there can be no assurances that any such exposure will not be material. Such claims may also negatively affect Verde’s reputation and divert management’s attention from its operations.
Verde’s business and the prices of the combined company’s common stock could suffer from negative publicity and other adverse consequences associated with recent civil and criminal charges brought against Terren Peizer, Verde’s former Executive Chairman and founder and Chairman of Acuitas Group Holdings, LLC and its successor, Humanitario, Verde’s largest stockholder, by the Securities and Exchange Commission and the United States Department of Justice.
On March 1, 2023, the U.S. Department of Justice announced charges (United States v. Terren S. Peizer, Court Docket: 2:23-CR-89) and the U.S. Securities and Exchange Commission filed a civil complaint (Securities and Exchange Commission v. Terren S. Peizer and Acuitas Group Holdings, LLC, Case No. 2:23-cv-01511) against Terren S. Peizer, Verde’s former Executive Chairman and founder and Chairman of Acuitas. The allegations relate to insider trading in the stock of an unrelated company, Ontrak, Inc. Acuitas also was named as a defendant in the SEC complaint. On June 21, 2024, Mr. Peizer was found guilty by a jury in the Central District of California of one count of securities fraud and two counts of insider trading related to his sale of Ontrak, Inc. shares. Mr. Peizer’s conviction is not yet final, and he plans to appeal the verdict. The SEC’s related civil action is currently stayed during the pendency of the criminal case.
Unfavorable or negative publicity faced by Verde and, following the Closing, the combined company, or those affiliated with the company, including Mr. Peizer and Acuitas, may affect public perception of the entire company. Adverse publicity and its effect on overall public perceptions of the company’s brand, or the company’s failure to respond effectively to adverse publicity, could have a material adverse effect on the company’s business. For example, any such unfavorable or negative publicity may affect, following the Closing, the public perception of the combined company and the price of the combined company’s common stock, which may make it more difficult for the company to attract and retain employees, business partners and customers, reduce confidence in the company’s products and services,
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harm investor confidence and the market price of the combined company’s common stock, and invite legislative and regulatory scrutiny. As a result, existing and prospective customers and business partners may fail to award the company additional business or may seek to cancel existing contracts or otherwise refrain from doing business with the company and direct future business to the company’s competitors, and may in the future take similar actions, and investors may be deterred from investing in or continuing to hold the combined company’s common stock. In addition, while Humanitario and Mr. Peizer have agreed to transfer all of the securities of the combined company received by them in the Merger to a voting trust upon completion of the Merger, as a result of which voting control over such securities will be exercised by an independent third-party trustee, any perception that this voting trust arrangement is not effective in shielding the business of the combined company from control or significant influence by Mr. Peizer may similarly have an adverse effect on the combined company’s business and the price of the combined company’s common stock.
If Verde experiences a significant disruption in its information technology systems, including security breaches, or if it fails to implement new systems and software successfully, its business operations and financial condition could be adversely affected.
Verde depends on information technology systems throughout Verde to, among other functions, control its manufacturing processes, process orders and bill, collect and make payments, interact with existing and prospective customers and suppliers, manage inventory and otherwise conduct business. Verde also depends on these systems to respond to prospective customer inquiries, contribute to its overall internal control processes, maintain records of its property, plant and equipment and record and pay amounts due to vendors and other creditors. The failure of Verde’s information technology systems to perform as it anticipates could disrupt Verde’s business and could result in transaction errors, processing inefficiencies and the loss of sales and customers. As Verde upgrades systems, it may also experience interruptions in service, loss of data or reduced functionality and other unforeseen material issues that could adversely impact its ability to provide quotes, take customer orders and otherwise run its business in a timely manner. As a result, Verde’s results of operations could be adversely affected.
In addition, cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in Verde’s operations or harm its reputation. Verde’s information technology systems are subject to potential disruptions, including significant network or power outages, cyberattacks, computer viruses, other malicious codes and/or unauthorized access attempts, any of which, if successful, could result in data leaks or otherwise compromise Verde’s confidential or proprietary information and disrupt its operations. Despite Verde’s efforts to protect sensitive information and comply with and implement data security measures, there can be no assurance that any controls and procedures that it has in place will be sufficient to protect Verde. Further, as cyber threats are continually evolving, Verde’s controls and procedures may become inadequate, and Verde may be required to devote additional resources to modify or enhance its systems in the future. Verde may also be required to expend resources to remediate cyber-related incidents or to enhance and strengthen its cyber security. Any such disruptions to Verde’s information technology systems, breaches or compromises of data, and/or misappropriation of information could result in violation of privacy and other laws, litigation, fines, negative publicity, lost sales or business delays, any of which could have a material adverse effect on its business, financial condition or results of operations.
Verde is subject to anti-corruption, anti-bribery, and anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject Verde to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect Verde’s business, results of operations, financial condition and reputation.
Verde is subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which Verde conducts or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act of 2010, and other anti-corruption laws and regulations. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit Verde and its officers, directors, employees, business partners, agents, representatives and third-party intermediaries from corruptly offering, promising, authorizing or providing, directly or indirectly anything of value to recipients in the public or private sector.
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Verde may leverage third parties to sell its products and conduct its business abroad. Verde, its officers, directors, employees, business partners agents, representatives and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if Verde does not explicitly authorize such activities. Verde cannot assure you that all of its officers, directors, employees, business partners, agents, representatives and third-party intermediaries will not take actions in violation of applicable law, for which Verde may be ultimately held responsible. If Verde conducts international sales and business, Verde’s risks under these laws may increase.
These laws also require companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls and compliance procedures designed to prevent any such actions. While Verde has certain policies and procedures to address compliance with such laws, it cannot assure you that none of its officers, directors, employees, business partners, agents, representatives and third-party intermediaries will take actions in violation of its policies and applicable law, for which Verde may be ultimately held responsible.
A violation of these laws or regulations could adversely affect Verde’s business, results of operations, financial condition and reputation. Verde’s policies and procedures designed to ensure compliance with these regulations may not be sufficient and Verde’s directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which Verde may be held responsible.
Any allegations or violation of anti-corruption, anti-bribery, anti-money laundering or financial and economic sanction laws could subject Verde to whistleblower complaints, adverse media coverage, investigations, settlements, prosecutions, enforcement actions, fines, damages, loss of export privileges, and severe administrative, civil and criminal sanctions, suspension or debarment from government contracts, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect Verde’s business, results of operations, prospects, financial condition and reputation. Responding to any investigation or action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees.
Risks Related to Verde’s Intellectual Property
Verde may not be able to protect adequately its intellectual property assets, which could adversely affect its competitive position and reduce the value of its products, and litigation to protect its intellectual property assets may be costly.
Verde’s commercial success may depend in part on its ability to protect its intellectual property for technologies and products it develops, to preserve trade secrets and to operate without infringing the proprietary rights of others. There can be no assurance that any intellectual property that Verde owns, obtains or files or is able to obtain or license from third parties will afford any competitive advantages or will not be challenged or circumvented by third parties. Furthermore, there can be no assurance that others will not independently develop similar technologies or duplicate any technology developed by Verde.
Third parties may claim that Verde infringes on their proprietary rights and may prevent Verde from commercializing and selling its products.
There has been substantial litigation in the manufacturing industry with respect to the manufacture, use, and sale of new products. These lawsuits often involve claims relating to the validity of patents and alleged infringement of patents or proprietary rights of third parties. Verde may be required to defend against claims relating to the alleged infringement of patent or proprietary rights of third parties.
Litigation initiated by a third-party claiming patent invalidity or infringement could:
• require Verde to incur substantial litigation expense, even if it is successful in the litigation;
• require Verde to divert significant time and effort of its management;
• result in the loss of Verde’s rights to develop, manufacture or market its products; and
• require Verde to pay substantial monetary damages or royalties in order to license proprietary rights from third parties or to satisfy judgments or to settle actual or threatened litigation.
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Although patent and intellectual property disputes within the bioplastics industry have often been settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and could include the long-term payment of royalties. Furthermore, the required licenses may not be made available to Verde on acceptable terms. Accordingly, an adverse determination in a judicial or administrative proceeding or a failure to obtain necessary licenses could prevent Verde from manufacturing and selling its products or increase its costs to market its products.
Verde relies primarily on trade secrets and know-how to protect its technology, and its failure to obtain or maintain trade secret protection could limit its ability to compete.
Verde relies on trade secrets and know-how to protect some of its technology and proprietary information, especially where Verde believes patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. Litigating a claim that a third party had illegally obtained and was using Verde’s trade secrets would be expensive and time consuming, and the outcome would be unpredictable. Moreover, if Verde’s competitors independently develop similar knowledge, methods and know-how, it will be difficult for it to enforce its rights and its business could be harmed.
Risks Related to Verde’s Business
Verde’s management has limited experience operating as a public company.
Verde’s executive officers have limited experience in the management of a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Verde’s management team may not successfully or efficiently manage its transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from Verde’s management team and could divert their attention away from the day-to-day management of its business and its research and development efforts, which could materially adversely affect Verde’s business, financial condition and operating results. Further, Verde may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. As a result, Verde may be required to pay higher outside legal, accounting, insurance or consulting costs than its competitors, which would put it at a disadvantage relative to competitors.
Verde depends on its team, and Verde’s business would suffer if it fails to retain its key personnel and attract additional highly skilled employees.
Verde depends greatly on its executive officers and other key employees. This may present particular challenges as Verde operates in a highly specialized industry sector, which may make replacement of its executive officers and other key employees difficult. A loss of Verde’s executive officers or other key employees, or their failure to satisfactorily perform their responsibilities, could have an adverse effect on Verde’s business, financial condition, results of operations and prospects.
Verde’s future success will depend, in part, upon its ability to identify, hire, develop, motivate and retain additional skilled personnel, which will require substantial additional funds. Trained and experienced personnel are in high demand and may be in short supply. Many of the companies that Verde competes with for experienced employees have greater resources than it and may be able to offer more attractive terms of employment. In addition, Verde invests significant time and expense in training employees, which increases their value to competitors that may seek to recruit them. There can be no assurance that Verde will be able to find, attract and retain additional qualified employees, directors, and advisors having the skills necessary to operate, develop and grow its business. Verde’s inability to hire qualified personnel, the loss of services of any of its executive officers, or the loss of services of other key employees, or advisors that may be hired in the future, may have a material and adverse effect on Verde’s business.
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Risks Related to the Combined Company
Risks Related to the Ownership of the Common Stock of the Combined Company
Upon completion of the Merger, the combined company will have limited cash or other liquid assets, and will need to complete one or more financings to execute on its business plan.
The combined company will have limited cash upon completion of the Merger. As a result, the combined company will need to raise significant additional capital to execute on its business plan, including Verde’s plans to lease additional warehousing space to support the planned increased manufacturing capacity at the Fullerton Facility and Verde’s plans to lease and buildout a new large volume manufacturing facility expected to be located in the Midwestern or Southwestern United States, as discussed elsewhere in this proxy statement/prospectus. There can be no assurance that Nxu, Verde or the combined company will be able to successfully raise new capital in connection with or following the Merger, or the terms of which any such capital, if available, might be able to be raised. If Nxu, Verde or the combined company do not raise sufficient proceeds in connection with the Merger and/or any subsequent financing, the combined company will need to raise additional financing through other sources after the Merger and/or generate sufficient revenues from product sales to build out its capacity. Verde believes that it would be possible, based on its current production capacity and by achieving additional product sales using that existing capacity, for Verde to be able to sustain its operations for at least the next 12 months. However, given that Verde has only generated minimal revenues from a very small number of customers to date, there can be no assurance that Verde will be able to achieve additional product sales or that its existing capacity would be sufficient to meet its production requirements.
