Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 01, 2023 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-38821 | |
Entity Registrant Name | Lordstown Motors Corp. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 83-2533239 | |
Entity Address, Address Line One | 2300 Hallock Young Road | |
Entity Address, City or Town | Lordstown | |
Entity Address State Or Province | OH | |
Entity Address, Postal Zip Code | 44481 | |
City Area Code | 234 | |
Local Phone Number | 285-4001 | |
Title of 12(b) Security | Class A Common Stock | |
Trading Symbol | RIDE | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 239,025,591 | |
Entity Central Index Key | 0001759546 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Balance Sheets
Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Current Assets | ||
Cash and cash equivalents | $ 108,086 | $ 121,358 |
Short-term investments | 68,589 | 100,297 |
Inventory, net | 6,340 | 13,672 |
Prepaid expenses and other current assets | 9,028 | 20,548 |
Total current assets | 192,043 | 255,875 |
Property, plant and equipment, net | 78,123 | 193,780 |
Other non-current assets | 2,244 | 2,657 |
Total Assets | 272,410 | 452,312 |
Current Liabilities | ||
Accounts payable | 8,431 | 12,801 |
Accrued and other current liabilities | 50,409 | 56,033 |
Total current liabilities | 58,840 | 68,834 |
Warrant and other non-current liabilities | 889 | 1,446 |
Total liabilities | 59,729 | 70,280 |
Mezzanine equity | ||
Series A Convertible Preferred stock, $0.0001 par value, 12,000,000 shares authorized; 300,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022 | 30,866 | 30,261 |
Stockholders' equity | ||
Class A common stock, $0.0001 par value, 450,000,000 shares authorized; 239,045,941 and 238,924,486 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 24 | 24 |
Additional paid in capital | 1,180,723 | 1,178,960 |
Accumulated deficit | (998,932) | (827,213) |
Total stockholders' equity | 181,815 | 351,771 |
Total liabilities and stockholders' equity | $ 272,410 | $ 452,312 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 |
Consolidated Balance Sheets | ||
Temporary equity par value | $ 0.0001 | $ 0.0001 |
Temporary equity shares authorized | 12,000,000 | 12,000,000 |
Temporary equity, shares issued | 300,000 | 300,000 |
Temporary equity shares outstanding | 300,000 | 300,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 450,000,000 | 450,000,000 |
Common stock, shares issued | 239,025,591 | 238,924,486 |
Common stock, shares outstanding | 239,025,591 | 238,924,486 |
Statements of Operations
Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Consolidated Statements of Operations | ||
Net sales | $ 189 | |
Cost of sales | 30,811 | |
Operating Expenses | ||
Selling, general and administrative expenses | 14,687 | $ 26,019 |
Research and development expenses | 14,425 | 61,864 |
Impairment of property plant & equipment and intangibles | 114,440 | |
Total operating expenses | 143,552 | 87,883 |
Loss from operations | (174,174) | (87,883) |
Other income (expense) | ||
Other income (expense) | 64 | (1,492) |
Interest income (expense) | 2,391 | (258) |
Loss before income taxes | (171,719) | (89,633) |
Net loss | (171,719) | (89,633) |
Less preferred stock dividend | (605) | |
Net loss attributable to common shareholders | $ (171,114) | $ (89,633) |
Net loss per share attributable to common shareholders | ||
Basic (in dollars per share) | $ (0.71) | $ (0.46) |
Diluted (in dollars per share) | $ (0.71) | $ (0.46) |
Weighted-average number of common shares outstanding | ||
Basic (in shares) | 239,754 | 196,503 |
Diluted (in shares) | 239,754 | 196,503 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity/(Deficit) - USD ($) $ in Thousands | Preferred stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance at Dec. 31, 2021 | $ 19 | $ 1,084,390 | $ (544,809) | $ 539,600 | |
Beginning Balance (in Shares) at Dec. 31, 2021 | 196,391,000 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of Class A Common stock | $ 1 | 615 | 616 | ||
Issuance of Class A Common stock (in shares) | 464,000 | ||||
Restricted stock vesting (in shares) | 125,000 | ||||
Stock compensation | 3,920 | 3,920 | |||
Net loss | (89,633) | (89,633) | |||
Ending balance at Mar. 31, 2022 | $ 20 | 1,088,925 | (634,442) | 454,503 | |
Ending Balance (in Shares) at Mar. 31, 2022 | 196,980,000 | ||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||
Accrual of Preferred stock dividends | 300 | ||||
Ending Balance at Dec. 31, 2022 | $ 30,261 | $ 30,261 | |||
Ending Balance (in Shares) at Dec. 31, 2022 | 300,000 | 300,000 | |||
Beginning balance at Dec. 31, 2021 | $ 19 | 1,084,390 | (544,809) | $ 539,600 | |
Beginning Balance (in Shares) at Dec. 31, 2021 | 196,391,000 | ||||
Ending balance at Dec. 31, 2022 | $ 24 | 1,178,960 | (827,213) | 351,771 | |
Ending Balance (in Shares) at Dec. 31, 2022 | 238,924,000 | ||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||
Accrual of Preferred stock dividends | $ 605 | 600 | |||
Ending Balance at Mar. 31, 2023 | $ 30,866 | $ 30,866 | |||
Ending Balance (in Shares) at Mar. 31, 2023 | 300,000 | 300,000 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Restricted stock vesting | (46) | $ (46) | |||
Restricted stock vesting (in shares) | 101,000 | ||||
Stock compensation | 2,414 | 2,414 | |||
Accrual of Preferred stock dividends | (605) | (605) | |||
Net loss | (171,719) | (171,719) | |||
Ending balance at Mar. 31, 2023 | $ 24 | $ 1,180,723 | $ (998,932) | $ 181,815 | |
Ending Balance (in Shares) at Mar. 31, 2023 | 239,026,000 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Cash flows from operating activities | |||
Net loss | $ (171,719) | $ (89,633) | |
Adjustments to reconcile net loss to cash used by operating activities: | |||
Stock-based compensation | 2,414 | 3,920 | |
Impairment of property plant and equipment and intangible assets | 114,440 | ||
Depreciation of property plant and equipment | 7,674 | ||
Write down of inventory and prepaid inventory | 19,764 | ||
Other non-cash changes | (1,085) | 4,420 | |
Changes in assets and liabilities: | |||
Inventory | (12,432) | ||
Prepaid expenses and other assets | 12,822 | 9,987 | |
Accounts payable | (4,115) | (1,490) | |
Accrued expenses and other liabilities | (5,879) | 3,763 | |
Net Cash used in operating activities | (38,116) | (69,033) | |
Cash flows from investing activities | |||
Purchases of property plant and equipment | (7,948) | (21,896) | |
Purchases of short-term investments | (22,208) | ||
Maturities of short-term investments | 55,000 | ||
Net Cash provided by (used in) investing activities | 24,844 | (21,896) | |
Cash flows from financing activities | |||
Down payments received from Foxconn | 50,000 | ||
Net Cash provided by financing activities | 50,477 | ||
(Decrease) / Increase in cash and cash equivalents | (13,272) | (40,452) | |
Cash and cash equivalents, beginning balance | 121,358 | 244,016 | $ 244,016 |
Cash and cash equivalents, ending balance | 108,086 | 203,564 | $ 121,358 |
Non-cash items | |||
Capital assets acquired with payables | $ 256 | 5,336 | |
Foxconn Investment Agreement for Common Stock | |||
Cash flows from financing activities | |||
Issuance of Class A Common stock | $ 477 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 3 Months Ended |
Mar. 31, 2023 | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Description of Business Lordstown Motors Corp., a Delaware corporation (“Lordstown,” the “Company” or “we”), is an original equipment manufacturer (“OEM”) of electric light duty vehicles focused on the commercial fleet market. Since inception, we have been developing our flagship vehicle, the Endurance, an electric full-size pickup truck. Our strategy is designed to accelerate the launch of new commercial electric vehicles (“EVs”). This includes working on our own vehicle programs as well as partnering with third parties, including Foxconn and its affiliates (as defined below), as we seek to leverage our vehicle development experience, our proprietary and open-source code and other non-proprietary technologies, our existing Endurance vehicle platform, and potentially new vehicle platforms to drive commonality and scale, and more efficiently develop and launch EVs, to enhance capital efficiency and achieve profitability. In the third quarter of 2022, the Company started commercial production of the Endurance with the first two vehicles completing assembly in September. The Company subsequently completed homologation and testing and received required certifications enabling us to record sales of the first three vehicles in the fourth quarter of 2022. Engineering readiness, quality and part availability governed the initial timing and speed of the Endurance launch. The rate of Endurance production remained very low during the fourth quarter of 2022 as we addressed launch-related issues that are often discovered as an entirely new vehicle begins operating in new and different environments by customers. Those challenges continued into the first quarter of 2023 as performance and quality issues with certain suppliers’ components led us to temporarily pause production and customer deliveries until mid-April 2023. Some of these issues were discovered by us or our suppliers, though some were experienced by our initial customers. In this regard, we filed paperwork with the National Highway Traffic Safety Administration (“NHTSA”) to voluntarily recall the Endurance to address these supplier quality issues. Production will remain at a very low rate as we continue to address any remaining, and to the extent we discover new, Endurance performance and component quality issues, manage ongoing supply chain constraints with key components, including hub motor components, and conserve funding given the high BOM cost. If we experience one or more of these or other factors in the future it could lead to additional pauses in vehicle builds or delivery of completed vehicles, or future recalls. We continue to evaluate the merits of producing and selling vehicles to customers in order to seed the commercial fleet market, demonstrate the capabilities of the Endurance, and support our OEM partnership pursuits. Due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. Foxconn Transactions The Company entered into a series of transactions with affiliates of Hon Hai Technology Group (“HHTG”, either HHTG or applicable affiliates of HHTG are referred to herein as “Foxconn”), beginning with the Agreement in Principal that was announced on September 30, 2021, pursuant to which we entered into definitive agreements to sell our manufacturing facility in Lordstown, Ohio under an Asset Purchase Agreement (as defined below) and outsource manufacturing of the Endurance to Foxconn under a Contract Manufacturing Agreement (as defined below). On November 7, 2022, we entered into an Investment Agreement with Foxconn under which Foxconn agreed to make an additional equity investment in the Company (the “Investment Agreement”). The Asset Purchase Agreement, Contract Manufacturing Agreement and the Investment Agreement together are herein referred to as the “Foxconn Transactions.” Investment Agreement and Foxconn Notice On November 7, 2022, the Company entered into the Investment Agreement under which Foxconn agreed to make additional equity investments in the Company through the purchase of $70 million of Class A common stock, $0.0001 par value per share (“Class A common stock”), and up to $100 million in Series A Convertible Preferred Stock, $0.0001 par value per share (the “Preferred Stock”), subject to certain conditions, including, without limitation, regulatory approvals and satisfaction of certain EV Program budget and EV Program milestones established by the parties. The Preferred Stock funding may only be used in connection with planning, designing, developing, engineering, testing, industrializing, certifying, homologating and launching one or more EVs in collaboration with Foxconn (the “EV Program”). Pursuant to the Investment Agreement, the parties agreed to terminate the Foxconn Joint Venture formed on May 11, 2022 (the “Foxconn Joint Venture”) and cause development activities to be undertaken directly by us. (See Note 6 – Capital Stock and Loss Per Share). On November 22, 2022, the parties completed the initial closing under the Investment Agreement, pursuant to which Foxconn purchased approximately $22.7 million of Class A common stock and $30 million of Preferred Stock (the “Initial Closing”). The Investment Agreement provides for the second closing of Class A common stock (the “Subsequent Common Closing”), at which time Foxconn is required to purchase approximately 26.9 million shares of Class A common stock for approximately $47.3 million. The Subsequent Common Closing is to occur within 10 business days following the parties’ receipt of a written communication from the U.S. government’s Committee on Foreign Investment in the United States (“CFIUS”) that CFIUS has concluded that there are no unresolved national security concerns with respect to the transactions (“CFIUS Clearance”) and subject to satisfaction of the other conditions set forth in the Investment Agreement (which the Company believes have been or will be satisfied). CFIUS Clearance was received on April 25, 2023, which means the Subsequent Common Closing is to occur on or before May 8, 2023. The Company is ready, willing and able to complete the Subsequent Common Closing on a timely basis. In addition, following the parties’ agreement to the EV Program budget and the EV Program milestones and satisfaction of those EV Program milestones and other conditions set forth in the Investment Agreement, Foxconn is to purchase in two tranches, a total of 0.7 million additional shares of Preferred Stock at a purchase price of $100 per share for aggregate proceeds of $70 million (the “Subsequent Preferred Funding”). The parties agreed to use commercially reasonable efforts to agree upon the EV Program budget and EV Program milestones no later than May 7, 2023. The completion of the Subsequent Common Closing and the Subsequent Preferred Funding would provide critical liquidity for the Company’s operations. On April 21, 2023, the Company received a letter from Foxconn (the “Foxconn Notice”) (1) asserting that the Company was in breach of the Investment Agreement due to its previously disclosed receipt of a notice (the “Nasdaq Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was no longer in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Global Select Market (the “Bid Price Requirement”) (see Note 9 – Subsequent Events – Nasdaq Notice) and (2) purporting to terminate the Investment Agreement if the breach is not cured within 30 days. In response, the Company notified Foxconn in writing on April 25, 2023 that (1) it believes the breach allegations in the Foxconn Notice are without merit, (2) the Investment Agreement, by its terms, does not permit Foxconn to terminate it following the Initial Closing, and (3) in any event, Foxconn cannot exercise termination rights because Foxconn has breached the Investment Agreement by failing to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. On May 1, 2023, after having publicly disclosed the Foxconn Notice, the Company received correspondence from Foxconn’s counsel (the “Second Foxconn Notice” and, together with the Foxconn Notice, the “Foxconn Notices”) (1) indicating that Foxconn agrees that it is unable to terminate the Investment Agreement after the Initial Closing, (2) asserting that the Nasdaq Notice constitutes a breach of a representation that is a condition to the Subsequent Common Closing and, therefore, Foxconn is not obligated to consummate the Subsequent Common Closing until such breach is cured, and (3) asserting that the Company’s claims regarding Foxconn’s breach of the Investment Agreement with respect to the EV Program and Subsequent Preferred Funding are without merit. The Company continues to believe that the breach allegations by Foxconn are without merit, and Foxconn is obligated to complete the Subsequent Common Closing on or before May 8, 2023. The Company intends to enforce its contractual rights and remedies under the Investment Agreement, including with respect to Foxconn’s breach regarding the EV Program budget and EV Program milestones, its funding obligations and its knowing and intentional efforts to invalidly terminate the Investment Agreement without any basis and withhold critical funding to the material detriment of the Company. The Company is in discussions with Foxconn to seek a resolution regarding these matters; however, to date, the parties are at an impasse and Foxconn has indicated that it does not intend the close the Subsequent Common Closing on May 8, 2023 and we do not expect Foxconn to provide its approval to the EV Program budget and EV Program milestones by May 7, 2023. No assurances can be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Common Closing or the Subsequent Preferred Funding to occur on a timely basis. If the Subsequent Common Closing is delayed or such fundings do not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial alternatives in the event a resolution is not reached. See Note 9 – Subsequent Events – Foxconn Notice. Closing of the APA with Foxconn On May 11, 2022, Lordstown EV Corporation, a Delaware corporation and wholly-owned subsidiary of the Company (“Lordstown EV”), closed the transactions contemplated by the asset purchase agreement with Foxconn EV Technology, Inc., an Ohio corporation, and an affiliate of HHTG, dated November 10, 2021 (the “Asset Purchase Agreement” or “APA” and the closing of the transactions contemplated thereby, the “APA Closing”). Pursuant to the APA, Foxconn purchased Lordstown EV’s manufacturing facility located in Lordstown, Ohio. Lordstown EV continues to own our hub motor assembly line, as well as our battery module and pack line assets, certain tooling, intellectual property rights and other excluded assets, and outsources all of the manufacturing of the Endurance to Foxconn under the Contract Manufacturing Agreement. Lordstown EV also entered into a lease pursuant to which Lordstown EV leases space located at the Lordstown, Ohio facility from Foxconn for Lordstown EV’s Ohio-based employees for a term equal to the duration of the Contract Manufacturing Agreement plus 30 days. The right of use asset and liability related to this lease is immaterial. We received $257 million in proceeds related to the sale, consisting of the $230 million initial purchase price for the assets, plus $8.9 million for expansion investments and an $18.4 million reimbursement payment for certain operating costs incurred by us from September 1, 2021 through the APA Closing. Foxconn made down payments of the purchase price totaling $200 million through April 15, 2022, of which $100 million was received in both 2022 and 2021. The $30 million balance of the purchase price and a reimbursement payment of approximately $27.5 million were paid at the APA Closing; $17.5 million was attributable to the reimbursement of certain operating expenses reported in research and development and $10 million was attributable to expansion costs. Under the terms of the APA, the $17.5 million reimbursement costs were an estimate which upon final settlement was subsequently increased to $18.4 million. Research and development costs are presented net of the $18.4 million reimbursement of costs by Foxconn for the year ended December 31, 2022. Included in the $18.4 million reimbursement were approximately $7.7 million of research and development costs incurred in 2021. Also, in connection with the APA Closing, the Company issued the Foxconn Warrants, which are exercisable until the third anniversary of the APA Closing for 1.7 million shares of Class A common stock at an exercise price of $10.50 per share (the “Foxconn Warrants”). In October 2021, prior to entering into the APA, Foxconn purchased 7.2 million shares of the Company’s Class A common stock for approximately $50.0 million. Contract Manufacturing Agreement On May 11, 2022, Lordstown EV and Foxconn entered into a manufacturing supply agreement (the “Contract Manufacturing Agreement” or “CMA”) in connection with the APA Closing. Pursuant to the Contract Manufacturing Agreement, Foxconn (i) manufactures the Endurance at the Lordstown facility for a fee per vehicle, (ii) following a transition period, procures components for the manufacture and assembly of the Endurance, subject to sourcing specifications provided by Lordstown EV, and (iii) provides certain post-delivery services. To date, Foxconn has not begun to provide the aforementioned procurement and post delivery services. The CMA provides us with an almost entirely variable manufacturing cost structure and alleviates us of the burden to invest in and maintain the Lordstown facility. The CMA requires Foxconn to use commercially reasonable efforts to assist with reducing component and logistics costs and reducing the overall BOM cost of the Endurance, and otherwise improving the commercial terms of procurement with suppliers. However, to date, we have not realized any material reduction of raw material or component costs or improvement in commercial terms based on Foxconn’s actions. Foxconn is required to conduct testing in accordance with procedures established by us and we are generally responsible for all motor vehicle regulatory compliance and reporting. The Contract Manufacturing Agreement also allocates responsibility between the parties for other matters, including component defects, quality assurance and warranties of manufacturing and design. Foxconn invoices us for manufacturing costs on a fee per vehicle produced basis, and to the extent purchased by Foxconn, component and other costs. Production volume and scheduling are based upon rolling weekly forecasts we provide that are generally binding only for a 12-week period, with some ability to vary the quantities of vehicle type. The CMA became effective on May 11, 2022 and continues for an initial term of 18 months plus a 12-month notice period in the event either party seeks to terminate the agreement. In the event neither party terminates the Contract Manufacturing Agreement following the initial term, it will continue on a month-to-month basis unless terminated upon 12 months’ prior notice. The CMA can also be terminated by either party due to a material breach of the agreement and terminates immediately upon the occurrence of any bankruptcy event. Ongoing Operations We need significant additional funding to execute our business plan. We are also seeking strategic partners, including other automakers, to provide additional capital and other support to enable us to scale the Endurance program and to develop new vehicle programs in coordination with Foxconn or otherwise. To date, we have not identified a strategic partner for the Endurance. To the extent we do not identify such a partner, we anticipate that production of the Endurance will cease in the near future. We also face significant contingent liabilities related to ongoing claims against us and government investigations (see Note 7 – Commitments and Contingencies for additional information). The ability for us to raise capital in the current market environment is extremely limited. As a result of these uncertainties, there is substantial doubt regarding our ability to continue as a going concern. If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain and trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings, if any. See “Liquidity and Going Concern” below. Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to these rules and regulations. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Form 10-K. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments necessary for a fair presentation of our interim financial results. All such adjustments are of a normal and recurring nature. The results of operations for any interim period are not indicative of results for the full fiscal year. The accompanying unaudited condensed consolidated interim financial statements include our accounts and those of our controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. Liquidity and Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. As more fully discussed below, there is substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements. The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. Pursuant to the requirements of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the consolidated financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company had cash, cash equivalents, and short-term investments of approximately $176.7 million and an accumulated deficit of $998.9 million at March 31, 2023 and a net loss of $171.7 million for the three months ended March 31, 2023. Since inception, we have been developing our flagship vehicle, the Endurance, an electric full-size pickup truck. In the third quarter of 2022, the Company started commercial production of the Endurance with the first two vehicles completing assembly in September. The Company subsequently completed homologation and testing and received required certifications that enabled us to begin sales in the fourth quarter of 2022. Engineering readiness, quality and part availability governed the initial timing and speed of the Endurance launch. The rate of Endurance production remained very low during the fourth quarter of 2022 as we addressed launch-related issues that are often discovered as an entirely new vehicle begins operating in new and different environments by customers. Those challenges continued into the first quarter of 2023 as performance and quality issues with certain suppliers’ components led us to temporarily pause production and customer deliveries until mid-April 2023. Some of these issues were discovered by us or our suppliers, though some were experienced by our initial customers. In this regard, we filed paperwork with NHTSA to voluntarily recall the Endurance to address these supplier quality issues. Production will remain at a very low rate as we continue to address any remaining, and to the extent we discover new, Endurance performance and component quality issues, manage ongoing supply chain constraints with key components, including hub motor components, and conserve funding given the high BOM cost. If we experience one or more of these or other factors in the future, it could lead to additional pauses in vehicle builds or delivery of completed vehicles or future recalls. We continue to evaluate the merits of producing and selling vehicles to customers in order to seed the commercial fleet market, demonstrate the capabilities of the Endurance, and support our OEM partnership pursuits. Due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. The performance and component quality and other supplier issues we have experienced with the Endurance have caused us to incur significant We also have meaningful exposure to material losses and costs related to ongoing litigation and regulatory proceedings for which insurance coverage has been denied for certain claims and may be unavailable for those and other claims. While we have engaged and continue to engage in discussions with the parties in these proceedings, we have not been able to reach a resolution of these matters. See Note 7 – Commitments and Contingencies for additional information and Part II - Item 1A. Risk Factors. In an effort to alleviate these conditions, our management continues to seek and evaluate opportunities to raise additional funds through the issuance of equity or debt securities, asset sales, through arrangements with strategic partners or through financing from government or financial institutions and seek strategic partners to scale the Endurance program. We have engaged a financial advisor to advise the Company on additional financing alternatives As discussed under Note 6 – Capital Stock and Loss Per Share, on November 7, 2022, the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company may offer and sell up to approximately 50.2 million shares of its Class A common stock from time to time through Jefferies (the “ATM Offering”). There were no transactions under the ATM Offering for the period ended March 31, 2023. In the future, additional sales will depend on a variety of factors, including the sales price of the Class A common stock being at least $1.00, higher than our current stock price, and our ability to maintain compliance with exchange listing requirements, which as of April 19, 2023, we were not. (See Note 9 – Subsequent Events – Nasdaq Notice) Even if the Company had the ability to issue shares of Class A common stock under the Sales Agreement, no assurances can be given that it would sell any shares of Class A common stock under the Sales Agreement, or, if it does, as to the price or amount of the shares that it sells or the dates when such sales will take place. Even if additional funds are raised under the ATM Offering, the Company will require additional financing to execute its business plan. The completion of the Subsequent Common Closing and the Subsequent Preferred Funding are necessary to provide critical liquidity for the Company’s operations, but the Company’s dispute with Foxconn means there is substantial uncertainty that such funding can be obtained. The Company is in discussions with Foxconn to seek a resolution regarding these matters; however, to date, the parties are at an impasse and Foxconn has indicated that it does not intend the close the Subsequent Common Closing on May 8, 2023 and we do not expect Foxconn to provide its approval to the EV Program budget and EV Program milestones by May 7, 2023. No assurances can be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Common Closing or the Subsequent Preferred Funding to occur on a timely basis. If the Subsequent Common Closing is delayed or such fundings do not occur, the Company will be deprived of critical funding necessary for its operations. See Note 9 – Subsequent Events – Foxconn Notices. As a result of having insufficient capital to execute our business plan, we have made and are continuing to make trade-offs with respect to how we allocate our capital, including substantially limiting investments in tooling, other aspects of the Endurance and our operations. The trade-offs we are making, including related to hard tooling, have and are likely to continue to result in higher costs for the Company in the future and are likely to slow or impair future design enhancements or options we may otherwise seek to make available to Endurance customers. The Company’s ability to continue as a going concern is dependent on our ability to effectively resolve our dispute with Foxconn and implement and realize the benefits of the Foxconn Transactions, raise substantial additional capital, and develop additional vehicles. The Company’s current level of cash, cash equivalents and short-term investments are not sufficient to execute our business plan. For the foreseeable future, we will incur significant operating expenses, capital expenditures and working capital funding that will deplete our cash on hand. Additionally, we face significant contingent liabilities arising from claims against us and government investigations. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these condensed consolidated financial statements. Our ability to obtain additional financing is extremely limited under current market conditions, in particular for our industry, and also influenced by other factors including the significant amount of capital required, the Foxconn dispute, the fact that the BOM cost of the Endurance is currently, and expected to continue to be, substantially higher than our selling price, uncertainty surrounding the performance of any vehicle produced by us, meaningful exposure to material losses and costs related to ongoing litigation and the SEC investigation, the Nasdaq Notice, the market price of our stock and potential dilution from the issuance of any additional securities. If we are unable to resolve our dispute with Foxconn in a timely manner on terms that allow us to continue operating as planned, identify other sources of funding, identify a strategic partner and resolve our significant contingent liabilities, we may need to further curtail or cease operations and seek protection by filing a voluntary petition for relief under the Bankruptcy Code. If this were to occur, the value available to our various stakeholders, including our creditors and stockholders, is uncertain and trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in bankruptcy proceedings, if any. Notice of Non-Compliance with Nasdaq Listing Requirements On April 19, 2023, the Company was notified by Nasdaq that, because the closing bid price for the Company’s Class A common stock had fallen below $1.00 per share for 30 consecutive business days (March 7, 2023 through April 18, 2023), the Company was no longer in compliance with the Bid Price Requirement. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has been provided with a compliance cure period of 180 calendar days, or until October 16, 2023, to regain compliance with the Bid Price Requirement. The Company is currently evaluating various courses of action to regain compliance with the Bid Price Requirement, including implementing a reverse stock split if such action is authorized by the Company’s stockholders at its annual meeting of stockholders to be held on May 22, 2023. See Note 9 – Subsequent Events – Nasdaq Notice for additional information. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates in Financial Statement Preparation The preparation of condensed consolidated financial statements in accordance with GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that affect the reported amounts in the consolidated financial statements, and related disclosures in the accompanying notes to the financial statements. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the condensed consolidated Financial Statements in the period they are determined to be necessary. Asset impairment loss calculations require us to apply judgment in estimating asset group fair values and future cash flows, including periods of operation, projections of product pricing, production levels, product costs, market supply and demand, inflation, projected capital spending and, specifically for fixed assets acquired, assigned useful lives, functional obsolescence, asset condition and discount rates. When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe would be consistent with the assumptions that a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The assessment of whether an asset group should be classified as held and used or held for sale requires us to apply judgment in estimating the probable timing of the sale, and in testing for impairment loss, judgment is required in estimating the net proceeds from the sale. Actual asset impairment losses could vary considerably from estimated impairment losses if actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values. Cash, cash equivalents and short-term investments Cash includes cash equivalents which are highly liquid investments that are readily convertible to cash. The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Our short-term investments consist primarily of liquid investment grade commercial paper, which are diversified among individual issuers, including non-U.S. governments, non-U.S. governmental agencies, supranational institutions, banks and corporations. The short-term investments are accounted for as available-for-sale securities. The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities. The Company maintains its cash in bank deposit and securities accounts that exceed federally insured limits. We have not experienced significant losses in such accounts and management believes it is not exposed to material credit risk. Inventory and Inventory Valuation Inventory is stated at the lower of cost or net realizable value. Net realizable value (“NRV”) is the estimated future selling price of the inventory in the ordinary course of business less cost to sell, and considers general market and economic conditions. A charge was also taken to adjust for inventory in excess of anticipated Endurance production. Due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. Therefore, the quantity we expect to produce and sell, along with inventory for future service and warranty parts is lower than previously anticipated. The charges to reflect the NRV totaled $19.8 million for the three months ended March 31, 2023 and are recorded within Cost of Sales in the Company’s Condensed Consolidated Statement of Operations. Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation will be computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life. Valuation of Long-Lived and Intangible Assets Long-lived assets, such as property, plant, and equipment are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Asset impairment calculations require us to apply judgment in estimating asset group fair values and future cash flows, including periods of operation, projections of product pricing, production levels, product costs, market supply and demand, inflation, projected capital spending and, specifically for fixed assets acquired, assigned useful lives, functional obsolescence, asset condition and discount rates. When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe would be consistent with the assumptions that a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The assessment of whether an asset group should be classified as held and used or held for sale requires us to apply judgment in estimating the probable timing of the sale, and in testing for impairment loss, judgment is required in estimating the net proceeds from the sale. Actual asset impairment losses could vary considerably from estimated impairment losses if actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values. Changes in these estimates and assumptions could materially affect the determination of fair value and any impairment charge. For assets to be held and used, including identifiable intangible assets and long-lived assets subject to amortization, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability of a long-lived asset subject to amortization is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Significant management judgment is required in this process. We recognized impairment charges of $109.8 million and $95.6 million for the three months ended March 31, 2023 and for the year ended December 31, 2022. No fixed asset impairment charges were recognized for the three months ended March 31, 2022. See Note 4 – Property, Plant and Equipment for details regarding our impairment. In November 2019, the Company entered into a transaction with Workhorse Group Inc. (“Workhorse Group”), for the purpose of obtaining certain intellectual property. In connection with granting this license, Workhorse Group received 10% of the outstanding Legacy Lordstown common stock, valued at $11.1 million, and was entitled to royalties of 1% of the gross sales price of the first 200,000 vehicle sales. In November 2020, we prepaid the royalty payment to Workhorse Group in the amount of $4.75 million, representing an advance on the royalties discussed above, but only to the extent that the aggregate amount of such royalty fees exceeded the amount paid upfront. During the year ended December 31, 2021, we continued to refine the design of the Endurance and considered technologies we would use in future vehicles. Given the technology used in the Endurance and new management’s strategic direction of the Company, inclusive of the transactions contemplated with Foxconn as detailed in Note 1 Description of Organization and Business Operations , we deemed it appropriate to change the useful life of the intellectual property license we acquired to zero months. As such, we recorded accelerated amortization of $11.1 million during the year ended December 31, 2021. Given that Workhorse Group technology is not being used in the Endurance and our strategic direction, inclusive of the transactions contemplated with Foxconn, we deemed it appropriate to terminate the royalty agreement. As such, we recorded a charge of $4.75 million during the year ended December 31, 2022 to write-off the prepaid royalty. In August 2021, the Company entered into an agreement to purchase a perpetual software license related to manufacturing execution system for a cost of $1.0 million. As of December 31, 2022, with the Company’s current strategic direction, it was determined that this software will not be utilized for the manufacturing of Endurance and therefore full impairment of $1.0 million was recorded for the period ended December 31, 2022. Research and development costs The Company expenses research and development costs as they are incurred. Research and development costs consist primarily of personnel costs for engineering, testing and manufacturing costs, along with expenditures for prototype manufacturing, testing, software subscriptions for computer-aided engineering and product lifecycle management validation, certification, contract and other professional services and costs associated with operating the Lordstown facility, prior to its sale. Stock-based compensation The Company’s stock incentive plan offers stock options, Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”). The Company recognizes share based compensation expense over a defined vesting period for the entire award. We estimate forfeitures based on actual historical forfeitures. The fair value for stock options is determined using the Black-Scholes option pricing models, which incorporates assumptions regarding the expected volatility, expected option life and risk-free interest rate. The grant date fair value of RSUs are calculated using the closing market price of the Company’s Class A common stock. Warrants The Company accounts for the Private Warrants (as defined below) and the Foxconn Warrants as described in Note 3 – Fair Value Measurements in accordance with the guidance contained in ASC Topic 815-40-15-7D and 7F under which these Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies these warrants as liabilities at their fair value at each reporting period or at the time of settlement. Any change in fair value is recognized in the statement of operations. The Company accounts for the BGL Warrants (as defined below) as equity as these warrants qualify as share-based compensation under ASC Topic 718. Income taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. Recently issued accounting pronouncements There are no recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s Condensed Financial Statements and related disclosures. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2023 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 3 — FAIR VALUE MEASUREMENTS The Company follows the accounting guidance in ASC Topic 820, Fair Value Measurements The Company has short-term investments which are primarily commercial paper that are classified as Level II. The valuation inputs for the short-term investments are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The Company has issued the following warrants: (i) warrants (the “Public Warrants”) to purchase shares of Class A common stock with an exercise price of $11.50 per share, (ii) warrants (the “Private Warrants”) to purchase Class A common stock with an exercise price of $11.50 per share, (iii) warrants (the “BGL Warrants”) to purchase Class A common stock with an exercise price of $10.00 per share, and (iv) the Foxconn Warrants to purchase shares of Class A common stock with an exercise price of $10.50. The BGL Warrants were issued as part of the Business Combination in October 2020, which are set to expire in October 2023, are classified as equity as they qualify as share-based compensation under ASC Topic 718, Compensation – Stock Compensation The Public Warrants and the Private Warrants were recorded in the Company’s Condensed Financial Statements as a result of the Business Combination between DiamondPeak and Lordstown EV Corporation (formerly known as Lordstown Motors Corp.) and the reverse recapitalization that occurred on October 23, 2020 and did not impact any reporting periods prior to the Business Combination. The Company determined that the fair value of the Public Warrants and Private Warrants was $100.9 million as of the date of the Business Combination. As of March 31, 2023, we had 1.7 million Foxconn Warrants, 2.3 million Private Warrants and 1.6 million BGL Warrants outstanding. As of March 31, 2022, we had 2.3 million Private Warrants, 1.6 million BGL Warrants outstanding and no Public Warrants outstanding. The fair value of the Foxconn Warrants was $0.3 million at issuance. The Private Warrants and the Foxconn Warrants are classified as a liability with any changes in the fair value recognized immediately in our condensed consolidated statements of operations. The following table summarizes the net loss (gain) on changes in fair value (in thousands) related to the Private Warrants and the Foxconn Warrants: Three months ended Three months ended March 31, 2023 March 31, 2022 Private Warrants (231) (1,520) Foxconn Warrants (136) — Net gain (loss) on changes in fair value $ (367) $ (1,520) Observed prices for the Public Warrants are used as Level 1 inputs as they were actively traded until being redeemed in January 2021. The Private Warrants and the Foxconn Warrants are measured at fair value using Level 3 inputs. These instruments are not actively traded and are valued using a Monte Carlo option pricing model and Black-Scholes option pricing model, respectively, that use observable and unobservable market data as inputs. A Monte Carlo model was used to simulate a multitude of price paths to measure fair value of the Private Warrants. The Monte Carlo model simulates risk-neutral stock price paths utilizing two parameters – a drift term (based on the risk-free rate and assumed volatility) and an error term (determined using a random number and assumed volatility). This analysis simulates possible paths for the stock price over the term of the Private Warrants. For each simulated price path, we evaluate the conditions under which the Company could redeem each Private Warrant for a fraction of whole shares of the underlying as detailed within the applicable warrant agreement. If the conditions are met, we assume redemptions would occur, although the Private Warrant holders would have the option to immediately exercise if it were more advantageous to do so. For each simulated price path, if a redemption does not occur the holders are assumed to exercise the Private Warrants if the stock price exceeds the exercise price at the end of the term. Proceeds from either the redemption or the exercise of the Private Warrants are reduced to a present value amount at each measurement date using the risk-free rate for each simulated price path. Present value indications from iterated priced paths were averaged to derive an indication of value for the Private Warrants. The Foxconn Warrants