Each of Nxu’s and Verde’s financial statements included elsewhere in this proxy statement/prospectus include explanatory paragraph describing the existence of substantial doubt about Nxu’s and Verde’s respective ability to continue as a going concern within one year after the date of Nxu’s and Verde’s respective financial statements. The pro forma balance sheet included elsewhere in this proxy statement/prospectus shows a pro forma cash position of the combined company of $5.5 million and total current assets of $6.6 million as of September 30, 2024, which pro forma amounts do not reflect expenditures of cash and other liquid resources subsequent to September 30, 2024 or that will be required to be made in the future or the payment of significant expenses being incurred in connection with the Merger and in connection with ongoing operations that will need to be paid by the combined company. Accordingly, the combined company’s ability to continue as a going concern in the near term will likely depend on the combined company’s ability to raise meaningful additional capital within the immediate term following completion of the Merger.
Nxu, Verde or the combined company may seek to raise additional cash through a combination of public and private equity offerings, debt financings or other financing transactions, sales of certain of Verde’s products or inventory, and collaborations, strategic alliances or partnerships. However, there can be no assurances that Nxu, Verde or the combined company will be able to raise additional capital or obtain adequate funds when and if needed or on acceptable terms. The failure of Nxu, Verde or the combined company to realize sufficient funds in connection with the Merger and/or any subsequent financing, to obtain new customers or generate sufficient revenues from product sales to existing and new customers, or to raise any other needed financing in the future, may require Verde to delay, limit or reduce its costs, delay or postpone leasing and buildout of its proposed new facility, and otherwise curtail its business and operations, any of which would likely have a material adverse effect on Verde’s business, results of operations and financial condition.
To the extent that Nxu, Verde or the combined company raise additional funds in connection with or after the Merger through the sale of equity or debt securities, (i) it may incur fees associated with such issuance, (ii) its existing stockholders will experience dilution from the issuance of new equity securities, (iii) it may incur ongoing interest expense and be required to grant a security interest in its assets in connection with any debt issuance and (iv) the new equity or debt securities may have rights, preferences and privileges senior to those of its existing stockholders. Debt financing and preferred equity financing, if available, may also involve agreements that include covenants limiting or restricting Nxu’s, Verde’s or the combined company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. In addition, utilization of Nxu’s, Verde’s or the combined company’s net operating loss and research and development credit carryforwards may be subject to significant annual limitations under Section 382 of the Code due to ownership changes resulting from future equity
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financing transactions. If Nxu, Verde or the combined company raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies or grant licenses on terms that are not favorable to Nxu, Verde or the combined company. In the event Nxu, Verde or the combined company is unable to obtain additional financing, the combined company may be unable to successfully implement its business plan, which could have a material and adverse impact on its business, including you losing your entire investment.
Upon or following completion of the Merger, failure by the combined company to comply with the initial listing standards or continued listing standards of Nasdaq will prevent its stock from being listed on Nasdaq or may result in delisting from Nasdaq.
Upon completion of the Merger, the combined company, under the name “Verde Bioresins, Corp.” will be required to meet the initial listing requirements to maintain the listing and continued trading of its shares on Nasdaq, including the minimum bid price requirement, minimum market value of publicly held shares and the minimum round lot requirement. These initial listing requirements are more difficult to achieve than the continued listing requirements. Pursuant to the Merger Agreement, Nxu agreed to use its reasonable efforts to cause the shares of Nxu common stock issued in the Merger to be approved for listing on Nasdaq on or prior to the Closing Date, although such condition may be waived in writing by Nxu and Verde. For more information, see the section titled “THE MERGER — Nasdaq Stock Market Listing’’ on page 126 of this proxy statement/prospectus. Based on information currently available to Nxu, Nxu anticipates that, at the closing, its stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement, which requires the combined company to maintain a minimum bid price of $4.00 per share over a 30-day trading period prior to listing, unless it effects a reverse stock split. The Nxu board of directors intends to effect a reverse stock split of the shares of Nxu common stock at a ratio of no less than 1-for-5 and no greater than 1-for-20. In addition, often times a reverse stock split will not result in a trading price for the affected common stock that is proportional to the ratio of the split. If the combined company fails to meet the initial listing requirements of Nasdaq and Nxu and Verde choose to close the Merger without Nasdaq’s approval, Nasdaq may notify the combined company that its shares of common stock will not be listed on Nasdaq. Additionally, even if the combined company is able to comply with initial listing standards of Nasdaq, there can be no assurance that the combined company will be able to thereafter maintain compliance with the continued listing standards of Nasdaq. In the event of such failure to satisfy continued listing standards, if the combined company is unable to regain compliance with the continued listing standards, Nasdaq may notify the combined company of the delisting of its common stock from Nasdaq. The combined company may appeal the determination to a hearings panel, which will stay the delisting action pending a panel decision. If the combined company does not appeal the determination, its common stock will be delisted. Any potential suspension of the shares of common stock from Nasdaq would likely result in decreased liquidity and increased volatility for the combined company’s common stock and would adversely affect the combined company’s ability to raise additional capital or to enter into strategic transactions. Any potential suspension of the shares of common stock from Nasdaq would also make it more difficult for stockholders to sell the combined company’s common stock in the public market.
If the common stock of the combined company cannot be listed on Nasdaq or upon a potential delisting from Nasdaq, if the common stock of the combined company is not then eligible for quotation on another market or exchange, trading of the shares could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of the common stock of the combined company, which may make it more difficult for stockholders to buy and sell shares; decreases in institutional and other investor demand for the shares, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute trades in the common stock of the combined company. Also, it may be difficult for the combined company to raise additional capital if the combined company’s common stock is not listed on a major exchange. The occurrence of any of these events could result in a further decline in the market price of the common stock of the combined company and could have a material adverse effect on the combined company.
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The market price of the combined company’s common stock is expected to be volatile, and the market price of the combined company’s common stock may drop following the Merger.
The market price of the combined company’s common stock following the Merger could be subject to significant fluctuations. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:
• if the combined company fails to raise an adequate amount of capital to fund its operations and continued growth of its business;
• failure to meet or exceed financial and operational forecasts, projections and targets the combined company included in this proxy statement/prospectus or that the combined company may otherwise provide to the public;
• failure to meet or exceed the financial and operational forecasts, projections and targets or other expectations of the investment community;
• if the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts;
• announcements of significant acquisitions, strategic collaborations, joint ventures or capital commitments by the combined company or its competitors;
• actions taken by regulatory agencies with respect to the combined company’s products, manufacturing process or sales and marketing terms;
• disputes or other developments relating to proprietary rights, including patents, litigation matters, and the combined company’s ability to obtain patent protection for its technologies;
• additions or departures of qualified personnel;
• significant lawsuits, including patent or stockholder litigation;
• if securities or industry analysts do not publish research or reports about the combined company’s business, or if they issue adverse or misleading opinions regarding its business and stock;
• changes in the market valuations of similar companies;
• general market or macroeconomic conditions or market conditions in the combined company’s sector;
• sales of securities by the combined company or its stockholders in the future;
• trading volume of the combined company’s common stock;
• announcements by competitors of new commercial products, significant contracts, commercial relationships or capital commitments;
• adverse publicity relating to products, including with respect to other products in such markets;
• the introduction of technological innovations that compete with the products and services of the combined company;
• period-to-period fluctuations in the combined company’s financial results; and
• general economic, industry and market conditions, such as those caused by the ongoing conflict between Russia and Ukraine, the war between Israel and Hamas, inflation and fluctuations in interest rates.
Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock. In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the combined company’s business and the value of its common
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stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies. Furthermore, market volatility may lead to increased shareholder activism if the combined company experiences a market valuation that activists believe is not reflective of its intrinsic value. Activist campaigns that contest or conflict with the combined company’s strategic direction or seek changes in the composition of its board of directors could have an adverse effect on the combined company’s operating results and financial condition.
Following the Merger, the combined company may be unable to integrate successfully the businesses of Nxu and Verde and realize the anticipated benefits of the Merger.
The Merger involves the combination of two companies which currently operate as independent companies. Following the Merger, the combined company will be required to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the Merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounter in the integration process include the following:
• the inability to successfully combine Nxu’s business of developing electronic vehicle charging technologies, including its NxuOne™ charging system, with Verde’s business of bioplastics production, including the development and manufacture of its PolyEarthylene bioresins, in a manner that permits the combined company to achieve the anticipated benefits from the Merger, which would result in the anticipated benefits of the Merger not being realized partly or wholly in the time frame currently anticipated or at all;
• the failure to successfully integrate Verde’s technologies and processes into Nxu’s electronic vehicle charging technologies;
• the inability to devote significant management attention and resources to coordinating Nxu’s and Verde’s lines of business and operations and the failure to operate two lines of business within the combined company;
• creation of uniform standards, controls, procedures, policies and information systems; and
• potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Merger.
In addition, Nxu and Verde have operated and, until the completion of the Merger, will continue to operate, independently. It is possible that the integration process also could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect the combined company’s ability to maintain its relationships with customers, suppliers and employees or the ability to achieve the anticipated benefits of the Merger, or could otherwise adversely affect the business and financial results of the combined company.
The combined company will incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.
The combined company will incur significant legal, accounting and other expenses in connection with this transaction and as a public company. The combined company’s management team will consist of the executive officers of Verde prior to the Merger, most of whom have no experience managing and operating a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise related to public company reporting requirements and compliance with applicable laws and regulations to ensure that the combined company complies with all of these requirements. These reporting requirements, rules and regulations, coupled with the potential litigation exposure associated with being a public company, could also make it more difficult for the combined company to attract and retain qualified persons to serve on the board of directors or on board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.
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Following the Closing, the combined company will continue to be an “emerging growth company” and a “smaller reporting company,” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make the combined company’s common stock less attractive to investors.
Following the Closing, the combined company will continue to be an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The combined company may remain an EGC until December 31, 2027, although if the market value of the combined company’s common stock that is held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if the combined company has annual gross revenues of $1.235 billion or more in any fiscal year, the combined company would cease to be an EGC as of December 31 of the applicable year. The combined company also would cease to be an EGC if the combined company issues more than $1.0 billion of non-convertible debt over a three-year period. For so long as the combined company remains an EGC, the combined company is permitted and intends to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:
• not being required to comply with the auditor attestation requirements in the assessment of the combined company’s internal control over financial reporting;
• not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
• reduced disclosure obligations regarding executive compensation; 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.
Even after the combined company no longer qualifies as an emerging growth company, the combined company may continue to qualify as a smaller reporting company, which would allow the combined company to take advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in the combined company’s periodic reports and proxy statements. In addition, if the combined company is a smaller reporting company with less than $100 million in annual revenue, the combined company would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
The combined company cannot predict whether investors will find the combined company’s common stock less attractive if the combined company relies on these exemptions. If some investors find the combined company’s common stock less attractive as a result, there may be a less active trading market for the combined company’s common stock and the combined company’s stock price may be more volatile.
In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. The combined company intends to take advantage 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 combined company will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that the combined company either irrevocably elects to “opt out” of such extended transition period or no longer qualifies as an EGC. The combined company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
The projections and forecasts presented in this proxy statement/prospectus may not be an indication of the actual results of the Merger or the combined company’s future results.
This proxy statement/prospectus contains projections and forecasts prepared by management of Verde. None of the projections and forecasts included in this proxy statement/prospectus have been prepared with a view toward public disclosure other than to certain parties involved in the Merger or toward complying with SEC guidelines or GAAP. When considering the projections and forecasts contained in this proxy statement/prospectus, Verde has a lengthy sales cycle and Verde has encountered in the past, and expects that it will encounter in the future, delays in adding new customers and realizing revenues from those customers. These delays in the past have caused Verde to need to revise its forecasts and push out its revenue forecasts, and there can be no assurances that Verde’s current estimates as to when customers will be added and the amount and timing of revenue Verde will realize from those customers will provide to
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be accurate. In addition, Verde’s projections and forecasts assume that Verde will be able to raise significant additional capital following completion of the Merger. The ability to raise significant additional capital on a timely basis and on reasonable terms will be critical to Verde’s ability to increase its production capacity, which assumed increased production capacity is also a key variable in Verde’s ability to meet its projections and forecasts. Verde’s forecasts can be affected by many variables, including the prospective customer’s due diligence and product revaluation process and timeline, the timing of completion of the Merger, the timely availability of capital to Verde on reasonable terms to allow Verde to build out its manufacturing and warehouse capacity (including significant additional capital Verde will need to raise following completion of the Merger for this purpose) and many other factors, many of which are outside Verde’s control. As a result, investors should not place undue reliance on Verde’s forecasts and projections with respect to future revenue, including those included in this proxy statement/prospectus.
The combined company’s actual financial position and operations after the Merger may differ materially from the unaudited pro forma financial data included in this proxy statement/prospectus.
The unaudited pro forma financial data for Nxu and Verde included in this proxy statement/prospectus are presented for illustrative purposes only and is not necessarily indicative of the combined company’s actual financial condition or results of operations of future periods, or the financial condition or results of operations that would have been realized had the entities been combined during the periods presented. The combined company’s actual results and financial position after the Merger may differ materially and adversely from the unaudited pro forma financial data included in this proxy statement/prospectus. In addition, the exchange ratio reflected in this proxy statement/prospectus was prepared using various assumptions, as described therein. The final exchange ratio could differ materially from the preliminary exchange ratio used to prepare the pro forma adjustments. For more information see the section titled “SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION” beginning on page 85 of this proxy statement/prospectus.
Provisions that will be in the combined company’s certificate of incorporation and by-laws and provisions under Delaware law could discourage, delay or prevent an acquisition of the combined company, which may be beneficial to its stockholders, and may prevent attempts by its stockholders to replace or remove its management.
Provisions that will be included in the combined company’s certificate of incorporation and by-laws may discourage, delay or prevent a merger, acquisition or other change in control of the combined company that stockholders may consider favorable, including transactions in which its common stockholders might otherwise receive a premium price for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of the combined company’s common stock, thereby depressing the market price of its common stock. In addition, because the combined company’s board of directors will be responsible for appointing the members of the combined company’s management team, these provisions may frustrate or prevent any attempts by the combined company’s stockholders to replace or remove its current management by making it more difficult for stockholders to replace members of the combined company’s board of directors. Among other things, these provisions:
• establish a classified board of directors such that only one of three classes of directors is elected each year;
• allow the authorized number of the combined company’s directors to be changed to any number less than nine only by resolution of its board of directors;
• limit the manner in which stockholders can remove directors from the combined company’s board of directors;
• establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and for nominations to the combined company’s board of directors;
• limit who may call stockholder meetings;
• prohibit actions by the combined company’s stockholders by written consent;
• require that stockholder actions be effected at a duly called stockholders meeting;
• authorize the combined company’s board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by the combined company’s board of directors; and
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• require the approval of the holders of at least two-thirds of the votes that all combined company stockholders would be entitled to cast to amend or repeal certain provisions of the combined company’s certificate of incorporation or by-laws.
Moreover, because the combined company is incorporated in Delaware, it is governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns 15% or more of the combined company’s outstanding voting stock from merging or combining with the combined company for a period of three years after the date of the transaction in which the person acquired 15% or more of the combined company’s outstanding voting stock, unless the merger or combination is approved in a manner prescribed by the statute.
The certificate of incorporation and bylaws of the combined company will provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers or other employees.
The certificate of incorporation and bylaws of the combined company will provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on the combined company’s behalf, any action asserting a breach of fiduciary duty owed by, or any other wrongdoing by, any current or former director, officer, or other employee or stockholder of the combined company, any action asserting a claim against it arising pursuant to any provisions of the DGCL, its certificate of incorporation or its bylaws, or any action asserting a claim against it that is governed by the internal affairs doctrine. The exclusive forum provision does not apply to actions arising under the Exchange Act. The certificate of incorporation will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers or other employees, which may discourage such lawsuits against the combined company and its directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the certificate of incorporation and bylaws to be inapplicable or unenforceable in an action, the combined company may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect its business, financial condition and results of operations.
Nxu and Verde do not anticipate that the combined company will pay any cash dividends in the foreseeable future.
Nxu has never paid any cash dividends to its stockholders. The current expectation is that the combined company will retain its future earnings, if any, to fund the growth of the combined company’s business as opposed to paying dividends. As a result, capital appreciation, if any, of the common stock of the combined company will be your sole source of gain, if any, for the foreseeable future.
An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.
Prior to the Merger, there had been no public market for shares of Verde capital stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active market for the combined company’s common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.
Future sales of shares by existing stockholders or the PIPE Investors, or the market’s expectation of such sales, could cause the combined company’s stock price to decline. In addition, sales of shares by the PIPE Investors prior to the Reset Date with respect to the PIPE Warrants may affect the price of the Nxu Class A common stock in a manner that increases the dilutive effect of the PIPE Warrants and reduces the percentage of ownership of the combined company to be held by pre-Private Placement Nxu stockholders.
If existing stockholders of Nxu or Verde sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market, including after legal restrictions on resale discussed in this proxy statement/prospectus lapse, the trading price of the common stock of the combined company could decline. Based
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on shares outstanding as of December 2, 2024 and shares expected to be issued upon completion of the Merger (but not including any shares of Nxu Class A common stock issued in the Private Placement or shares of Nxu Class A common stock issuable upon exercise of any PIPE Warrants, all of which will be automatically exercised concurrently with the Merger to the extent not previously exercised), the combined company would have outstanding a total of approximately 418,538,541 shares of common stock immediately following completion of the Merger, including the contemplated the exercise of all outstanding Verde options prior to the Closing. Of these shares of common stock, approximately 392,895,848 shares will be held by Humanitario, Verde’s largest stockholder. While Humanitario has agreed to the restriction on sales of such shares with Nxu and Verde as described elsewhere in this proxy statement/prospectus, all of these shares will be available for sale in the public market beginning 180 days after the Closing. Any such sales by Humanitario would be subject to various registration requirements given Humanitario’s status as an affiliate of Verde, however, Verde will enter into a registration rights agreement with Humanitario — see “AGREEMENTS RELATED TO THE MERGER — Registration Rights Agreement” on page 147 of this proxy statement/prospectus — that will afford Humanitario the right to cause Verde to register certain sale transactions that Humanitario may seek to effect. If Humanitario were to seek to effect any such sale of shares of common stock, or if the market were to perceive that Humanitario were to desire to do so, it could cause the trading value of the combined company’s stock price to decline. In addition, all shares not held by affiliates of the combined company, will be freely tradable, without restriction, in the public market. In addition, shares of common stock that are subject to outstanding options of Verde will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act. If these shares are sold, the trading price of the combined company’s common stock could decline.
In addition, in connection with the Private Placement, Nxu also entered into a registration rights agreement with the PIPE Investors requiring Nxu to register the resale of the Purchased Shares and the shares of Nxu Class A common stock issuable upon exercise of the PIPE Warrants under a resale registration statement. On December 30, 2024, Nxu filed a registration statement on Form S-1 (File No. 333-284086) to register for resale by the PIPE Investors up to 114,503,816 shares of Nxu Class A common stock, consisting of (1) 6,800,000 Purchased Shares, (2) 5,200,000 shares of Nxu Class A common stock issuable upon exercise of the Pre-Funded Warrants, (3) up to 57,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series A Warrants, and (4) up to 45,251,908 shares of Nxu Class A common stock issuable upon exercise of the Series B Warrants. Sales of common stock by the PIPE Investors, or the perception that such sales may occur, could also cause the trading value of the combined company’s stock price to decline. In addition, any sales of common stock by the PIPE Investors prior to the Reset Date with respect to the PIPE Warrants could impact the price of Nxu’s Class A common stock in a manner that results in additional dilution to Nxu stockholders pursuant to the reset provisions of the Series A and Series B warrants, which additional dilution may be significant, and which additional dilution may further reduce the percentage ownership of Nxu pre-Private Placement stockholders in the combined company, since all dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders.
After completion of the Merger, Verde’s stockholders will own approximately 95% of the combined company’s stock, and these stockholders and the combined company’s executive officers, directors and principal stockholders may have the ability to control or significantly influence matters submitted to the combined company’s stockholders for approval. In addition, as a result of the Voting Trust Agreement to be entered into by Verde’s largest stockholder, stockholders who own a significant portion of the shares of the combined company’s common stock not held by affiliates of the combined company may be able to exercise significant control or influence over matters put to stockholders for approval.
Upon the completion of the Merger, it is anticipated that Verde’s stockholders will, in the aggregate, beneficially own approximately 95% of the combined company’s outstanding shares of common stock, subject to certain assumptions. As a result, these stockholders may be able to control or significantly influence all matters submitted to the combined company’s stockholders for approval, as well as the combined company’s management and affairs. In connection with the Merger, Humanitario has agreed to enter into the Voting Trust Agreement, pursuant to which, among other things, the Voting Trustee shall vote all shares of common stock of the combined company subject to the Voting Trust Agreement in favor of any vote, consent or other action in the same proportion as voted by pubic stockholders of the combined company that are not affiliates of the combined company with respect to such matter; provided, however, that the Voting Trustee shall vote all shares of common stock of the combined company in accordance with the direction of the holder of such shares with respect to certain extraordinary transactions set forth in the Voting Trust Agreement. However, there can be no assurance that the Voting Trust Agreement will be effective
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in mitigating the influence and potential for control of the combined company by Humanitario. In addition, as a result of the Voting Trust Agreement and the manner in which shares subject to the Voting Trust Agreement will be voted, stockholders who own a significant portion of the shares of the combined company’s common stock not held by affiliates of the combined company — even if it is a relatively small amount — may be able to control or significantly influence the election of directors, approval of any merger, consolidation or sale of all or substantially all of the combined company’s assets and other matters put to the combined company’s stockholders for approval. In addition, any concentration of voting power could delay or prevent an acquisition of the combined company on terms that other stockholders may desire.
The combined company may in the future become a “controlled company” within the meaning of the applicable Nasdaq rules and, as a result, the combined company may qualify for exemptions from certain corporate governance requirements. If the combined company relies on these exemptions, the stockholders of the combined company will not have the same protections afforded to stockholders of companies that are subject to such requirements.
Humanitario currently controls approximately 81.7% of the voting power of Verde’s capital stock and will control approximately 93.8% of the combined voting power of the combined company’s common stock following the consummation of the Merger. In connection with the Merger, Humanitario has agreed to enter into the Voting Trust Agreement, pursuant to which, among other things, the Voting Trustee shall vote all shares of common stock of the combined company subject to the Voting Trust Agreement in favor of any vote, consent or other action in the same proportion as voted by public stockholders of the combined company that are not affiliates of the combined company with respect to such matter. Pursuant to the terms of the Voting Trust Agreement, the Voting Trust Agreement will remain in effect until the earliest to occur of the following: (i) Terren Peizer, the sole member, Chairman and managing member of Acuitas, an affiliate of Humanitario, is sentenced to a non-custodial sentence, or finishes service of any custodial part of a sentence, based on the conviction of one count of securities fraud and two counts of insider trading, or the conversion of such charges is set aside or reversed, (ii) the fifth anniversary of the Closing Date, and (iii) such time as Humanitario and its affiliates collectively beneficially own shares of common stock of the combined company representing in the aggregate less than 10% of the total voting power of all shares of common stock of the combined company then outstanding. Following expiration of the Voting Trust Agreement, assuming Humanitario still owns more than 50% of the combined company’s common stock, Verde may be a “controlled company” within the meaning of applicable rules of Nasdaq. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that:
• a majority of the board of directors consist of independent directors;
• director nominees must be selected, or recommended for selection, by either (i) the independent directors constituting a majority of the board of directors’ independent directors or (ii) a nominations committee comprised solely of independent directors; and
• the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.