do not have any redemption features and their fair value was measured using the Black-Scholes closed-form option pricing model. Inputs to the model include remaining term, prevailing stock price, strike price, risk-free rate, and volatility. The stock price volatility rates utilized were 90% and 80%, respectively, for the valuations as of March 31, 2023 and March 31, 2022. This assumption considers observed historical stock price volatility of other companies operating in the same or similar industry as the Company over a period similar to the remaining term of the Private Warrants and the Foxconn Warrants, as well as the volatility implied by the traded options of the Company. The risk-free rates utilized were 3.819% and 2.454% for the valuations as of March 31, 2023 and March 31, 2022, respectively, for the Private Warrants. The risk-free rate utilized for the valuation of the Foxconn Warrants as of three months ended March 31, 2023 was 3.896% . The following tables summarize the valuation of our financial instruments (in thousands): Total Quoted prices in active markets (Level 1) Prices with observable inputs (Level 2) Prices with unobservable inputs (Level 3) March 31, 2023 Cash and cash equivalents $ 108,086 $ 108,086 $ — $ — Short-term investments 68,589 — 68,589 — Private Warrants 23 — — 23 Foxconn Warrants 34 — — 34 Total Quoted prices in active markets (Level 1) Prices with observable inputs (Level 2) Prices with unobservable inputs (Level 3) December 31, 2022 Cash and cash equivalents $ 121,358 $ 121,358 $ — $ — Short-term investments 100,297 — 100,297 — Private Warrants 254 — — 254 Foxconn Warrants 170 170 The following table summarizes the changes in our Level 3 financial instruments (in thousands): Balance at December 31, 2022 Additions Settlements Loss on fair value adjustments included in earnings Balance at March 31, 2023 Private Warrants $ 254 — — (231) $ 23 Foxconn Warrants 170 — (136) 34 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2023 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4 — PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net of impairment charges, consisted of the following (in thousands): March 31, 2023 December 31, 2022 Property, Plant & Equipment Land $ — $ — Buildings — — Machinery and equipment 20,384 41,143 Tooling 59,602 119,735 Construction in progress 14,287 41,378 $ 94,273 $ 202,256 Less: Accumulated depreciation (16,150) (8,476) Total $ 78,123 $ 193,780 We outsource all of the manufacturing of the Endurance and operation of certain remaining assets to Foxconn under the Contract Manufacturing Agreement. During the year ended December 31, 2022, the Company sold its manufacturing facility, certain equipment, and other assets located in Lordstown, Ohio and recorded a gain of $100.9 million. We continue to own our hub motor assembly line, as well as our battery module and pack line assets, certain tooling and other excluded assets. Construction in progress as of March 31, 2023 primarily includes certain production equipment and tooling and uninstalled equipment acquired for higher capacity production and general assets the Company's facility in Lordstown, Ohio and tooling held at various supplier locations. We continue to evaluate the merits of producing and selling vehicles to customers in order to seed the commercial fleet market, demonstrate the capabilities of the Endurance, and support our OEM partnership pursuits. Due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. As of March 31, 2023, the Company determined that there was substantial doubt in our ability to continue as a going concern. As substantially all of our fixed assets support the production of the Endurance, the Company periodically reviews its fixed asset useful lives for depreciation purposes and for potential impairment. In light of the fact that we anticipate production of the Endurance will cease in the near future, the Company has revised its estimate of the useful life of manufacturing assets, shortening the depreciation period to July 31, 2023. Accordingly, as of April 1, 2023 depreciation on these assets was revised to account for this change in estimate that will result in substantially higher depreciation beginning in the second quarter of 2023. As of March 31, 2023, property, plant, and equipment was reviewed for potential impairment for recoverability by comparing the carrying amount of our asset group to estimated undiscounted future cash flows expected to be generated by the asset group. The Company determined that all our property, plant, and equipment represent one asset group which is the lowest level for which identifiable cash flows are available. |
MEZZANINE EQUITY
MEZZANINE EQUITY | 3 Months Ended |
Mar. 31, 2023 | |
MEZZANINE EQUITY | |
MEZZANINE EQUITY | NOTE 5 – MEZZANINE EQUITY On November 7, 2022, the Company issued 0.3 million shares of Preferred Stock for $100 per share to Foxconn, resulting in gross proceeds of $30 million. In addition, following the parties’ agreement to the EV Program budget and the EV Program milestones and satisfaction of those EV Program milestones and other conditions set forth in the Investment Agreement, Foxconn is to purchase in two tranches, a total of 0.7 million additional shares of Preferred Stock at a purchase price of $100 per share for aggregate proceeds of $70 million. The first tranche will be in an amount equal to 0.3 million shares for an aggregate purchase price of $30 million; the second tranche will be in an amount equal to 0.4 million shares for an aggregate purchase price of $40 million. The parties agreed to use commercially reasonable efforts to agree upon the EV Program budget and EV Program milestones no later than May 7, 2023. The completion of the Subsequent Preferred Funding would provide critical liquidity for the Company’s operations. On April 21, 2023, the Company received the Foxconn Notice asserting the Company had breached the Investment Agreement and purporting to terminate the Investment Agreement if the breach is not cured within 30 days. The Company has notified Foxconn in writing that (1) it believes the breach allegations in the Foxconn Notice are without merit, (2) the Investment Agreement, by its terms, does not permit Foxconn to terminate it following the Initial Closing, and (3) in any event, Foxconn cannot exercise termination rights because Foxconn has breached the Investment Agreement by failing to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. On May 1, 2023, after having publicly disclosed the Foxconn Notice, the Company received the Second Foxconn Notice (1) indicating that Foxconn agrees that it is unable to terminate the Investment Agreement after the Initial Closing, (2) asserting that the Nasdaq Notice constitutes a breach of a representation that is a condition to the Subsequent Common Closing and, therefore, Foxconn is not obligated to consummate the Subsequent Common Closing until such breach is cured, and (3) asserting that the Company’s claims regarding Foxconn’s breach of the Investment Agreement with respect to the EV Program and Subsequent Preferred Funding are without merit. The Company continues to believe that the breach allegations by Foxconn are without merit, and Foxconn is obligated to complete the Subsequent Common Closing on or before May 8, 2023. The Company intends to enforce its contractual rights and remedies under the Investment Agreement, including with respect to Foxconn’s breach regarding the EV Program budget and EV Program milestones, its Subsequent Preferred Funding obligations and its knowing and intentional efforts to invalidly terminate the Investment Agreement without any basis and withhold critical funding to the material detriment of the Company. The Company is in discussions with Foxconn to seek a resolution regarding these matters; however, to date, the parties are at an impasse and Foxconn has indicated that it does not intend the close the Subsequent Common Closing on May 8, 2023 and we do not expect Foxconn to provide its approval to the EV Program budget and EV Program milestones by May 7, 2023. No assurances can be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Preferred Funding to occur on a timely basis. If such funding does not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial alternatives in the event a resolution is not reached. The Preferred Stock, with respect to dividend rights, rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company and redemption rights, ranks: (a) on a parity basis with each other class or series of any equity interests (“Capital Stock”) of the Company now or hereafter existing, the terms of which expressly provide that such class or series ranks on a parity basis with the Preferred Stock as to such matters (such Capital Stock, “Parity Stock”); (b) junior to each other class or series of Capital Stock of the Company now or hereafter existing, the terms of which expressly provide that such class or series ranks senior to the Preferred Stock as to such matters (such Capital Stock, “Senior Stock”); and (c) senior to the Class A common stock and each other class or series of Capital Stock of the Company now or hereafter existing, the terms of which do not expressly provide that such class or series ranks on a parity basis with, or senior to, the Preferred Stock as to such matters (such Capital Stock, “Junior Stock”). While Foxconn’s beneficial ownership of our Class A common stock meets the 25% Ownership Requirement (defined below), Parity Stock and Senior Stock can only be issued with Foxconn’s consent. In the event of any liquidation, dissolution or winding up of the affairs of the Company, the holders of Preferred Stock are entitled, out of assets legally available therefor, before any distribution or payment to the holders of any Junior Stock, and subject to the rights of the holders of any Senior Stock or Parity Stock and the rights of the Company’s existing and future creditors, to receive in full a liquidating distribution in cash and in the amount per share of Preferred Stock equal to the greater of (1) the sum of $100 per share plus the accrued unpaid dividends with respect to such share, and (2) the amount the holder would have received had it converted such share into Class A common stock immediately prior to the date of such event. All holders of shares of Preferred Stock are entitled to vote with the holders of Class A common stock on all matters submitted to a vote of stockholders of the Company as a single class with each share of Preferred Stock entitled to a number of votes equal to the number of shares of Class A common stock into which such share could be converted; provided, that no holder of shares of Preferred Stock will be entitled to vote to the extent that such holder would have the right to a number of votes in respect of such holder’s shares of Class A common stock, Preferred Stock or other capital stock that would exceed the limitations set forth in clauses (i) and (ii) of the definition of Ownership Limitations. Pursuant to the Certificate of Designation, commencing on the later of (1) May 7, 2023, and (2) the earlier of (x) the date of the Subsequent Common Closing and (y) November 7, 2023 (the “Conversion Right Date”), and subject to the Ownership Limitations, the Preferred Stock is convertible at the option of the holder into a number of shares of Class A common stock obtained by dividing the sum of the liquidation preference (i.e., $100 per share) and all accrued but unpaid dividends with respect to such share as of the applicable conversion date by the conversion price as of the applicable conversion date. The conversion price currently is $1.936 per share and it is subject to customary adjustments. At any time following the third anniversary of the date of issuance, the Company can cause the Preferred Stock to be converted if the volume-weighted average price of the Class A common stock exceeds 200% of the Conversion Price for a period of at least twenty trading days in any period of thirty consecutive trading days. Foxconn’s ability to convert is limited by clauses (i) and (ii) of the definition of the Ownership Limitations. Upon a change of control, Foxconn can cause the Company to purchase any or all of its Preferred Stock at a purchase price equal to the greater of its liquidation preference (including any unpaid accrued dividends) and the amount of cash and other property that it would have received had it converted its Preferred Stock prior to the change of control transaction (the “Change of Control Put”). The terms of the Company’s Preferred Stock do not specify an unconditional obligation of the Company to redeem the Preferred Stock on a specific or determinable date, or upon an event certain to occur. The Company notes the Change of Control Put; however, this is contingent on the occurrence of the change of control event, which is not a known or determinable event at time of issuance. Therefore, the Preferred Stock is not considered to be mandatorily redeemable. The conversion of the Preferred Stock is based on fixed conversion price rather than a fixed conversion amount. The value of the Preferred Stock obligation would not vary based on something other than the fair value of the Company’s equity shares or change inversely in relation to the fair value of the Company’s equity shares. Based on these factors, Preferred Stock does not require classification as a liability in accordance with the provisions in ASC 480 “Distinguishing Liabilities from Equity”. The Preferred Stock is not redeemable at a fixed or determinable date or at the option of the holder. However, the Preferred Stock does include the Change of Control Put, which could allow the holder to redeem the Preferred Stock upon the occurrence of an event. As the Company cannot assert control over any potential event which would qualify as a change of control, the event is not considered to be solely within the control of the issuer, and would require classification in temporary equity (as per ASC 480-10-S99-3A(4)). Accordingly, the Preferred Stock is classified as temporary equity and is separated from permanent equity on the Company’s Balance Sheet. The Company believes that the transaction price associated with the sale of the Preferred Stock to Foxconn is representative of fair value and will be the basis for initial measurement. The Preferred Stock issued by the Company accrues dividends at the rate of 8 % per annum whether or not declared and/or paid by the Company (cumulative dividends). In addition, the dividends will compound on a quarterly basis (upon each Preferred Dividend Payment Date (as defined in the Certificate of Designation, Preferences and Rights of the Series A Convertible Preferred Stock filed by the Company with the Secretary of State of the State of Delaware (the “Certificate of Designations”))) to the extent they are not paid by the Company. The Company records the dividends (effective PIK dividends) as they are earned, based on the fair value of the Preferred Stock at the date they are earned. In addition, the holders of the Preferred Stock participate with any dividends payable in respect of any Junior Stock or Parity Stock. For the year ended December 31, 2022, and quarter ended March 31, 2023 the Company accrued $0.3 million and $0.6 million dividends, respectively, which represents the estimated fair value to Preferred Stock with a corresponding adjustment to additional-paid-in-capital common stock in the absence of retained earnings. While the Company concluded above that accretion to redemption value of the Preferred Stock was not required as the Preferred Stock is not currently redeemable or probable of becoming redeemable, it is noted that the recognition of the dividends will not necessarily reflect the redemption value at any time (given the ‘greater of’ language included as part of the determination of redemption value per above). As of March 31, 2023, the Company does not consider change of control to be probable. |