Though the combined company currently neither anticipates becoming a “controlled company,” nor taking advantage of any “controlled company” exemptions even if deemed to be a “controlled company,” if the controlled company were to be deemed to be a “controlled company” and were to elect to be exempt from some or all of these corporate governance requirements, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
The combined company will be disqualified from certain private placement safe harbor exemptions otherwise available under the federal securities laws, which may adversely affect the combined company’s ability to offer and sell its securities and raise capital in an efficient manner.
As discussed in more detail above, on June 21, 2024, Terren Peizer, Verde’s former Executive Chairman and founder of Acuitas, was found guilty by a jury in the Central District of California of one count of securities fraud and two counts of insider trading related to his sale of Ontrak, Inc. shares. As a result of Mr. Peizer’s criminal conviction, the combined company will fall within the “bad actor” disqualification provisions of Rule 506 of Regulation D under the Securities Act. These provisions ban an issuer from offering or selling securities pursuant to the safe harbor in
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Rule 506 if the issuer, or any other “covered person,” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived by the SEC. The definition of a “covered person” under the rule includes an issuer’s directors, general partners, managing members and executive officers, promoters and persons compensated for soliciting investors in the offering and any beneficial owner of 20% or more of the issuers outstanding voting equity securities.
The SEC or the court may waive such disqualification upon a showing of good cause that disqualification is not necessary under the circumstances for which the safe harbor exemptions are being denied. While the combined company may determine to seek a waiver in the future, no waiver has been sought to date. If a waiver is sought in the future, there is no assurance that the SEC would grant the waiver. Absent a waiver, the combined company will be restricted in its ability to raise capital in a private placement in reliance on Regulation D, although the combined company would remain eligible as an SEC registrant to access the capital equity markets through an SEC-registered offering or through another exemption from the registration requirements. The application of the “bad actor” disqualifications to the combined company could make capital raising more costly or inhibit the combined company’s ability to raise capital, which could have an adverse impact on the combined company’s business, financial condition and results of operations.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the combined company, its business or its market, its stock price and trading volume could decline.
The trading market for the combined company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect not to provide research coverage of the combined company’s common stock after the completion of the Merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the combined company will not have any control over the analysts or the content and opinions included in their reports. The price of the combined company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the combined company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.
The combined company will have broad discretion in the use of the cash and cash equivalents of the combined company and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.
The combined company will have broad discretion over the use of the cash and cash equivalents of the combined company. You may not agree with the combined company’s decisions, and its use of the proceeds may not yield any return on your investment. The combined company’s failure to apply these resources effectively could compromise its ability to pursue its growth strategy and the combined company might not be able to yield a significant return, if any, on its investment of these net proceeds. You will not have the opportunity to influence the combined company’s decisions on how to use its cash resources.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to the proposed reverse stock split described in the section entitled “MATTERS BEING SUBMITTED TO A VOTE OF NXU STOCKHOLDERS — PROPOSAL NO. 3 — THE REVERSE STOCK SPLIT PROPOSAL” beginning on page 156 of this proxy statement/prospectus or the Private Placement.
The following are answers to some questions that you, as a stockholder of Nxu, may have regarding the matters being considered at the Nxu special meeting. Nxu urges you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the matters being considered at the Nxu special meeting. Additional important information is also contained in the annexes to this proxy statement/prospectus.
Q: What is the Merger?
On October 23, 2024, Nxu, Verde, Merger Sub I and Merger Sub II entered into the Merger Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A. The Merger Agreement contains the terms and conditions of the proposed Merger. Pursuant to the Merger Agreement, and subject to the terms and conditions contained therein, Merger Sub I, a wholly owned subsidiary of Nxu created for purposes of the Merger, will merge with and into Verde, with Verde surviving the First Merger. Promptly following the First Merger, Verde will merge with and into Merger Sub II, with Merger Sub II surviving the Second Merger as a wholly owned subsidiary of Nxu. Upon completion of the Merger, Nxu will change its corporate name to “Verde Bioresins, Corp.” The company following the Closing is referred to herein as the “combined company.”
At the First Merger Effective Time, each outstanding share of Verde common stock issued and outstanding immediately prior to the First Merger Effective Time, other than shares of Verde common stock to be canceled pursuant to the Merger Agreement and dissenting shares, shall be canceled and shall be converted automatically into the right to receive a number of Nxu common stock equal to the exchange ratio described in more detail in the section entitled “THE MERGER AGREEMENT — Merger Consideration” beginning on page 133 of the accompanying proxy statement/prospectus.
Upon completion of the Merger, Nxu stockholders as of immediately prior to the Merger are expected to own approximately 5% of the outstanding shares of capital stock of the combined company and Verde stockholders as of immediately prior to the Merger are expected to own approximately 95% of the outstanding shares of capital stock of the combined company, assuming that Nxu’s aggregate enterprise value is approximately $16.2 million, in each case on a fully-diluted and as-converted basis. Nxu’s assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over Nxu’s cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company. Furthermore, all dilution from the Private Placement, including dilution attributable to the PIPE Warrants and the shares of Nxu Class A common stock issuable upon exercise thereof, will be absorbed by pre-Merger Nxu stockholders. See “Q: What equity stake will Nxu current stockholders hold in the combined company following the consummation of the Merger?” below.
Q: Why am I receiving this proxy statement/prospectus?
A: You are receiving this proxy statement/prospectus because you have been identified as a stockholder of Nxu as of the Record Date, and you are entitled to vote to approve the matters set forth herein. This document serves as:
• a proxy statement of Nxu used to solicit proxies for the Nxu special meeting to vote on the matters set forth herein; and
• a prospectus of Nxu used to offer shares of Nxu common stock in exchange for shares of Verde common stock in the Merger.
This proxy statement/prospectus and its annexes contain important information about the Merger Agreement and the other matters to be acted upon at the Nxu special meeting. You should read this proxy statement/prospectus, including the section titled “RISK FACTORS” beginning on page 15, and its annexes carefully and in their entirety.
Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement/prospectus and its annexes.
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Q: What will Nxu stockholders receive for their shares of Nxu Class A common stock, Nxu Class B common stock or Nxu Series B preferred stock in the Merger?
A: Nxu stockholders will generally not receive any consideration as a result of the Merger.
Certain Nxu stockholders will settle Nxu RSUs in accordance with the terms and conditions of the applicable equity award agreement.
Certain Nxu executives and stockholders may receive financing bonuses that are contingent on the combined company raising significant capital as a result of one or more post-Closing financings obtained by the combined company.
Q: What will Nxu optionholders receive for their shares of Nxu Class A common stock in the Merger?
A: Any outstanding option to acquire Nxu Class A common stock that has an exercise price that is greater than the closing price of a share of Nxu Class A common stock on the trading day immediately preceding the date of the Closing will be cancelled without payment and no longer exercisable immediately prior to the First Effective Time. Any option to acquire Nxu Class A common stock that has an exercise price that is equal to or less than the closing price of a share of Nxu Class A common stock on the trading day immediately preceding the date of the Closing will remain outstanding and exercisable subject to the terms and conditions of the applicable option award agreement and incentive plan.
Q: What will Nxu warrantholders receive for their shares of Nxu Class A common stock in the Merger?
A: Any Nxu Warrant outstanding and unexercised immediately prior to the First Merger Effective Time will remain in effect pursuant to its terms and will be unaffected by the Merger (other than the PIPE Warrants, all of which will be automatically exercised concurrently with the Merger to the extent not previously exercised). Each Nxu warrantholder (other than holders of the PIPE Warrants) will have the option to exercise any such Nxu Warrant and receive, for each warrant share that would have been issuable upon such exercise immediately prior to Closing, the same number of shares of Nxu common stock. If such Nxu warrantholder (other than holders of the PIPE Warrants) chooses not to exercise any such Nxu Warrant, the Nxu warrantholder will continue to hold onto the Nxu Warrant and it will remain outstanding.
No fractional shares of Nxu common stock will be issued in the Merger, and Nxu warrantholders will receive cash in lieu of any fractional shares of Nxu Class A common stock in the event the Nxu warrantholders exercise their options prior to Closing. Nxu Warrants (other than the PIPE Warrants) may remain outstanding after Closing.
Q: Will the common stock of the combined company trade on an exchange?
A: Shares of Nxu Class A common stock are currently listed on the Nasdaq Capital Market under the symbol “NXU.” After completion of the Merger, Nxu will be renamed “Verde Bioresins, Corp.” and it is expected that the common stock of the combined company will trade on the Nasdaq Capital Market under the symbol “VRDE.”
Q: What is being voted on at the Nxu special meeting?
A: Nxu stockholders will vote on the following proposals at the Nxu special meeting:
• Proposal No. 1, the Transaction Proposal, to approve (i) the issuance of shares of Nxu common stock, which will represent more than 20% of the shares of Nxu common stock outstanding immediately prior to the Merger, to stockholders of Verde, pursuant to the terms of the Merger Agreement, a copy of which is attached to this proxy statement/prospectus as Annex A, and (ii) the change of control of Nxu resulting from the Merger, pursuant to Nasdaq Listing Rules 5635(a) and 5635(b), respectively.
• Proposal Nos. 2 – 8, the Charter Proposals, each presented and voted on separately as required by the SEC rules, to approve and adopt certain amendments to the Nxu Charter. The full text of the Proposed A&R Charter reflecting each of the proposed amendments pursuant to the Charter Proposals is attached to this proxy statement/prospectus as Annex B.
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• Proposal No. 2, the Common Stock Declassification Proposal, to eliminate the dual class structure of the Nxu common stock such that the Nxu Class A common stock will be re-designated as Nxu “common stock” and the Nxu Class B common stock will be cancelled.
• Proposal No. 3, the Reverse Stock Split Proposal, to effect a reverse stock split of Nxu’s issued and outstanding Class A common stock at a ratio of any whole number in the range of 1-for-5 to 1-for-20, inclusive, with the final ratio to be determined in the discretion of the Nxu board of directors and as agreed to by Verde at or prior to the closing of the Merger, or in the sole discretion of the Nxu board of directors if Proposal No. 1 is not approved.
• Proposal No. 4, the Board Classification Proposal, to classify the Board of Directors of Nxu.
• Proposal No. 5, the Supermajority Stockholder Vote Proposal, to require approval by at least two-thirds of the voting power of the shares of capital stock of Nxu that would then be entitled to vote in the election of directors at an annual meeting of stockholders in order to amend Article VI (Amendment of the Bylaws), Article VIII (Board of Directors), Article XI (Consent of Stockholders in Lieu of Meeting) and Article XII (Special Meeting of Stockholders) of the Nxu Charter, as amended by the Charter Proposals.
• Proposal No. 6, the Director Removal Proposal, to amend the Nxu Charter to permit the removal of a director only for cause by the affirmative vote of at least two-thirds of the voting power of the shares of capital stock of Nxu that would then be entitled to vote in an election of directors.
• Proposal No. 7, the Officer Exculpation Proposal, to extend the provisions limiting the personal liability of directors to Nxu or its stockholders for monetary damages for breach of fiduciary duties to include Nxu’s officers.
• Proposal No. 8, the Miscellaneous Charter Proposal, to (i) update provisions governing indemnification and advancement provisions in the Nxu Charter and (ii) change the combined company’s name to “Verde Bioresins, Corp.”
• Proposal No. 9, the Equity Plan Proposal, to approve the Verde Bioresins, Corp. 2025 Equity Incentive Plan, in the form attached to this proxy statement/prospectus as Annex C.