CAPITAL STOCK AND LOSS PER SHAR
CAPITAL STOCK AND LOSS PER SHARE | 3 Months Ended |
Mar. 31, 2023 | |
CAPITAL STOCK AND LOSS PER SHARE | |
CAPITAL STOCK AND LOSS PER SHARE | NOTE 6 — CAPITAL STOCK AND LOSS PER SHARE On August 17, 2022, the Company held a special meeting of stockholders whereby our stockholders voted to amend the to increase our authorized shares of capital stock from 312 million to 462 million, consisting of (i) 450 million shares of Class A common stock and (ii) 12 million shares of preferred stock, each with a par value of $0.0001 . We had 239.0 million and 238.9 million issued outstanding a The weighted-average number of shares outstanding for basic and diluted loss per share of Class A common stock is as follows (in thousands): Three months ended Three months ended March 31, 2023 March 31, 2022 Basic weighted average shares outstanding 239,754 196,503 Diluted weighted average shares outstanding 239,754 196,503 The following outstanding potentially dilutive Class A common stock equivalents have been excluded from the computation of diluted net loss per share attributable to Class A common stock stockholders for the periods presented due to their anti-dilutive effect (in thousands): Three months ended Three months ended March 31, 2023 March 31, 2022 Foxconn Preferred Stock 15,943 — Share awards 102 3,862 Foxconn Warrants 1,700 — BGL Warrants 1,649 1,649 Private Warrants 2,314 2,314 Total 21,708 7,825 Investment Transactions On November 7, 2022, the Company entered into the Investment Agreement under which Foxconn agreed to make additional equity investments (collectively, the “Investment Transactions”) in the Company through the purchase of $70 million of Class A common stock and up to $100 million in Preferred Stock (together with the Class A common stock, the “Securities”), subject to certain conditions, including, without limitation, regulatory approvals and satisfaction of certain EV Program budget and EV Program milestones established by the parties. The Company will use any proceeds from the sale of the Class A common stock for general corporate purposes as determined by the Company’s Board of Directors (the “Board”) and the proceeds from the sale of the Preferred Stock is limited to funding the EV Program or any substitute or replacement electric vehicle program as agreed to by Foxconn and the Company. Investment Agreement On November 22, 2022, the Company completed the Initial Closing under the Investment Agreement, at which Foxconn purchased (a) approximately 12.9 million shares of Class A common stock at a purchase price of $1.76 per share, and (b) 0.3 million shares of Preferred Stock at a purchase price of $100 per share, for an aggregate purchase price of approximately $52.7 million. The Investment Agreement provides for the Subsequent Common Closing, at which time Foxconn is required to purchase approximately 26.9 million shares of Class A common stock for approximately $47.3 million. The Subsequent Common Closing is to occur within 10 business days following the parties’ receipt of CFIUS Clearance and subject to satisfaction of the other conditions set forth in the Investment Agreement (which the Company believes have been or will be satisfied). CFIUS Clearance was received on April 25, 2023, which means the Subsequent Common Closing is to occur on or before May 8, 2023. The Company is ready, willing and able to complete the Subsequent Common Closing on a timely basis. In addition, following the parties’ agreement to the EV Program budget and the EV Program milestones and satisfaction such milestones and other conditions set forth in the Investment Agreement, Foxconn is to purchase in the Subsequent Preferred Funding two tranches equal to 0.7 million additional shares of Preferred Stock at a purchase price of $100 per share for aggregate proceeds of $70 million. The parties agreed to use commercially reasonable efforts to agree upon the EV Program budget and EV Program milestones no later than May 7, 2023. On April 21, 2023, the Company received the Foxconn Notice (1) asserting that the Company was in breach of the Investment Agreement due to its previously disclosed receipt of the Nasdaq Notice indicating that the Company was no longer in compliance with the Bid Price Requirement (see – Note 9 – Subsequent Events – Nasdaq Notice) and (2) purporting to terminate the Investment Agreement if the breach is not cured within 30 days. In response, the Company notified Foxconn in writing on April 25, 2023 that (1) it believes the breach allegations in the Foxconn Notice are without merit, (2) the Investment Agreement, by its terms, does not permit Foxconn to terminate it following the Initial Closing, and (3) in any event, Foxconn cannot exercise termination rights because Foxconn has breached the Investment Agreement by failing to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate Subsequent Preferred Funding. On May 1, 2023, after having publicly disclosed the Foxconn Notice, the Company received the Second Foxconn Notice (1) indicating that Foxconn agrees that it is unable to terminate the Investment Agreement after the Initial Closing, (2) asserting that the Nasdaq Notice constitutes a breach of a representation that is a condition to the Subsequent Common Closing and, therefore, Foxconn is not obligated to consummate the Subsequent Common Closing until such breach is cured, and (3) asserting that the Company’s claims regarding Foxconn’s breach of the Investment Agreement with respect to the EV Program and Subsequent Preferred Funding are without merit. The Company continues to believe that the breach allegations by Foxconn are without merit, and Foxconn is obligated to complete the Subsequent Common Closing on or before May 8, 2023. The Company intends to enforce its contractual rights and remedies under the Investment Agreement, including with respect to Foxconn’s breach regarding the EV Program budget and EV Program milestones, its funding obligations and its knowing and intentional efforts to invalidly terminate the Investment Agreement without any basis and withhold critical funding to the material detriment of the Company. The Company is in discussions with Foxconn to seek a resolution regarding these matters; however, to date, the parties are at an impasse and Foxconn has indicated that it does not intend the close the Subsequent Common Closing on May 8, 2023 and we do not expect Foxconn to provide its approval to the EV Program budget and EV Program milestones by May 7, 2023. No assurances can be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Common Closing or the Subsequent Preferred Funding to occur on a timely basis. If the Subsequent Common Closing is delayed or such fundings do not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial alternatives in the event a resolution is not reached. The Investment Agreement also provides that: ● Board Representation ● Termination of Foxconn Joint Venture ● Standstill ● Exclusivity ● Voting Agreement and Consent Rights directors Foxconn has agreed to vote all of its shares of Class A common stock and Preferred Stock (to the extent then entitled to vote) in favor of each director recommended by the Board and in accordance with any recommendation of the Board on all other proposals that are the subject of stockholder action (other than any action related to any merger or business combination or other change of control transaction or sale of assets). So long as the 25% Ownership Requirement is satisfied, without the consent of the holders of at least a majority of the then-issued and outstanding Preferred Stock (voting as a separate class), the Company cannot (i) amend any provision of the Charter or the Company’s amended and restated bylaws in a manner that would adversely affect the Preferred Stock or increase or decrease the number of shares of Preferred Stock, (ii) authorize or create, or increase the number of shares of any parity or senior securities other than securities on parity with the Preferred Stock with an aggregate liquidation preference of not more than $30 million, (iii) increase the size of the Board, or (iv) sell, license or lease or encumber any material portion of the Company’s hub motor technology and production line other than in the ordinary course of business. ● Participation Rights The Investment Agreement contains closing conditions. The Investment Agreement can be terminated by mutual agreement of the parties to amend the Investment Agreement to allow such a termination, and cannot otherwise be terminated by either party following the Initial Closing. Registration Rights Agreement On November 22, 2022, the Company and Foxconn entered into the Registration Rights Agreement pursuant to which the Company agreed to use reasonable efforts to file and cause to be declared effective a registration statement with the SEC registering the resale of the Class A common stock issued to Foxconn, including any shares of Common Stock issuable upon conversion of the Preferred Stock under the Investment Agreement, which is to be filed promptly following the earlier to occur of (i) the Subsequent Common Closing and (ii) May 7, 2023. Foxconn also has customary demand and piggyback registration rights with respect to the shares of Class A common stock issued or issuable under the Investment Agreement, and indemnification rights. Sales Agreement and ATM Offering On November 7, 2022, the Company entered into the Sales Agreement with Jefferies, as agent, pursuant to which the Company may offer and sell up to approximately 50.2 million shares of our Class A common stock, from time to time through Jefferies. The Company has agreed to pay Jefferies commissions for its services of acting as agent of up to 3% of the gross proceeds from the sale of the shares of Class A common stock pursuant to the Sales Agreement. The Company has also agreed to provide Jefferies with customary indemnification and contribution rights. Upon delivery of an issuance notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell shares of Class A common stock at market prices by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Global Select Market, the existing trading market for the Class A common stock. During 2022, Jefferies sold approximately 7.8 million shares of Class A common stock, which resulted in net proceeds of $12.4 million. There were no shares sold in the quarter ending March 31, 2023. The Company may instruct Jefferies to not sell the shares of Class A common stock if the sales cannot be transacted at or above the price designated by the Company in any issuance notice. The Company is not obligated to make any sales of the shares of Class A common stock under the Sales Agreement. In the future, any additional sales will depend on a variety of factors, including the sales price of the Class A common stock being at least $1.00, higher than the current stock price, and our ability to maintain compliance with exchange listing requirements, which as of April 19, 2023, we were not (see Note 9 – Subsequent Events – Nasdaq Notice). Even if the Company had the ability to issue shares of Class A common stock under the Sales Agreement, no assurances can be given that the Company would sell any shares of Class A common stock under the Agreement, or, if it does, as to the price or amount of the shares of Class A common stock that it sells or the dates when such sales will take place. Even if additional funds are raised under the ATM Offering, the Company will require additional financing to execute its business plan. The Company or Jefferies may suspend or terminate the offering of shares of Class A commons stock upon notice to the other party, subject to certain conditions. Jefferies will act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq. We entered into an equity purchase agreement (“Equity Purchase Agreement”) with YA II PN, LTD. (“YA”) on July 23, 2021 , pursuant to which YA had committed to purchase up to $400 million of our Class A common stock, at our direction from time to time, subject to the satisfaction of certain conditions. The Equity Purchase Agreement was terminated on November 22, 2022. As consideration for YA’s irrevocable commitment to purchase shares of the Company’s Class A common stock upon the terms of and subject to satisfaction of the conditions set forth in the Equity Purchase Agreement, upon execution of the Equity Purchase Agreement, the Company issued 0.4 million shares of its Class A common stock to YA (the “Commitment Shares”). During the year ended December 31, 2022, we issued 17.5 million shares to YA and received $40.4 million cash, net of equity issuance costs. During the year ended December 31, 2021, inclusive of the 0.4 million Commitment Shares, we issued 9.6 million shares to YA and received $49.4 million cash, net of equity issuance costs |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 – COMMITMENTS AND CONTINGENCIES The Company is subject to extensive pending and threatened legal proceedings arising in the ordinary course of business and we have already incurred, and expect to continue to incur, significant legal expenses in defending against these claims. The Company records a liability for loss contingencies in the Condensed Consolidated Financial Statements when a loss is known or considered probable and the amount can be reasonably estimated. The Company has and may in the future enter into discussions regarding settlement of these matters, and may enter into settlement agreements if it believes it is in the best interest of the Company. Settlement by the Company or adverse decisions with respect to the matters disclosed, individually or in the aggregate, may result in liability material to the Company’s consolidated results of operations, financial condition or cash flows. The Company had accruals of $34.7 million and $35.9 million, for the periods ending March 31, 2023 and December 31, 2022, respectively, for certain of its outstanding legal proceedings within Accrued and other current liabilities on its Condensed Consolidated Balance Sheet. The accrual is based on current information, legal advice and the potential impact of the outcome of one or more claims on related matters and may be adjusted in the future based on new developments. This accrual does not reflect a full range of possible outcomes for these proceedings or the full amount of any damages alleged, which are significantly higher. Furthermore, the Company may use Class A common stock as a consideration in any settlement. While the Company believes that additional losses beyond current accruals are likely, and any such additional losses may be significant, it cannot presently estimate a possible loss contingency or range of reasonably possible loss contingencies beyond current accruals. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments and potential actions by third parties. Lordstown was notified by its primary insurer under our post-merger directors and officers insurance policy that the insurer is taking the position that no coverage is available for the consolidated securities class action, various shareholder derivative actions, the consolidated stockholder class action, various demands for inspection of books and records, the SEC investigation, and the investigation by the United States Attorney’s Office for the Southern District of New York described below, and certain indemnification obligations, under an exclusion to the policy called the “retroactive date exclusion.” The insurer has identified other potential coverage issues as well. Excess coverage attaches only after the underlying insurance has been exhausted, and generally applies in conformance with the terms of the underlying insurance. Lordstown is analyzing the insurer’s position, and intends to pursue any available coverage under this policy and other insurance. As a result of the denial of coverage, no or limited insurance may be available to us to reimburse our expenses or cover any potential losses for these matters, which could be significant. The insurers in our Side A D&O insurance program, providing coverage for individual directors and officers in derivative actions and certain other situations, have issued a reservation of rights letter which, while not denying coverage, has cast doubt on the availability of coverage for at least some individuals and/or claims. Legal fees and costs of litigation or an adverse judgment or settlement in any one or more of our ongoing litigation matters that are not insured or that is in excess of insurance coverage could significantly exceed our current accrual and ability to pay. This would have a material adverse effect on our financial position and results of operations and could severely curtail or cause our operations to cease entirely. On October 30, 2020, the Company, together with certain of its current and former executive officers including Mr. Burns, Mr. LaFleur, Mr. Post and Mr. Schmidt, and certain of our other current and former employees, were named as defendants in a lawsuit filed by Karma Automotive LLC (“Karma”) in the United States District Court for the Central District of California (“District Court”). On November 6, 2020, the District Court denied Karma’s request for a temporary restraining order. On April 16, 2021, Karma filed an Amended Complaint that added additional defendants (two Company employees and two Company contractors that were previously employed by Karma) and a number of additional claims alleging generally that the Company unlawfully poached key Karma employees and misappropriated Karma’s trade secrets and other confidential information. The Amended Complaint contains a total of 28 counts, including: (i) alleged violations under federal law of the Computer Fraud and Abuse Act and the Defend Trade Secrets Act; (ii) alleged violations of California law for misappropriation of trade secrets and unfair competition; (iii) common law claims for breach of contract and tortious interference with contract; (iv) common law claims for breach of contract, including confidentiality agreements, employment agreements and the non-binding letter of intent; and (v) alleged common law claims for breach of duties of loyalty and fiduciary duties. The Amended Complaint also asserts claims for conspiracy, fraud, interstate racketeering activity, and violations of certain provisions of the California Penal Code relating to unauthorized computer access. Karma is seeking permanent injunctive relief and monetary damages based on a variety of claims and theories asserting very substantial losses by Karma and/or improper benefit to the Company that significantly exceed the Company’s accrual with respect to the matter and ability to pay. The Company has opposed Karma’s damages claims on factual and legal grounds, including lack of causality. The Company is vigorously challenging Karma’s asserted damages. After several months of discovery, Karma filed a motion for preliminary injunction on August 8, 2021, seeking to temporarily enjoin the Company from producing any vehicle that incorporated Karma’s alleged trade secrets. On August 16, 2021, Karma also moved for sanctions for spoliation of evidence. On September 16, 2021, the District Court denied Karma’s motion for a preliminary injunction, and denied, in part, and granted, in part, Karma’s motion for sanctions. As a result of its partial grant of Karma’s sanctions motion, the District Court awarded Karma a permissive adverse inference jury instruction, the scope of which will be determined at trial. On January 14, 2022, Karma filed a motion for terminating sanctions (i.e., judgment in its favor on all claims) against the Company and defendant, Darren Post, as a result of Mr. Post’s handling of documents subject to discovery requests. The Company and Mr. Post opposed the request for sanctions. On February 18, 2022, the Court granted in part Karma’s motion for sanctions against Mr. Post and the Company, finding that Karma was entitled to reasonable attorneys’ fees and costs incurred as a result of Mr. Post’s and the Company’s failure to comply with the Court’s discovery orders. Karma’s request for terminating sanctions was denied. As a result of the Court’s order, on March 4, 2022, Karma submitted its application for attorneys’ fees and costs in the amount of $0.1 million. The Company did not oppose Karma’s application, and on March 21, 2022, the Court ordered an award of Karma’s costs and attorneys’ fees against the Company and Mr. Post in the amount of $0.1 million, which has been paid by the Company. On July 22, 2022, Karma filed a second motion for terminating sanctions against the Company and against Mr. Post based upon Mr. Post’s installation of anti-forensic software on his personal computers following his second deposition. Karma requested that the Court enter a default judgment on all claims against Mr. Post and the Company. Karma asked that, in the event terminating sanctions were not issued, the Court order a negative adverse inference on “remaining issues,” specifically that “Defendants Lordstown Motors Corp. and Darren Post shall be presumed to have misappropriated Karma’s trade secrets and confidential information, used Karma’s trade secrets and confidential information, and deliberately and maliciously destroyed evidence of their misappropriation and use of Karma’s trade secrets and confidential information in considering all damages and maliciousness.” The Court denied Karma’s second request for terminating sanctions in all respects. On September 27, 2022, Karma filed an ex parte In late November 2022, the Court ruled on the motion for summary judgment filed by the Company and the individual defendants. The ruling granted summary judgment in defendants’ favor on 9 counts and partial summary judgment on 11 counts of Karma’s Complaint. Although favorable, the ruling does not substantively alter the scope of the trial, as Karma’s claims for misappropriation of trade secrets, conspiracy, breach of the non-disclosure agreement, interference with Karma’s employment contracts, and violation of the computer fraud statutes will be the subject of the trial. The Company is continuing to evaluate the matters asserted in the lawsuit and is vigorously defending against Karma’s claims. The Company continues to believe that there are strong defenses to the claims and any damages demanded. The proceedings are subject to uncertainties inherent in the litigation process. Six related putative securities class action lawsuits were filed against the Company and certain of its current and former officers and directors and former DiamondPeak directors between March 18, 2021 and May 14, 2021 in the U.S. District Court for the Northern District of Ohio (Rico v. Lordstown Motors Corp., et al. (Case No. 21-cv-616); Palumbo v. Lordstown Motors Corp., et al. (Case No. 21-cv-633); Zuod v. Lordstown Motors Corp., et al. (Case No. 21-cv-720); Brury v. Lordstown Motors Corp., et al. (Case No. 21-cv-760); Romano v. Lordstown Motors Corp., et al., (Case No. 21-cv-994); and FNY Managed Accounts LLC v. Lordstown Motors Corp., et al. (Case No. 21-cv-1021)). The matters have been consolidated and the Court appointed George Troicky as lead plaintiff and Labaton Sucharow LLP as lead plaintiff’s counsel. On September 10, 2021, lead plaintiff and several additional named plaintiffs filed their consolidated amended complaint, asserting violations of federal securities laws under Section 10(b), Section 14(a), Section 20(a), and Section 20A of the Exchange Act and Rule 10b-5 thereunder against the Company and certain of its current and former officers and directors. The complaint generally alleges that the Company and individual defendants made materially false and misleading statements relating to vehicle pre-orders and production timeline. Defendants filed a motion to dismiss, which is fully briefed as of March 3, 2022. A hearing on the motion to dismiss has not been scheduled and a decision has not yet been rendered. We intend to vigorously defend against the claims. The proceedings are subject to uncertainties inherent in the litigation process. Four related stockholder derivative lawsuits were filed against certain of the Company’s officers and directors, former DiamondPeak directors, and against the Company as a nominal defendant between April 28, 2021 and July 9, 2021 in the U.S. District Court for the District of Delaware (Cohen, et al. v. Burns, et al. (Case No. 21-cv-604); Kelley, et al. v. Burns, et al. (Case No. 12-cv-724); Patterson, et al. v. Burns, et al. (Case No. 21-cv-910); and Sarabia v. Burns, et al. (Case No. 21-cv-1010)). The derivative actions in the District Court of Delaware have been consolidated. On August 27, 2021, plaintiffs filed a consolidated amended complaint, asserting violations of Section 10(b), Section 14(a), Section 20(a) and Section 21D of the Exchange Act and Rule 10b-5 thereunder, breach of fiduciary duties, insider selling, and unjust enrichment, all relating to vehicle pre-orders, production timeline, and the merger with DiamondPeak. On October 11, 2021, defendants filed a motion to stay this consolidated derivative action pending resolution of the motion to dismiss in the consolidated securities class action. On March 7, 2022, the court granted in part defendants' motion to stay, staying the action until the resolution of the motion to dismiss in the consolidated securities class action, but requiring the parties to submit a status report if the motion to dismiss was not resolved by September 3, 2022. The court further determined to dismiss without a motion, on the grounds that the claim was premature, plaintiffs' claim for contribution for violations of Sections 10(b) and 21D of the Exchange Act without prejudice. The parties filed a joint status report as required because the motion to dismiss in the consolidated securities class action was not resolved as of September 3, 2022. The parties filed additional court-ordered joint status reports on October 28, 2022, January 6, 2023 and April 3, 2023. On April 4, 2023, the Court ordered the parties to submit a letter brief addressing whether the Court should lift the stay. On April 14, 2023, the parties submitted a joint letter requesting that the Court not lift the stay. On April 17, 2023, the court lifted the stay and ordered the parties to meet and confer by May 8, 2023 and submit a proposed case-management plan. We intend to vigorously defend against the claims. The proceedings are subject to uncertainties inherent in the litigation process. Another related stockholder derivative lawsuit was filed in U.S. District Court for the Northern District of Ohio on June 30, 2021 (Thai v. Burns, et al. (Case No. 21-cv-1267)), asserting violations of Section 10(b), Section 14(a), Section 20(a) and Section 21D of the Exchange Act and Rule 10b-5 thereunder, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste, based on similar facts as the consolidated derivative action in the District Court of Delaware. On October 21, 2021, the court in the Northern District of Ohio derivative action entered a stipulated stay of the action and scheduling order relating to defendants’ anticipated motion to dismiss and/or subsequent motion to stay that is similarly conditioned on the resolution of the motion to dismiss in the consolidated securities class action. We intend to vigorously defend against the claims. The proceedings are subject to uncertainties inherent in the litigation process. Another related stockholder derivative lawsuit was filed in the Delaware Court of Chancery on December 2, 2021 (Cormier v. Burns, et al. (C.A. No. 2021-1049)), asserting breach of fiduciary duties, insider selling, and unjust enrichment, based on similar facts as the federal derivative actions. An additional related stockholder derivative lawsuit was filed in the Delaware Court of Chancery on February 18, 2022 (Jackson v. Burns, et al. (C.A. No. 2022-0164)), also asserting breach of fiduciary duties, unjust enrichment, and insider selling, based on similar facts as the federal derivative actions. On April 19, 2022, the parties in Cormier and Jackson filed a stipulation and proposed order consolidating the two actions, staying the litigation until the resolution of the motion to dismiss in the consolidated securities class action and appointing Schubert Jonckheer & Kolbe LLP and Lifshitz Law PLLC as Co-Lead Counsel. On May 10, 2022, the court granted the parties’ proposed stipulation and order to consolidate the actions, and to stay the consolidated action pending the resolution of the motion to dismiss in the consolidated securities class action. While the action remains stayed, on June 24, 2022, the plaintiffs filed a consolidated complaint asserting similar claims, and substituting a new plaintiff (Ed Lomont) for Cormier, who no longer appears to be a named plaintiff in the consolidated action. We intend to vigorously defend against these actions. The proceedings are subject to uncertainties inherent in the litigation process. Two putative class action lawsuits were filed against former DiamondPeak directors and DiamondPeak Sponsor LLC on December 8 and 13, 2021 in the Delaware Court of Chancery (Hebert v. Hamamoto, et al. (C.A. No. 2021-1066); and Amin v Hamamoto, et al. (C.A. No. 2021-1085)). The plaintiffs purport to represent a class of investors in DiamondPeak and assert breach of fiduciary duty claims based on allegations that the defendants made or failed to prevent alleged misrepresentations regarding vehicle pre-orders and production timeline, and that but for those allegedly false and misleading disclosures, the plaintiffs would have exercised a right to redeem their shares prior to the de-SPAC transaction. On February 9, 2022, the parties filed a stipulation and proposed order consolidating the two putative class action lawsuits, appointing Hebert and Amin as co-lead plaintiffs, appointing Bernstein Litowitz Berger & Grossmann LLP and Pomerantz LLP as co-lead counsel and setting a briefing schedule for the motions to dismiss and motions to stay. The motions to stay were fully briefed as of February 23, 2022 and the court held oral argument on February 28, 2022. On March 7, 2022, the court denied the motion to stay. On March 10, 2022, defendants filed their brief in support of their motion to dismiss. The motion to dismiss was fully briefed on April 27, 2022, and was scheduled for oral argument on May 10, 2022. On May 6, 2022, defendants withdrew the motion to dismiss without prejudice. On July 22, 2022, co-lead plaintiffs filed an amended class action complaint asserting similar claims. Defendants filed a motion to dismiss the amended class action complaint on October 14, 2022. Plaintiffs’ answering brief and Defendants’ reply brief were due on November 18 and December 9, 2022, respectively. Oral argument on the motion to dismiss was scheduled for January 6, 2023. On January 5, 2023, the defendants withdrew their motion to dismiss. On February 2, 2023, the court issued a case scheduling order setting forth pre-trial deadlines and a date for trial in March 2024. On February 3, 2023, defendants filed their answer to plaintiffs’ amended class action complaint. On February 7, 2023, plaintiffs served the Company, as a non-party, with a subpoena for certain information, which the Company responded to on February 21, 2023. Plaintiff and the Company, as a non-party, are currently meeting and conferring regarding the scope of the Company’s discovery obligations pursuant to the subpoena. The defendants intend to vigorously defend against the claims. The proceedings are subject to uncertainties inherent in the litigation process. In addition, between approximately March 26, 2021 and September 23, 2021, LMC received eight demands for books and records pursuant to Section 220 of the Delaware General Corporation Law from stockholders who state they are investigating whether to file similar derivative lawsuits, among other purposes. A lawsuit to compel inspection of books and records under 8 Del. C. § 220 was filed against the Company on May 31, 2022 in the Delaware Court of Chancery (Turner v. Lordstown Motors Corp. (C.A. No. 2022-0468)). The plaintiff sought production of documents related to, among other things, vehicle pre-orders, production timeline, and stock sales by insiders. The Company made supplemental document productions in connection with discussions to resolve or narrow this action. On December 6, 2022, the parties filed a stipulation to dismiss the action with prejudice and, as a result, the Turner matter has been completely resolved and there are no disputes as to the remaining books and records requests. The Company has also received two subpoenas from the SEC for the production of documents and information, including relating to the merger between DiamondPeak and Legacy Lordstown and pre-orders of vehicles, and the Company has been informed by the U.S. Attorney’s Office for the Southern District of New York that it is investigating these matters. The Company has cooperated, and will continue to cooperate, with these and any other regulatory or governmental investigations and inquiries. On January 26, 2023, we filed a petition in the Delaware Court of Chancery pursuant to Section 205 of the Delaware General Corporation Law (“DGCL”), which permits the Court of Chancery, in its discretion, to validate potentially defective corporate acts and stock after considering a variety of factors, due to developments regarding potential interpretations of the DGCL. As previously disclosed, on March 24, 2022, we received a letter addressed to the Board from the law firm of Purcell & Lefkowitz LLP (“Purcell”) on behalf of three purported stockholders. Among other matters, the stockholder letter addressed the approval of our Charter at the special meeting of stockholders held on October 22, 2020, which included a 200 million share increase in the number of authorized shares of Class A common stock (the “2020 Class A Increase Amendment”), and was approved by a majority of the then-outstanding shares of both our Class A and Class B common stock, voting as a single class. The stockholder letter alleged that the 2020 Class A Increase Amendment required a separate vote in favor by at least a majority of the then outstanding shares of Class A common stock under Section 242(b)(2) of the DGCL, and that the 200 million shares in question were thus unauthorized. Following receipt of the stockholder letter, the Board undertook a review of the matters raised with the assistance of outside counsel not involved in the underlying transactions at issue and had determined, in reliance upon, among other things, advice of several law firms including a legal opinion of Delaware counsel, that the assertions regarding DGCL Section 242(b)(2) were wrong and that a separate class vote of the Class A common stock was not required to approve the 2020 Class A Increase Amendment. We continue to believe that a separate vote of Class A common stock was not required to approve the 2020 Class A Increase Amendment. However, in light of a recent decision of the Court of Chancery that created uncertainty regarding this issue, we filed a petition in the Court of Chancery pursuant to Section 205 seeking validation of the 2020 Class A Increase Amendment and the shares issued pursuant thereto to resolve any uncertainty with respect to those matters. petition and, on February 28, 2023 issued an amended order granting the Company’s motion to validate each of the following and eliminate the uncertainty with respect thereto: (1) the 2020 Class A Increase Amendment and the Charter as of the time of filing with the Delaware Secretary of State, and (2) all shares of capital stock that we issued in reliance on the effectiveness of the 2020 Class A Increase Amendment and the Charter as of the date of such shares were issued. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 8 — RELATED PARTY TRANSACTIONS The Company’s Board has adopted a written Related Party Transaction Policy that sets forth policies and procedures for the review and approval or ratification of any transaction, arrangement or relationship in which the Company or any of its subsidiaries was, is or will be a participant, the amount of which exceeds $120,000 and in which any director, executive officer or beneficial owner of 5% or more of the Class A common stock had, has or will have a direct or indirect material interest (a “Related Party Transaction”). Pursuant to this policy, the Audit Committee of the Board (the “Audit Committee”) reviews and approves any proposed Related Party Transaction, considering among other factors it deems appropriate, whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The Audit Committee may then approve or disapprove the transaction in its discretion. Any related person transaction will be disclosed in the applicable SEC filing as required by the rules of the SEC. Pursuant to the Investment Agreement described in Note 6 – Capital Stock and Loss Per Share, Foxconn’s beneficial ownership of Class A common stock exceeded 5% in November 2022 causing Foxconn to become a related party. The Company has entered into the Foxconn Transactions with Foxconn described under Note 1 – Description of Organization and Business Operations – Foxconn Transactions. See Note 9 – Subsequent Events – Foxconn Notice for additional information regarding the status of the Foxconn Transactions. In August 2020, we entered into an emissions credit agreement with GM pursuant to which, and subject to the terms of which, until the completion of the first three annual production/model years wherein we produce vehicles at least ten months out of the production/model year, the counterparty will have the option to purchase such emissions credits as well as emissions credits from any other U.S. state, country or jurisdiction generated by vehicles produced by us not otherwise required by us to comply with emissions laws and regulations at a purchase price equal to 75% of the fair market value of such credits. While we have launched the Endurance as a 2023 model year, due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. Therefore, the duration of our obligations under this agreement will extend for several years and are ultimately dependent upon whether we are able to launch a new vehicle and the associated timing and/or our ability to obtain a strategic partner to support the scaling of the Endurance. In November 2019, the Company entered into a transaction with Workhorse Group, for the purpose of obtaining certain intellectual property. In connection with granting this license, Workhorse Group received 10% of the outstanding Legacy Lordstown common stock, valued at $11.1 million, and was entitled to royalties of 1% of the gross sales price of the first 200,000 vehicle sales. In November 2020, we prepaid the royalty payment of $4.75 million, representing an advance on the royalties discussed above, but only to the extent that the aggregate amount of such royalty fees exceeded the amount paid upfront. Given that Workhorse Group technology is not being used in the Endurance and our strategic direction, inclusive of the transactions contemplated with Foxconn, we deemed it appropriate to terminate the royalty agreement. As such, we recorded a charge of $4.75 million during the year ended December 31, 2022 to write-off prepaid royalty. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 9 — SUBSEQUENT EVENTS Nasdaq Notice On April 19, 2023, the Company received the Nasdaq Notice indicating that, because the closing bid price for the Company’s Class A common stock had fallen below $1.00 per share for 30 consecutive business days (March 7, 2023 through April 18, 2023), the Company was no longer in compliance with the Bid Price Requirement. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a compliance cure period of 180 calendar days, or until October 16, 2023, to regain compliance with the Bid Price Requirement. To regain compliance, the closing bid price of the Company’s Class A common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to October 16, 2023. If the Company does not regain compliance by October 16, 2023, the Company may be eligible for an additional grace period. The Company is currently evaluating various courses of action to regain compliance with the Bid Price Requirement, including implementing a reverse stock split if such action is authorized by the Company’s stockholders. In anticipation of receipt of the Nasdaq Notice, on April 11, 2023, the Company filed a definitive proxy statement (the “Proxy Statement”) for the Company’s annual meeting of stockholders to be held on May 22, 2023 (the “Annual Meeting”) which included a proposal to amend the Charter, to effect a reverse stock split of the Company’s Class A common stock at a reverse stock split ratio ranging from 1: 3 15 There can be no assurance that stockholders will approve the Reverse Stock Split Proposal at the Annual Meeting, that a reverse stock split, if implemented, will increase the market price of the Class A common stock in proportion to the reduction in the number of shares of Class A common stock outstanding before such reverse stock split or, even if it does, that such price will be maintained for any period of time. Additional information, including certain risks associated with the Reverse Stock Split Proposal, can be found in the Proxy Statement. Foxconn Notice On April 21, 2023, the Company received the Foxconn Notice (1) asserting that the Company was in breach of the Investment Agreement due to its previously disclosed receipt of the Nasdaq Notice indicating that the Company was no longer in compliance with the Bid Price Requirement and (2) purporting to terminate the Investment Agreement if the breach is not cured within 30 days. In response, the Company notified Foxconn in writing on April 25, 2023 that (1) it believes the breach allegations in the Foxconn Notice are without merit, (2) the Investment Agreement, by its terms, does not permit Foxconn to terminate it following the Initial Closing, and (3) in any event, Foxconn cannot exercise termination rights because Foxconn has breached the Investment Agreement by failing to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. On May 1, 2023, after having publicly disclosed the Foxconn Notice, the Company received the Second Foxconn Notice (1) indicating that Foxconn agrees that it is unable to terminate the Investment Agreement after the Initial Closing, (2) asserting that the Nasdaq Notice constitutes a breach of a representation that is a condition to the Subsequent Common Closing and, therefore, Foxconn is not obligated to consummate the Subsequent Common Closing until such breach is cured, and (3) asserting that the Company’s claims regarding Foxconn’s breach of the Investment Agreement with respect to the EV Program and Subsequent Preferred Funding are without merit. The Company continues to believe that the breach allegations by Foxconn are without merit, and Foxconn is obligated to complete the Subsequent Common Closing on or before May 8, 2023. The Company intends to enforce its contractual rights and remedies under the Investment Agreement, including with respect to Foxconn’s breach regarding the EV Program budget and EV Program milestones, its funding obligations and its knowing and intentional efforts to invalidly terminate the Investment Agreement without any basis and withhold critical funding to the material detriment of the Company. The Company is in discussions with Foxconn to seek a resolution regarding these matters; however, to date, the parties are at an impasse and Foxconn has indicated that it does not intend the close the Subsequent Common Closing on May 8, 2023 and we do not expect Foxconn to provide its approval to the EV Program budget and EV Program milestones by May 7, 2023. No assurances can be given that the parties will reach a resolution of these matters or that any such resolution will allow the Subsequent Common Closing or the Subsequent Preferred Funding to occur on a timely basis. If the Subsequent Common Closing is delayed or such fundings do not occur, the Company will be deprived of critical funding necessary for its operations. The Company is evaluating its legal and financial alternatives in the event a resolution is not reached. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Use of Estimates in Financial Statement Preparation | Use of Estimates in Financial Statement Preparation The preparation of condensed consolidated financial statements in accordance with GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that affect the reported amounts in the consolidated financial statements, and related disclosures in the accompanying notes to the financial statements. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of changes are reflected in the condensed consolidated Financial Statements in the period they are determined to be necessary. Asset impairment loss calculations require us to apply judgment in estimating asset group fair values and future cash flows, including periods of operation, projections of product pricing, production levels, product costs, market supply and demand, inflation, projected capital spending and, specifically for fixed assets acquired, assigned useful lives, functional obsolescence, asset condition and discount rates. When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe would be consistent with the assumptions that a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The assessment of whether an asset group should be classified as held and used or held for sale requires us to apply judgment in estimating the probable timing of the sale, and in testing for impairment loss, judgment is required in estimating the net proceeds from the sale. Actual asset impairment losses could vary considerably from estimated impairment losses if actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values. |
Cash, cash equivalents and short-term investments | Cash, cash equivalents and short-term investments Cash includes cash equivalents which are highly liquid investments that are readily convertible to cash. The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Our short-term investments consist primarily of liquid investment grade commercial paper, which are diversified among individual issuers, including non-U.S. governments, non-U.S. governmental agencies, supranational institutions, banks and corporations. The short-term investments are accounted for as available-for-sale securities. The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities. The Company maintains its cash in bank deposit and securities accounts that exceed federally insured limits. We have not experienced significant losses in such accounts and management believes it is not exposed to material credit risk. |