• Proposal No. 10, the PIPE Proposal, to approve, for purposes of complying with Nasdaq Listing 5635(d), the issuance of shares of Nxu Class A common stock issuable upon exercise of the Series A Warrants and Series B Warrants pursuant to the terms of the PIPE Securities Purchase Agreement.
• Proposal No. 11, the Adjournment Proposal, if necessary, to approve the adjournment of the Nxu special meeting to a later date or dates to permit further solicitation and vote of proxies in the event that there are insufficient votes for any of the above proposals.
Q: Are the Proposals conditioned on one another?
A: Nxu may not consummate the Merger if the Transaction Proposal, each of the Charter Proposals, and the Equity Plan Proposal, being the Required Proposals, are not approved at the Nxu special meeting. Additionally, except with respect to the Reverse Stock Split Proposal and the PIPE Proposal, each of the Required Proposals are conditioned on the approval of the other Required Proposals. The Reverse Stock Split Proposal, the PIPE Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
Q: How were the transaction structure and consideration for the Merger determined?
A: The Nxu board of directors considered a number of strategic alternatives to enhance stockholder value, including a merger with Verde. After receiving introductory material from Roth Capital Partners, LLC, Nxu’s Chief Executive Officer, Mark Hanchett, met with Brian Gordon, President and Chief Operating Officer of Verde, to learn more about Verde’s technology and business. After further review and conversations, Verde and
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Nxu entered into a non-binding letter of intent and term sheet setting forth, among other things, the Merger consideration described elsewhere in this proxy statement/prospectus and various closing conditions. Please see the section entitled “THE MERGER — Background of the Merger” for additional information.
Q: What is required to consummate the Merger?
A: There are several closing conditions in the Merger Agreement, including the approval by Nxu stockholders of the Required Proposals and an accepted Nasdaq listing application for the combined company, as further discussed below:
Conditions to Each Party’s Obligations
The respective obligations of each party to the Merger Agreement to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or, if permitted by applicable law, waiver by the party whose benefit such condition exists of the following conditions:
• no prohibition by a governmental authority prohibiting or enjoining the Merger;
• this registration statement, of which this proxy statement/prospectus forms a part, becoming effective in accordance with the provisions of the Securities Act, no stop order being issued by the SEC and remaining in effect with respect to this registration statement, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending and remaining in effect with respect to this registration statement, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending;
• the combined company’s common stock having been approved for listing on Nasdaq, subject only to official notice of issuance thereof;
• the directors and officers of Nxu upon the consummation of the First Merger being appointed in accordance with the Merger Agreement;
• (a) the approval of the Transaction Proposal and the Equity Plan Proposal by a majority of the total votes cast by the Nxu stockholders at the Nxu special meeting and (b) approval of the Proposed A&R Charter at the Nxu special meeting shall have been obtained from (i) the holders of a majority of the voting power of the then-outstanding shares of capital stock of Nxu entitled to vote generally in the election of directors, voting together as a single class and (ii) holders of two-thirds of the outstanding shares of Nxu Class B common stock (collectively, the “Required Nxu Stockholder Approvals”); and
• the approval of the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger) having been obtained by the requisite number of stockholders of Verde in accordance with the DGCL and agreements between Verde and its stockholders (the “Verde Stockholder Approvals”).
Conditions to the Obligations of Nxu
The obligations of Nxu to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or, if permitted by applicable law, waiver by Nxu of the following further conditions:
• the representations and warranties of Verde contained in Sections 4.01, 4.02(a) and 4.23 of the Merger Agreement (regarding organization, standing and corporate power of Verde, the authority and approvals of Verde to, among other things, execute and deliver the Merger Agreement, and each of the ancillary documents attached thereto to which it is or will be a party and to consummate the transactions contemplated thereby, and brokers fees) being true and correct in all material respects as of the Closing Date as if made at and as of such date (or, if given as of an earlier date, as of such earlier date);
• the representations and warranties contained in Section 4.04 of the Merger Agreement (regarding the capitalization of Verde) being true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date as if made at and as of such date (or, if given as of an earlier date, as of such earlier date);
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• the other representations and warranties of Verde being true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth in the Merger Agreement) as of the Closing Date (or, if given as of an earlier date, as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, does not result in a Material Adverse Effect;
• the Voting Trust Transfer (as defined in the Merger Agreement) shall have been completed in accordance with the Verde Support Agreement;
• Nxu having received a certificate signed by an officer of Verde confirming that the conditions set forth in the first four bullet points in this section have been satisfied;
• Verde having performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Merger Agreement prior to the Closing Date;
• Nxu having received the executed counterparts to all of the Ancillary Agreements (as defined in the Merger Agreement) to which Verde, or any Verde stockholder, is party;
• Verde shall have procured that all Verde Notes shall be converted into Verde common stock (and any securities under such Verde Notes shall be released), and all Verde Warrants shall be exercised for Verde common stock, in each case in accordance with their terms as provided in the Merger Agreement; and
• no Material Adverse Effect having occurred since the date of the Merger Agreement that is continuing.
Conditions to the Obligations of Verde
The obligations of Verde to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or, if permitted by applicable law, waiver by Verde of the following further conditions:
• the representations and warranties of Nxu and the Merger Subs contained in Sections 5.01, 5.02(a), and 5.14 of the Merger Agreement (regarding organization, standing and corporate power, the authority to execute and deliver the Merger Agreement and each of the ancillary documents thereto to which it is or will be a party and to consummate the transactions contemplated thereby, and brokers) being true and correct, in all respects as of the Closing Date, as though made on and as of the Closing Date (or, if given as of an earlier date, as of such earlier date);
• the representations and warranties contained in Section 5.04 of the Merger Agreement (regarding the capitalization of Nxu and the Merger Subs) being true and correct in all respects, (except for de minimis inaccuracies) as of the Closing Date as if made at and as of such date (or, if given as of an earlier date, as of such earlier date);
• the other representations and warranties regarding Nxu and the Merger Subs being true and correct (without giving effect to any limitation of “materiality” or “Material Adverse Effect” or any similar limitation set forth in the Merger Agreement) as of the Closing, except where the failure of such representations and warranties to be true and correct, taken as a whole, does not result in a Material Adverse Effect on Nxu or NXU Technologies, LLC, a Delaware limited liability company and a wholly owned subsidiary of Nxu (“Nxu Tech”);
• Nxu having performed and complied in all material respects with the covenants and agreements required to be performed or complied with by it under the Merger Agreement;
• Verde having received a certificate signed by an officer of Nxu confirming that the conditions set forth in the first four bullet points of this section have been satisfied;
• Verde having received the executed counterparts to all of the agreements ancillary to the Merger Agreement to which Nxu is party;
• certain directors and executive officers of Nxu specified in the Merger Agreement having been removed from their respective positions or tendered their irrevocable resignations, in each case effective as of the Effective Time; and
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• Since the date of the Merger Agreement, neither Nxu nor Nxu Tech have suffered or incurred any unforeseen extraordinary liability that first arises or the consequences of which first become apparent after the date of the Merger Agreement and is not otherwise disclosed to Verde, or the consequences of which are not reasonably foreseeable as of the date of the Merger Agreement, if such liability would reasonably be expected to cause a Material Adverse Effect (as defined in the Merger Agreement) on Nxu and Nxu Tech, taken as a whole.
Q: Who will be the directors of the combined company following the Merger?
A: Immediately after the Closing, the board of directors of the combined company is expected to be comprised of six members, which will be divided into three separate classes as follows:
• Class I (term ending 2027): Mark Adler and Jeffrey Brown.
• Class II (term ending 2026): Jessica Billingsley and Cuong Do.
• Class III (term ending 2025): Brian Gordon and Michael Sherman.
It is anticipated that Michael Sherman will be designated Chairman of the board of directors of the combined company upon the Closing.
Q: Who will be the executive officers of the combined company immediately following the Merger?
A: Immediately following the Merger, the executive management team of the combined company is expected to consist of the following:
Name | | Title |
Joseph Paolucci | | Chief Executive Officer |
Brian Gordon | | President and Chief Operating Officer |
Q: What are the material U.S. federal income tax consequences of the Merger to Nxu stockholders?
A: Nxu stockholders will not sell, exchange or dispose of any shares of Nxu common stock as a result of the Merger. Thus, there will be no material U.S. federal income tax consequences to Nxu stockholders as a result of the Merger.
Q: What are the material U.S. federal income tax consequences of the Merger to Verde U.S. holders?
A: The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Assuming the Merger constitutes a reorganization, subject to the qualifications and limitations set forth in the section entitled “THE MERGER — Material U.S. Federal Income Tax Consequences of the Merger,” a Verde U.S. holder (as defined on page 149) will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of shares of Nxu common stock in exchange for shares of Verde capital stock in the Merger.
See the section entitled “THE MERGER — Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 149 of this proxy statement/prospectus for a more complete description of the material U.S. federal income tax consequences of the Merger to U.S. holders of Verde capital stock.
Q: What equity stake will Nxu current stockholders hold in the combined company immediately following the Closing of the Merger?
A: Assuming Nxu’s aggregate enterprise value is approximately $16.2 million, Nxu stockholders will retain approximately 5% of the fully diluted and fully converted capitalization of the combined company immediately following the Merger. Nxu’s assumed aggregate enterprise value will be reduced by the excess of certain lease payments remaining unpaid at the Closing over Nxu’s cash balance at the Closing, and any such reduction will decrease the ownership percentage interest of pre-Merger Nxu stockholders in the combined company. See “THE MERGER AGREEMENT — Merger Consideration” on page 133 for more information.
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Furthermore, the approximately 5% of the fully diluted and fully converted capitalization of the combined company immediately following the Merger held by pre-Merger Nxu stockholders will include the Purchased Shares and shares of Nxu Class A common stock issued upon the exercise of the PIPE Warrants. Accordingly, pre-Merger Nxu stockholders who held shares prior to the Private Placement will absorb all dilution from the Private Placement. The approximately 95% of the fully diluted and fully converted capitalization of the combined company immediately following the Merger held by pre-Merger Verde stockholders will not be diluted as a result of the Private Placement.
The following table illustrates the share numbers and ownership percentages of the combined company immediately following the Closing, assuming (A) the exercise of all PIPE Warrants and (B) that the reset price for the Series A Warrants and the Series B Warrants is equal to (i) the PIPE issuance price of $0.25, (ii) the price at the midpoint of the PIPE issuance price and the floor price, which is $0.1512, and (iii) the floor price of $0.0524. The ownership percentages reflected in the table below are based on 23,420,057 shares of Nxu Class A common stock outstanding as of December 30, 2024, which (A) assumes Nxu’s aggregate enterprise value is approximately $16.2 million, (B) includes the shares of Nxu common stock to be issued to Verde stockholders at the Closing of the Merger and (C) the shares of Nxu common stock underlying options that will be issuable to Verde optionholders at the Closing of the Merger, and (D) excludes:
• (i) 905,308 shares of Nxu Class A common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $317.36 per share;
• (ii) 103,809 shares of Nxu Class A common stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $97.93 per share;
• (iii) a maximum of 66,667 shares of Nxu Class A common stock issuable upon the conversion of outstanding Nxu convertible notes (assuming a minimum conversion price of $0.15 per share);
• (iv) 3,495,518 shares of Nxu Class A common stock issuable upon vesting of outstanding restricted stock units under Nxu’s equity incentive plan; and
• (v) 40,811,421 shares of Nxu Class A common stock reserved for issuance under Nxu’s equity incentive plan.
| | Assuming reset price is
equal to the PIPE
issuance price of $0.375 | | Assuming reset price is
equal to the PIPE
issuance price of $0.25 | | Assuming reset price is
$0.1512, the midpoint of
the PIPE issuance price
and the floor price | | Assuming reset price is the
floor price of $0.0524 |
Shares | | Percentage | | Shares | | Percentage | | Shares | | Percentage | | Shares | | Percentage |
Pre-Merger Nxu stockholders | | 36,620,057 | | 5 | % | | 34,620,057 | | 5 | % | | 56,302,597 | | 5 | % | | 131,123,873 | | 5 | % |
Pre-Private Placement Nxu Stockholders | | 16,620,057 | | 2.3 | % | | 16,620,057 | | 2.4 | % | | 16,620,057 | | 1.5 | % | | 16,620,057 | | 0.6 | % |
Private Placement Investors | | 20,000,000 | | 2.7 | % | | 18,000,000 | | 2.6 | % | | 39,682,540 | | 3.5 | % | | 114,503,816 | | 4.4 | % |
Pre-Merger Verde stockholders | | 695,781,083 | | 95 | % | | 657,781,083 | | 95 | % | | 1,069,749,343 | | 95 | % | | 2,491,353,587 | | 95 | % |
Total combined company stock outstanding | | 732,401,140 | | 100 | % | | 692,401,140 | | 100 | % | | 1,126,051,940 | | 100 | % | | 2,622,477,460 | | 100 | % |
Q: Why is Nxu proposing the amendments to the Nxu Charter as set forth in the Charter Proposals?
A: Nxu is seeking stockholder approval of proposed amendments to the Nxu Charter that are required to effectuate the Merger and that the Nxu board of directors believes are appropriate, including, among other things, to (a) eliminate the dual class structure of the Nxu common stock and effectuate a reverse stock split, (b) classify the board of directors of the Nxu board of directors, (c) require a supermajority stockholder vote in connection with certain actions under the Nxu Charter, (d) permit the removal of a director only for cause, (e) extend the provision limiting the personal liability of directors to Nxu or its stockholders for monetary damages for breach of fiduciary duties to include Nxu’s officers, (f) update provisions governing indemnification and advance
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provisions in the certificate of incorporation, and (g) change the combined company’s name to “Verde Bioresins, Corp.” Under the Nxu Charter and Delaware law, stockholder approval is required in order to effect the Charter Proposals. Please see the respective sections of each proposal for more information.
Q: Why is Nxu seeking stockholder approval of the Transaction Proposal?
A: Nxu is seeking stockholder approval in order to comply with Nasdaq Rule 5635(a) and (b) of the Nasdaq Listed Company Manual.
Under Nasdaq Rule 5635(a), stockholder approval is required prior to the issuance of securities in connection with the acquisition of another company if such securities are not issued in a public offering and (i) have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such securities (or securities convertible into or exercisable for common stock); or (ii) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities.
Because the transactions contemplated by the Merger Agreement and the related arrangements described herein may require stockholder approval due to the above limitations, Nxu is seeking stockholder approval in order to ensure that securities can be issued as required in such arrangements without violation of Nasdaq listing standards.
Q: What material factors did the Board of Directors of Nxu consider in connection with the Merger?
A: By and large, the board of directors of Nxu viewed the Merger and proposed transactions with Verde as positive. Upon deliberation, the board of directors of Nxu determined that the potential positive value of the successful completion of the transactions with Verde outweighed any negative factors. Management felt that the transaction with Verde was the best possible alternative available to enhance stockholder value and the overall value of Nxu. Management considered positive factors relating to the Merger Agreement, the Merger and the other transactions contemplated thereby including the following material factors:
• The aggregate value to be retained by Nxu’s stockholders in the combined company pursuant to the Merger.
• Challenges facing Nxu’s business.
• Nxu’s liquidity position and anticipated working capital requirements.
The primary negative consequence of the transaction that Nxu’s board of directors considered was that following the Merger, the Nxu stockholders would own a relatively small percentage of the combined company’s common stock. Nxu’s board of directors did not believe that such negative factor outweighed the positive impact of the transaction to Nxu’s stockholders.
If the Merger Agreement is not approved by Nxu stockholders or if the Merger is not completed for any other reason, Nxu will remain an independent public company, Nxu Class A common stock will continue to be listed and traded on the Nasdaq Capital Market, if eligible, and registered under the Exchange Act and Nxu will continue to file periodic reports with the SEC. If the Merger is not completed, Nxu’s board of directors will continue to evaluate and review Nxu’s business operations and capitalization, among other things, and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the Merger Agreement is not approved by Nxu’s stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to Nxu will be offered or that Nxu’s business, prospects or results of operation will not be adversely impacted.
Furthermore, if the Merger is not completed, the price of Nxu Class A common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of Nxu Class A common stock would return to the price at which it traded as of the date of this proxy statement/prospectus.
Q: Did the Nxu Board of Directors receive a Fairness Opinion from a Financial Advisor?
A: Yes. Nxu engaged Lake Street to render an opinion as to the fairness, from a financial point of view, of the Verde Enterprise Value used to determine the Closing Merger Consideration to Nxu. Lake Street is a full-service securities firm that provides, among other things, investment banking services and regularly is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwriting and secondary distributions of securities, private placements and other valuations for estate, corporate and other
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purposes. Nxu’s board of directors decided to use the services of Lake Street because it is a recognized provider of investment banking services that has experience in similar matters. Lake Street rendered its final written opinion to Nxu’s board of directors on October 19, 2024, which was consulted by the Nxu board of directors in a meeting of the Nxu board of directors held on October 23, 2024.
In this analysis, Lake Street reviewed and considered such financial and other matters as it deemed relevant, including, among other things:
• a draft of the Merger Agreement provided to Lake Street by Nxu on September 26, 2024, the terms of which was confirmed with Nxu on October 18, 2024 to not have materially changed since September 26, 2024;
• Nxu’s projected financials on a stand-alone basis for the fiscal years ended December 31, 2024 and December 31, 2025 prepared by Maxim Group’s equity research and confirmed by Nxu;
• Verde’s financial projections on a stand-alone basis for the fiscal years ended December 31, 2024 through December 31, 2028 prepared and furnished to Lake Street by management of Verde (the “Verde Projections”);
• public information with respect to certain other companies in lines of business that Lake Street believed to be comparable to Nxu and Verde, in whole or in part, which included an examination of current public market prices and resulting valuation statistics;
• the financial terms, to the extent publicly available, of certain other mergers involving the acquisition of companies Lake Street believed to be comparable to Nxu and Verde, in whole or in part;
• a discounted cash flow analysis of Verde on a stand-alone basis based on the Verde Projections;
• discussed with the managements of Verde and Nxu regarding certain aspects of the Merger, the business, financial condition and prospects of Verde and Nxu, respectively, the effect of the Merger on the business, financial condition and prospects of Verde and Nxu, respectively, and certain other matters that Lake Street deemed relevant; and
• other research and analysis and such other factors as Lake Street deemed appropriate, including such other analyses, examinations and inquiries and such other financial, economic and market criteria as Lake Street deemed necessary and appropriate.
Lake Street concluded that, based upon and subject to qualifications, assumptions, and other matters considered and described in connection with the preparation of its opinion, as of October 19, 2024, the Verde Enterprise Value used for the Closing Merger Consideration was fair, from a financial point of view, to Nxu.
Q: What happens if I sell my shares of Nxu common stock before the Nxu special meeting?
A: The Record Date for the Nxu special meeting is earlier than the date that the Merger is expected to be completed. If you transfer your shares of Nxu common stock after the Record Date, but before the Nxu special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Nxu special meeting. If you transfer your shares of Nxu common stock prior to the Record Date, you will have no right to vote those shares at the Nxu special meeting.
Q. What will happen to Nxu if, for any reason, the Merger does not close?
A. If, for any reason, the Merger does not close, the Nxu board of directors may elect to, among other things, review and evaluate another strategic transaction like the Merger, attempt to sell or otherwise dispose of the various assets of Nxu, or dissolve and liquidate its assets. If Nxu decides to dissolve or liquidate its assets, Nxu would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurances as to the amount or timing of available cash left, if any, to distribute to Nxu stockholders after paying the debts and other obligations of Nxu and setting aside funds for reserves.
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Q. What risks should I consider in deciding whether to vote in favor of the Merger?
A. You should carefully review the section entitled “RISK FACTORS” beginning on page 15 of this proxy statement/prospectus which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which the combined company’s business will be subject, and risk and uncertainties to which each of Nxu and Verde, as independent companies, are subject.
Q: What vote is required to approve the Proposals presented at the Nxu special meeting?
A: The Transaction Proposal (No. 1) requires the affirmative vote of the majority of the votes cast by the holders of all of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock, and Nxu Series B preferred stock present in person or represented by proxy at the Nxu special meeting. Abstentions and broker non-votes are not considered votes cast and will have no effect on this proposal.
The Common Stock Declassification Proposal (No. 2) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. In addition, this proposal requires the affirmative vote of the holders of at least two-thirds of the voting power of the Nxu Class B common stock, voting separately as a class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Reverse Stock Split Proposal (No. 3) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Board Classification Proposal (No. 4) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Supermajority Stockholder Vote Proposal (No. 5) requires the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Director Removal Proposal (No. 6) requires the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Officer Exculpation Proposal (No. 7) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Miscellaneous Charter Proposal (No. 8) requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” this proposal.
The Equity Plan Proposal (No. 9), the PIPE Proposal (No. 10) and the Adjournment Proposal (No. 11) each require the affirmative vote of the majority of the votes cast by the holders of all of the outstanding shares of Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock present in person or represented by proxy at the Nxu special meeting. Abstentions and broker non-votes are not considered votes cast and will have no effect on these proposals.
The Closing is conditioned on the approval of the Transaction Proposal, each of the Charter Proposals, and the Equity Plan Proposal, being the Required Proposals. Except with respect to the Reverse Stock Split Proposal, each Required Proposal is conditioned on approval of the other Required Proposals. The Reverse Stock Split Proposal and the Adjournment Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.
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Q: As a Nxu stockholder, how does the Nxu board of directors recommend I vote?
A: After careful consideration, the Nxu board of directors recommends that Nxu stockholders vote “FOR” all of the proposals.
Q: How do I attend the Nxu special meeting?
A: The Nxu special meeting will be held at Eastern Time on in a virtual-only format. Stockholders will not be able to attend the Nxu special meeting in person. Participating in the Nxu special meeting online enables holders of record and duly appointed proxyholders, including holders who hold their shares in “street name” who have duly appointed themselves as a proxyholder, to ask questions and vote, all in real time. Holders of record and duly appointed proxyholders can vote at the appropriate times during the Nxu special meeting. Guests, including holders who hold their shares in “street name” and who have not duly appointed themselves as a proxyholder, can log in to the Nxu special meeting as set out below. Guests can listen to the Nxu special meeting but are not able to ask questions or vote at the Nxu special meeting. If you hold your shares in “street name” and wish to appoint yourself as proxyholder to participate in the Nxu special meeting, including asking questions and voting, please follow the instructions in the voting instruction form or contact your broker, bank, or nominee for instructions.
To log in to the Nxu special meeting online, visit www.virtualshareholdermeeting.com/ on your smart phone, tablet or computer. If you are a holder of record or a duly appointed proxyholder, you will need to enter the 16-digit control number issued in respect of your shares, your first and last name and your email address. If you are a guest, you will need to enter your first and last name and your email address. You will need the latest versions of Chrome, Safari, Edge, or Firefox. Please ensure your browser is compatible. Nxu recommends that you log in at least 15 minutes before the Nxu special meeting starts.
If you are a holder of record or duly appointed proxyholder that would like to vote at the Nxu special meeting, it is important that you are connected to the Internet at all times during the Nxu special meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the special meeting. You should allow ample time to check into the Nxu special meeting online and complete the related procedures.
If you encounter any technical difficulties accessing the virtual Nxu special meeting during the check-in or the Nxu special meeting, please use the phone numbers found on the log-in page to contact technical support.
Q. Who can vote at the Nxu special meeting?
A. Only Nxu stockholders of record at the close of business on the Record Date will be entitled to vote at the Nxu special meeting. The Nxu board of directors has fixed as the record date for the Nxu special meeting.
Stockholder of Record: Shares Registered in Your Name
If, at the close of business on the record date, your shares of Nxu common stock were registered directly in your name with Nxu’s transfer agent, Equiniti Trust Company, LLC (“Equiniti”), then you are a Nxu stockholder of record. As a Nxu stockholder of record, you may vote virtually at the Nxu special meeting or vote by proxy. Whether or not you plan to attend the Nxu special meeting, please vote as soon as possible by completing and returning the enclosed proxy card or vote by proxy over the telephone or on the internet as instructed on the proxy card to ensure your vote is counted. Nxu stockholders are invited to attend the special meeting, which will be a virtual meeting held exclusively via live webcast.
Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Similar Organization
If, at the close of business on the record date, your shares of Nxu common stock were not held in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Nxu special meeting. As a beneficial owner, you have the right to direct your broker or other agent how to vote the shares in your account. You are also invited to attend and vote at the Nxu special meeting.
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Series B Preferred Stock
The holder of the single share of Series B preferred stock is also entitled to vote at the Nxu special meeting. The single share of Series B preferred stock is entitled to a number of votes number of votes that could be cast by holders of Nxu Class A common stock and Nxu Class B common stock.
Q: How many votes do I have at the Nxu special meeting?
A: Each share of Nxu Class A common stock is entitled to one vote and each share of Nxu Class B common stock is entitled to ten votes. In addition, the single share of Series B preferred stock issued and outstanding is entitled to a number of votes equal to the total number of votes that could be cast by holders of the Nxu Class A common stock and Nxu Class B common stock. The holder of the single share of Nxu Series B preferred stock, Mr. Hanchett, has agreed pursuant to the Series B Voting Agreement to cast all of the votes to which he is entitled as a holder of the Nxu Series B preferred stock “FOR” each Required Proposal if the votes cast “FOR” such Required Proposal by the holders of Nxu Class A common stock and Nxu Class B common stock exceed the votes cast “AGAINST” such Required Proposal by such holders, and “AGAINST” each Required Proposal if the votes cast “AGAINST” such Required Proposal by the holders of Nxu Class A common stock and Nxu Class B common stock exceed the votes cast “FOR” such Required Proposal.
As of the close of business on the Record Date, there were shares of Nxu Class A common stock outstanding and shares of Nxu Class B common stock outstanding. As of the Record Date, Nxu’s Chief Executive Officer, Mark Hanchett, and Nxu’s President, Annie Pratt (the “Nxu Insiders”), owned and shares of Nxu Class B common stock, respectively, and and shares of Nxu Class A common stock, respectively, representing approximately % and % of the total voting power of Nxu’s outstanding common stock, respectively, for an aggregate of approximately % of the voting power of Nxu’s outstanding common stock. As noted above, Mr. Hanchett is the holder of the single share of Nxu Series B preferred stock outstanding, which Mr. Hanchett has agreed to vote pursuant to the Series B Voting Agreement.
In addition, on December 26, 2024, each of Mark Hanchett, Annie Pratt, Britt Ide, Jessica Billingsley and Sarah Wyant (the “PIPE Insiders”) entered into voting agreements (each, a “PIPE Voting Agreement”) in connection with the signing of the Private Placement to vote all shares of Nxu voting stock over which each such individual has voting control in favor of the PIPE Proposal.
Q: What constitutes a quorum at the Nxu special meeting?
A: For Proposal Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10, the presence in person or by proxy of the holders of at least one-third of the total voting power of all outstanding shares of Nxu Class A common stock, Nxu Class B common stock, and Nxu Series B preferred stock, considered together as one class, is required to constitute a quorum in order for the stockholders to vote on each of these proposals. In addition, a quorum for Proposal No. 2 also requires the presence in person or by proxy of the holders of at least one-third of the total voting power of the outstanding shares of the Nxu Class B common stock. A quorum is not required in order for stockholders to vote on Proposal No. 11. In the absence of a quorum, the stockholders present or represented by proxy may adjourn the meeting, including by taking a vote pursuant to Proposal No. 11, without notice other than announcement at the Nxu special meeting, until a quorum shall be present or represented.
As of the Record Date, there were shares of Nxu Class A common stock issued and outstanding, representing votes, shares of Nxu Class B common stock issued and outstanding, representing votes, and one share of Series B preferred stock issued and outstanding, representing votes that could be cast by the holders of Nxu Class A common stock and Nxu Class B common stock on an action. As a result, votes must be represented at the Nxu special meeting in order to constitute a quorum to vote Proposal Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10. Additionally, shares of Nxu Class B common stock must be represented at the Nxu special meeting in order to constitute a quorum to vote on Proposal No. 2. Abstentions will count as present for the purposes of establishing a quorum with respect to each proposal, but broker non-votes will not.
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Q: How will the Nxu Insiders vote?
A: The Nxu Insiders have agreed to vote any shares of Nxu common stock owned by them in favor of the Required Proposals. As of the Record Date, the Nxu Insiders held approximately % and %, respectively, of the total voting power of Nxu outstanding common stock for an aggregate of approximately % of the voting power of Nxu outstanding common stock. Mr. Hanchett is the holder of the sole share of Nxu Series B preferred stock issued and outstanding, which represents 50.0% of the voting power of the Nxu Class A common stock, Nxu Class B common stock and Nxu Series B preferred stock, voting together as a single class. However, Mr. Hanchett has agreed to vote the Nxu Series B preferred stock pursuant to the Series B Voting Agreement, which requires Mr. Hanchett to cast all of the votes to which he is entitled as a holder of the Nxu Series B preferred stock “FOR” each Required Proposal if the votes cast “FOR” such Required Proposal by the holders of Nxu Class A common stock and Nxu Class B common stock exceed the votes cast “AGAINST” such Required Proposal by such holders, and “AGAINST” each Required Proposal if the votes cast “AGAINST” such Required Proposal by the holders of Nxu Class A common stock and Nxu Class B common stock exceed the votes cast “FOR” such Required Proposal.
Pursuant to the PIPE Voting Agreements, the PIPE Insiders have agreed to vote all shares of Nxu voting stock over which each such individual has voting control in favor of the PIPE Proposal.
Q: Do I have appraisal rights if I object to the proposed Merger Agreement?
A: The Merger Agreement, the Nxu Charter and Nxu Bylaws do not provide for any additional appraisal rights other than those provided for under applicable law. Pursuant to DGCL § 262(b)(1), Nxu stockholders will not have appraisal rights due to the shares’ status as publicly listed shares on a national securities exchange and because Nxu stockholders will not exchange any shares. See the section entitled “THE MERGER — Appraisal Rights and Dissenters’ Rights” for more information.
Q: When is the Merger expected to be consummated?
A: It is currently anticipated that the Merger will be consummated promptly following the Nxu special meeting to be held on , provided that all the requisite stockholder approvals are obtained and other conditions to the consummation of the Merger have been satisfied or waived.
Q: What do I need to do now?
A: Nxu urges you to read carefully and consider the information contained in this proxy statement/prospectus and the annexes attached to this proxy statement/prospectus and to consider how the Merger will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank, or other nominee, on the voting instruction form provided by the broker, bank, or nominee.
Q: How do I vote?
A: Nxu recommends that you vote by proxy even if you plan to attend the Nxu special meeting and vote virtually. If you are a holder of record of Nxu common stock on , there are three ways to vote by proxy:
• by Telephone: You can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;
• by Internet: You can vote over the Internet at www.proxyvote.com by following the instructions on the proxy card; or
• by Mail: You can vote by mail by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided.
If you hold your shares in “street name,” meaning your shares are held of record by a broker, bank, or other nominee, you should follow the instructions provided by your broker, bank, or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Nxu special meeting and vote in person, obtain a proxy from your broker, bank, or nominee.
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Q: What will happen if I abstain from voting or fail to vote at the Nxu special meeting?
A: If you hold your shares in “street name,” and you fail to provide instructions to your broker, then on discretionary or non-routine proposals, a broker non-vote will occur.
For the Transaction Proposal (Proposal No. 1), the Equity Plan Proposal (Proposal No. 9), the PIPE Proposal (Proposal No. 10) and the Adjournment Proposal (Proposal No. 11), abstentions and broker non-votes are not considered votes cast and will have no effect on such proposals.
For each of the Charter Proposals (Proposal Nos. 2 – 8), abstentions and broker non-votes will have the same effect as votes “AGAINST” such proposals.
Furthermore, since Nxu does not expect brokers to have discretionary authority to vote for any of the proposals being presented at the Nxu special meeting, broker non-votes will not be counted for purposes of a quorum, but abstentions will be counted.
Q: What will happen if I sign and submit my proxy card without indicating how I wish to vote?
A: Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal being submitted to a vote of the stockholders at the Nxu special meeting.
Q: If I am not going to attend the Nxu special meeting, should I submit my proxy card instead?
A: Yes. Whether you plan to attend the Nxu special meeting or not, please read the enclosed proxy statement/prospectus carefully, and vote your shares by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided or voting by telephone or over the Internet by following the instructions on the proxy card.
Q: If my shares are held in “street name,” will my broker, bank, or nominee automatically vote my shares for me?
A: No. Under the Dodd-Frank Act and securities exchanges rules, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary or non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. Nxu does not expect brokers to have discretionary authority to vote for any of the proposals presented at the Nxu special meeting and therefore your broker, bank, or nominee cannot vote your shares without your instruction. Your broker, bank, or nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.
Q: May I change my vote after I have submitted my executed proxy card?
A: Yes. Whether you have voted by telephone, Internet or mail, if you are a stockholder of record, you may change your vote and revoke your proxy by:
• sending a written statement to that effect to the attention of Nxu’s Corporate Secretary at Nxu’s principal executive offices, provided such statement is received no later than ;
• voting again by Internet or telephone at a later time before the closing of those voting facilities at 11:59 p.m. Eastern Time on ;
• by sending a later dated, signed proxy card to the address listed below that is received no later than ; or
• by attending the Nxu special meeting virtually, revoking your proxy and voting online.
If your shares of Nxu Class A common stock are held in “street name” by your broker, bank, or another nominee as of the close of business on the Record Date, you must follow the instructions of your broker, bank, or other nominee to revoke or change your voting instructions.
Your most recent proxy card or telephone or Internet proxy is the one that is counted. Your attendance at the Nxu special meeting by itself will not revoke your proxy unless you give written notice of revocation before your proxy is voted or you vote electronically at the Nxu special meeting.
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Q: Who counts the votes?
A: A representative of The Carideo Group, Inc (the “Inspector of Election”), or its designee, has been engaged as Nxu’s inspector of election (the “Inspector of Election”). If you are a holder of record, your executed proxy card is returned directly to the Inspector of Election for tabulation. If you hold your shares through a broker, bank, or other nominee, your broker, bank, or other nominee returns one proxy card to the Inspector of Election on behalf of all its clients.
Q: How can I find out the results of the voting at the Nxu special meeting?
A: Preliminary voting results will be announced at the Nxu special meeting. Final voting results will be published in a Current Report on Form 8-K that Nxu will file with the SEC within four business days after the Nxu special meeting. If final voting results are not available in time to file a Form 8-K within four business days after the Nxu special meeting, Nxu intends to file a Form 8-K to publish preliminary results and, within four business days after the final results are known, file an additional Form 8-K to publish the final results.
Q: What should I do if I receive more than one set of voting materials?
A: You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote all of your shares. To ensure that all of your shares are voted, for each set of voting materials, please submit your proxy by telephone, via the Internet or by completing, signing, dating and returning each proxy card and voting instruction card that you receive in order to cast your vote with respect to all your shares.
Q: Who can help answer my questions?
A: If you have questions about the proposals or if you need additional copies of the proxy statement/prospectus or the enclosed proxy card or wish to request copies of documents referred to in this proxy statement/prospectus, you should contact: in writing, Nxu, Inc., 1700 Alhambra Blvd., Suite 102, Sacramento, California 95816, ATTN: Annie Pratt or by email at investors@nxuenergy.com.
To obtain timely delivery, your request for materials must be received no later than five business days prior to the Nxu special meeting.
Q: Who will solicit and pay the cost of soliciting proxies?
A: The Nxu board of directors is soliciting your proxy to vote your shares of common stock on all matters scheduled to come before the Nxu special meeting. Nxu will pay the cost of soliciting proxies for the Nxu special meeting. In addition to solicitation by mail, proxies may be solicited in person or by telephone, e-mail, facsimile or other means by Nxu’s officers or regular employees, without paying them any additional compensation or renumeration. Nxu will reimburse, upon their request, banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Nxu common stock for their expenses in forwarding soliciting materials to beneficial owners of Nxu common stock and in obtaining voting instructions from those owners. Nxu’s directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Nxu has engaged D.F. King & Co. (“D.F. King”) to assist it in soliciting proxies. Nxu will pay the fees of D.F. King, which Nxu expects to be approximately $25,000, plus reimbursement of out-of-pocket expenses. D.F. King will provide advice relating to the content of solicitation materials, solicit banks, brokers, institutional investors, and hedge funds to determine voting instructions, monitor voting, and deliver executed proxies to Nxu’s voting tabulator.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial information and the accompanying notes (the “pro forma financial information”) are presented to illustrate the estimated effects of the anticipated merger between Nxu, Inc. (“Nxu”) and Verde Bioresins, Inc. (“Verde”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) entered into by both parties on October 23, 2024. The merger between Nxu and Verde is accounted for as a reverse acquisition, where Verde, the legal acquiree, is determined to be the accounting acquirer of Nxu. Refer to Note 1.
The following transactions are expected to occur in accordance with the Merger Agreement:
• Nxu Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Nxu (“Merger Sub I”) will merge with and into Verde (the “First Merger”), with Verde continuing as the surviving entity as a wholly-owned subsidiary of Nxu. and (ii) immediately following the First Merger (the “Effective Time”), Verde will merge within and into Nxu Merger Sub, LLC, a Delaware limited liability company (the “Second Merger”, and together with the First Merger, the “Merger”), with Merger Sub II surviving the Second Merger as a wholly-owned subsidiary of Nxu.
• Immediately prior to the Effective Time, all outstanding convertible notes of Verde will be converted into shares of Verde common stock and all outstanding and unexercised Verde warrants will be exercised for shares of Verde common stock, and
• At the Effective Time, (a) each then-outstanding share of Verde common stock, other than any cancelled shares and dissenting shares, will be converted into the right to receive a number of shares of Nxu common stock, and (b) each then-outstanding and unexercised Verde option to purchase shares of Verde common stock, whether vested or unvested, will be assumed by Nxu and converted into an option to purchase a number of shares of Nxu common stock. The shares of Nxu common stock that will be issued to Verde stockholders and the number of shares of Nxu common stock underlying options that will be issuable to Verde optionholders will be calculated using a formula in the Merger Agreement based on the estimated enterprise value of each of Verde and Nxu.
• Upon consummation of the transactions contemplated by the Merger Agreement, it is expected that the current stockholders of Verde will own approximately 95% of the post-Merger combined entity (the “Combined Company”), and the current stockholders of Nxu will own approximately 5% of the Combined Company on a fully-diluted and as-converted basis. Following the Merger, the name of Nxu will be changed to “Verde Bioresins, Corp.” and its common stock will remain listed on the Nasdaq Stock Exchange.
The pro forma financial information has been prepared under the following assumptions:
• The unaudited pro forma condensed combined balance sheet of the Combined Company as of September 30, 2024 assumes that the Merger had occurred on September 30, 2024.
• The unaudited pro forma condensed combined statement of operations of the Combined Company for the year ended December 31, 2023 and unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024 assumes that the Merger had occurred on January 1, 2023, the beginning of the earliest period presented.
The pro forma financial information has been compiled using, and should be read in conjunction with the following:
• The audited consolidated financial statements and notes of Nxu as of and for the year ended December 31, 2023 included in the Form 10-K filed by Nxu with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 and the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 included in the Form 10-Q filed by Nxu with the SEC on November 13, 2024, both of which are incorporated by reference into this proxy statement/prospectus; and
• The audited consolidated financial statements and notes of Verde Bioresins as of and for the year ended December 31, 2023 and unaudited condensed consolidated financial statements for the nine months ended September 30, 2024 included elsewhere in this proxy statement/prospectus.
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• The accompanying notes to the unaudited pro forma condensed combined financial information;
The pro forma financial information is for informational purposes only and is not necessarily indicative of what the actual consolidated results of operations and financial position of the Combined Company would have been had the Merger taken place on the dates indicated, nor are they indicative of future consolidated results of operations or financial position of the Combined Company. The pro forma financial information is based on the information available to management at the time of preparation and assumptions that management believes are reasonable and supportable. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. It is likely that the actual adjustments upon the completion of the Merger will differ from the pro forma adjustments, and it is possible the differences may be material.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2024
(in thousands)
| | Nxu, Inc.
(Historical) | | Verde
BioResins
(Historical) | | Transaction
Accounting
Adjustments
(Note 3) | | Accounting
Adjustments
(Note 3) | | Notes | | Pro Forma
Combined |
ASSETS | | | | | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | | | |
Cash | | $ | 2,208 | | | $ | 227 | | | $ | 2,740 | | | $ | — | | | H | | $ | 5,175 | |
Accounts receivable | | | — | | | | 16 | | | | — | | | | — | | | | | | 16 | |
Inventory | | | — | | | | 216 | | | | — | | | | — | | | | | | 216 | |
Prepaid expenses and other current assets | | | 841 | | | | 60 | | | | — | | | | — | | | | | | 901 | |
Total current assets | | | 3,049 | | | | 519 | | | | 2,740 | | | | — | | | | | | 6,308 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Property and equipment, net | | | 1,922 | | | | 2,538 | | | | — | | | | — | | | | | | 4,460 | |
Assets held for sale | | | 717 | | | | — | | | | — | | | | — | | | | | | 717 | |
Right-of-use assets, net | | | 433 | | | | 1,175 | | | | — | | | | — | | | | | | 1,608 | |
Investment in Lynx | | | 2,025 | | | | — | | | | — | | | | — | | | | | | 2,025 | |
Intangible assets, net | | | 45 | | | | — | | | | — | | | | (45 | ) | | A | | | — | |
Other assets | | | 249 | | | | 470 | | | | — | | | | — | | | | | | 719 | |
Total assets | | $ | 8,440 | | | $ | 4,702 | | | $ | 2,740 | | | $ | (45 | ) | | | | $ | 15,837 | |
| | | | | | | | | | | | | | | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 1,670 | | | $ | 3,614 | | | $ | (1,817 | ) | | | — | | | C | | $ | 8,156 | |
| | | | | | | | | | | | 4,584 | | | | — | | | E | | | | |
| | | | | | | | | | | 105 | | | | — | | | H | | | | |
Variable share settled restricted stock units | | | 2,483 | | | | — | | | | (2,483 | ) | | | — | | | B | | | — | |
Convertible notes, net of debt discount of $0 | | | — | | | | 10,625 | | | | (10,625 | ) | | | — | | | C | | | — | |
Current portion of operating lease liability | | | 869 | | | | 363 | | | | — | | | | — | | | | | | 1,232 | |
Total current liabilities | | | 5,022 | | | | 14,602 | | | | (10,236 | ) | | | — | | | | | | 9,388 | |
Lease liability, net of current portion | | | 52 | | | | 891 | | | | — | | | | — | | | | | | 943 | |
Convertible debt and warrant liability, at
fair value | | | 16 | | | | — | | | | (10 | ) | | | — | | | D | | | 6 | |
Total liabilities: | | | 5,090 | | | | 15,493 | | | | (10,246 | ) | | | — | | | | | | 10,337 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Stockholders’ equity (deficit): | | | | | | | | | | | | | | | | | | | | | | |
Common Stock | | | 1 | | | | 32 | | | | — | | | | 10 | | | F | | | 44 | |
| | | | | | | | | | | | 1 | | | | — | | | H | | | | |
Additional paid-in capital | | | 281,061 | | | | 23,752 | | | | 2,483 | | | | — | | | B | | | 46,344 | |
| | | | | | | | | | | | 12,442 | | | | — | | | C | | | | |
| | | | | | | | | | | | 10 | | | | — | | | D | | | | |
| | | | | | | | | | | | 45 | | | | | | | E | | | | |
| | | | | | | | | | | | — | | | | (279,075 | ) | | F | | | | |
| | | | | | | | | | | | 2,992 | | | | | | | G | | | | |
| | | | | | | | | | | | 2,634 | | | | | | | H | | | | |
Accumulated deficit | | | (277,712 | ) | | | (34,575 | ) | | | (4,629 | ) | | | — | | | E | | | (40,888 | ) |
| | | | | | | | | | | | — | | | | 279,020 | | | F | | | | |
| | | | | | | | | | | | (2,992 | ) | | | — | | | G | | | | |
Total stockholders’ (deficit) equity | | | 3,350 | | | | (10,791 | ) | | | 12,986 | | | | (45 | ) | | | | | 5,500 | |
Total liabilities, convertible preferred stock and stockholders’ equity (deficit) | | $ | 8,440 | | | $ | 4,702 | | | $ | 2,740 | | | $ | (45 | ) | | | | $ | 15,837 | |
See accompanying notes to the unaudited pro forma condensed combined financial statements.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2023
(in thousands, except share and per share data)
| | Nxu, Inc.
(Historical) | | Verde
BioResins
(Historical) | | Transaction
Accounting
Adjustments
(Note 3) | | Notes | | Pro Forma
Combined |
Revenue – Battery systems and components | | $ | 494 | | | $ | — | | | $ | — | | | | | $ | 494 | |
Revenue – Retail charging services | | | 2 | | | | — | | | | — | | | | | | 2 | |
Revenue – Sales of PolyEarthylene Product | | | — | | | | 108 | | | | — | | | | | | 108 | |
Total revenue | | | 496 | | | | 108 | | | | — | | | | | | 604 | |
| | | | | | | | | | | | | | | | | | | |
Cost of sales – Battery systems and components | | | 1,013 | | | | — | | | | — | | | | | | 1,013 | |
Cost of sales – Retail charging services | | | 2 | | | | — | | | | — | | | | | | 2 | |
Cost of sales – PolyEarthylene Product | | | — | | | | 60 | | | | — | | | | | | 60 | |
Depreciation | | | 14 | | | | — | | | | — | | | | | | 14 | |
Total cost of revenue | | | 1,029 | | | | 60 | | | | — | | | | | | 1,089 | |
| | | | | | | | | | | | | | | | | | | |
Gross profit (loss) | | | (533 | ) | | | 48 | | | | — | | | | | | (485 | ) |
Operating expenses: | | | | | | | | | | | | | | | | | | |
Research and development | | | 13,173 | | | | 1,182 | | | | — | | | | | | 14,355 | |
General and administrative | | | 33,376 | | | | 4,783 | | | | 4,629 | | | AA | | | 45,780 | |
| | | | | | | | | | | | 2,992 | | | DD | | | | |
Selling expenses | | | — | | | | 419 | | | | — | | | | | | 419 | |
Advertising | | | 319 | | | | — | | | | — | | | | | | 319 | |
Total operating expenses | | | 46,868 | | | | 6,384 | | | | 7,621 | | | | | | 60,873 | |
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