Inventory and Inventory Valuation | Inventory and Inventory Valuation Inventory is stated at the lower of cost or net realizable value. Net realizable value (“NRV”) is the estimated future selling price of the inventory in the ordinary course of business less cost to sell, and considers general market and economic conditions. A charge was also taken to adjust for inventory in excess of anticipated Endurance production. Due to the production delays from early January to mid-April 2023, the failure to identify a strategic partner for the Endurance, and extremely limited ability to raise capital in the current market environment, we anticipate production of the Endurance will cease in the near future. Therefore, the quantity we expect to produce and sell, along with inventory for future service and warranty parts is lower than previously anticipated. The charges to reflect the NRV totaled $19.8 million for the three months ended March 31, 2023 and are recorded within Cost of Sales in the Company’s Condensed Consolidated Statement of Operations. |
Property, plant and equipment | Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation will be computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life. |
Valuation of Long-Lived and Intangible Assets | Valuation of Long-Lived and Intangible Assets Long-lived assets, such as property, plant, and equipment are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Asset impairment calculations require us to apply judgment in estimating asset group fair values and future cash flows, including periods of operation, projections of product pricing, production levels, product costs, market supply and demand, inflation, projected capital spending and, specifically for fixed assets acquired, assigned useful lives, functional obsolescence, asset condition and discount rates. When performing impairment tests, we estimate the fair values of the assets using management’s best assumptions, which we believe would be consistent with the assumptions that a hypothetical marketplace participant would use. Estimates and assumptions used in these tests are evaluated and updated as appropriate. The assessment of whether an asset group should be classified as held and used or held for sale requires us to apply judgment in estimating the probable timing of the sale, and in testing for impairment loss, judgment is required in estimating the net proceeds from the sale. Actual asset impairment losses could vary considerably from estimated impairment losses if actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values. Changes in these estimates and assumptions could materially affect the determination of fair value and any impairment charge. For assets to be held and used, including identifiable intangible assets and long-lived assets subject to amortization, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability of a long-lived asset subject to amortization is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Significant management judgment is required in this process. We recognized impairment charges of $109.8 million and $95.6 million for the three months ended March 31, 2023 and for the year ended December 31, 2022. No fixed asset impairment charges were recognized for the three months ended March 31, 2022. See Note 4 – Property, Plant and Equipment for details regarding our impairment. In November 2019, the Company entered into a transaction with Workhorse Group Inc. (“Workhorse Group”), for the purpose of obtaining certain intellectual property. In connection with granting this license, Workhorse Group received 10% of the outstanding Legacy Lordstown common stock, valued at $11.1 million, and was entitled to royalties of 1% of the gross sales price of the first 200,000 vehicle sales. In November 2020, we prepaid the royalty payment to Workhorse Group in the amount of $4.75 million, representing an advance on the royalties discussed above, but only to the extent that the aggregate amount of such royalty fees exceeded the amount paid upfront. During the year ended December 31, 2021, we continued to refine the design of the Endurance and considered technologies we would use in future vehicles. Given the technology used in the Endurance and new management’s strategic direction of the Company, inclusive of the transactions contemplated with Foxconn as detailed in Note 1 Description of Organization and Business Operations , we deemed it appropriate to change the useful life of the intellectual property license we acquired to zero months. As such, we recorded accelerated amortization of $11.1 million during the year ended December 31, 2021. Given that Workhorse Group technology is not being used in the Endurance and our strategic direction, inclusive of the transactions contemplated with Foxconn, we deemed it appropriate to terminate the royalty agreement. As such, we recorded a charge of $4.75 million during the year ended December 31, 2022 to write-off the prepaid royalty. In August 2021, the Company entered into an agreement to purchase a perpetual software license related to manufacturing execution system for a cost of $1.0 million. As of December 31, 2022, with the Company’s current strategic direction, it was determined that this software will not be utilized for the manufacturing of Endurance and therefore full impairment of $1.0 million was recorded for the period ended December 31, 2022. |
Research and development costs | Research and development costs The Company expenses research and development costs as they are incurred. Research and development costs consist primarily of personnel costs for engineering, testing and manufacturing costs, along with expenditures for prototype manufacturing, testing, software subscriptions for computer-aided engineering and product lifecycle management validation, certification, contract and other professional services and costs associated with operating the Lordstown facility, prior to its sale. |
Stock-based compensation | Stock-based compensation The Company’s stock incentive plan offers stock options, Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”). The Company recognizes share based compensation expense over a defined vesting period for the entire award. We estimate forfeitures based on actual historical forfeitures. The fair value for stock options is determined using the Black-Scholes option pricing models, which incorporates assumptions regarding the expected volatility, expected option life and risk-free interest rate. The grant date fair value of RSUs are calculated using the closing market price of the Company’s Class A common stock. |
Warrants | Warrants The Company accounts for the Private Warrants (as defined below) and the Foxconn Warrants as described in Note 3 – Fair Value Measurements in accordance with the guidance contained in ASC Topic 815-40-15-7D and 7F under which these Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies these warrants as liabilities at their fair value at each reporting period or at the time of settlement. Any change in fair value is recognized in the statement of operations. The Company accounts for the BGL Warrants (as defined below) as equity as these warrants qualify as share-based compensation under ASC Topic 718. |
Income taxes | Income taxes Income taxes are recorded in accordance with ASC Topic 740, Income Taxes The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. |
Recently issued accounting pronouncements | Recently issued accounting pronouncements There are no recently issued, but not yet adopted, accounting pronouncements which are expected to have a material impact on the Company’s Condensed Financial Statements and related disclosures. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
FAIR VALUE MEASUREMENTS | |
Summary of the net loss (gain) on changes in fair value related to warrants | The following table summarizes the net loss (gain) on changes in fair value (in thousands) related to the Private Warrants and the Foxconn Warrants: Three months ended Three months ended March 31, 2023 March 31, 2022 Private Warrants (231) (1,520) Foxconn Warrants (136) — Net gain (loss) on changes in fair value $ (367) $ (1,520) |
Summary of the valuation of financial instruments | The following tables summarize the valuation of our financial instruments (in thousands): Total Quoted prices in active markets (Level 1) Prices with observable inputs (Level 2) Prices with unobservable inputs (Level 3) March 31, 2023 Cash and cash equivalents $ 108,086 $ 108,086 $ — $ — Short-term investments 68,589 — 68,589 — Private Warrants 23 — — 23 Foxconn Warrants 34 — — 34 Total Quoted prices in active markets (Level 1) Prices with observable inputs (Level 2) Prices with unobservable inputs (Level 3) December 31, 2022 Cash and cash equivalents $ 121,358 $ 121,358 $ — $ — Short-term investments 100,297 — 100,297 — Private Warrants 254 — — 254 Foxconn Warrants 170 170 |
Schedule of loss on fair value recognized in earnings | The following table summarizes the changes in our Level 3 financial instruments (in thousands): Balance at December 31, 2022 Additions Settlements Loss on fair value adjustments included in earnings Balance at March 31, 2023 Private Warrants $ 254 — — (231) $ 23 Foxconn Warrants 170 — (136) 34 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
PROPERTY, PLANT AND EQUIPMENT | |
Summary of property, plant and equipment, net | March 31, 2023 December 31, 2022 Property, Plant & Equipment Land $ — $ — Buildings — — Machinery and equipment 20,384 41,143 Tooling 59,602 119,735 Construction in progress 14,287 41,378 $ 94,273 $ 202,256 Less: Accumulated depreciation (16,150) (8,476) Total $ 78,123 $ 193,780 |
CAPITAL STOCK AND LOSS PER SH_2
CAPITAL STOCK AND LOSS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
CAPITAL STOCK AND LOSS PER SHARE | |
Schedule of the weighted-average number of shares outstanding for basic and diluted loss per share | The weighted-average number of shares outstanding for basic and diluted loss per share of Class A common stock is as follows (in thousands): Three months ended Three months ended March 31, 2023 March 31, 2022 Basic weighted average shares outstanding 239,754 196,503 Diluted weighted average shares outstanding 239,754 196,503 |
Schedule of computation of diluted net loss per share to common shareholders for their anti-dilutive effect | The following outstanding potentially dilutive Class A common stock equivalents have been excluded from the computation of diluted net loss per share attributable to Class A common stock stockholders for the periods presented due to their anti-dilutive effect (in thousands): Three months ended Three months ended March 31, 2023 March 31, 2022 Foxconn Preferred Stock 15,943 — Share awards 102 3,862 Foxconn Warrants 1,700 — BGL Warrants 1,649 1,649 Private Warrants 2,314 2,314 Total 21,708 7,825 |
DESCRIPTION OF ORGANIZATION A_2
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||||||
Apr. 21, 2023 | Nov. 22, 2022 USD ($) tranche D $ / shares shares | Nov. 07, 2022 USD ($) $ / shares shares | May 11, 2022 | Nov. 10, 2021 USD ($) | Jul. 23, 2021 shares | Oct. 31, 2021 USD ($) shares | Nov. 30, 2019 USD ($) | Mar. 31, 2023 USD ($) item $ / shares shares | Mar. 31, 2022 USD ($) shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) shares | May 07, 2023 USD ($) | Dec. 30, 2022 USD ($) | Aug. 17, 2022 $ / shares | Apr. 15, 2022 USD ($) | Oct. 23, 2020 USD ($) | |
Business Acquisition | |||||||||||||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | ||||||||||||||||
Research and development expenses | $ 14,425 | $ 61,864 | |||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||||||||
Issuance of Class A Common stock | 616 | ||||||||||||||||
Warrant and other non-current liabilities | $ 889 | $ 1,446 | $ 100,900 | ||||||||||||||
Cash and cash equivalents | 108,086 | 121,358 | |||||||||||||||
cash, cash equivalents and short-term investments | 176,700 | ||||||||||||||||
Accumulated deficit | 998,932 | 827,213 | |||||||||||||||
Net loss | $ 171,719 | $ 89,633 | |||||||||||||||
Convertible preferred shares, shares issued | shares | 300 | ||||||||||||||||
Common Stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Stock issued in aggregate purchase | shares | 464 | ||||||||||||||||
Issuance of Class A Common stock | $ 70,000 | $ 1 | |||||||||||||||
Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Research and development expenses | $ 18,400 | ||||||||||||||||
Foxconn | Common Stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Stock issued in aggregate purchase | shares | 26,900 | ||||||||||||||||
Proceeds from stock issuance | $ 47,300 | ||||||||||||||||
Contract Manufacturing Agreement | Lordstown EV Corporation | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Initial term | 18 months | ||||||||||||||||
Notice period | 12 months | ||||||||||||||||
Equity Funding Agreement With Y A | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Stock issued in aggregate purchase | shares | 400 | 17,500 | 9,600 | ||||||||||||||
Issuance of Class A Common stock | $ 40,400 | $ 49,400 | |||||||||||||||
Equity Funding Agreement With Y A | Maximum | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Issuance of Class A Common stock | 400,000 | ||||||||||||||||
Equity Funding Agreement With Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Purchase price for sale of assets | $ 230,000 | ||||||||||||||||
Research and development expenses | 7,700 | ||||||||||||||||
Down payments received | $ 200,000 | ||||||||||||||||
Proceeds from sale of assets | 100,000 | $ 100,000 | |||||||||||||||
Total proceeds from sale of assets | 257,000 | ||||||||||||||||
Proceeds from Sale of Assets for Expansion Investments | 8,900 | ||||||||||||||||
Proceeds from Sale of Assets for Reimbursement Payments | $ 18,400 | ||||||||||||||||
Balance of purchase price | 30,000 | ||||||||||||||||
Reimbursement payment receivable on closing | 27,500 | ||||||||||||||||
Reimbursable operating expenses receivable | 18,400 | $ 17,500 | |||||||||||||||
Reimbursable expansion cost receivable | $ 10,000 | ||||||||||||||||
Stock issued in aggregate purchase | shares | 7,200 | ||||||||||||||||
Proceeds from stock issuance | $ 50,000 | ||||||||||||||||
Open Market Sales Agreement | Jefferies LLC | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Stock issued in aggregate purchase | shares | 0 | 7,800 | |||||||||||||||
Proceeds from stock issuance | $ 12,400 | ||||||||||||||||
Minimum sales price higher than current stock price for additional sales | $ / shares | $ 1 | ||||||||||||||||
Open Market Sales Agreement | Maximum | Jefferies LLC | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Number of shares to be issued | shares | 50,200 | ||||||||||||||||
Investment agreement | Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Aggregate value of shares for issuance | $ 100,000 | ||||||||||||||||
Preferred Stock, Par or Stated Value Per Share | $ / shares | $ 0.0001 | ||||||||||||||||
Investment agreement | Foxconn | Common Stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Proceeds from issuance of preferred stock | 47,300 | ||||||||||||||||
Number of members that can be appointed to board | item | 2 | ||||||||||||||||
Issuance of Class A Common stock | 22,700 | ||||||||||||||||
Investment agreement | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Proceeds from issuance of preferred stock | $ 52,700 | ||||||||||||||||
Stock issued in aggregate purchase | shares | 300 | ||||||||||||||||
Issuance of Class A Common stock | $ 30,000 | ||||||||||||||||
Number of tranches of share issue | tranche | 2 | ||||||||||||||||
Scenario, Plan | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Warrants to purchase common stock | shares | 1,700 | ||||||||||||||||
Warrant exercise price | $ / shares | $ 10.50 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Equity Funding Agreement With Foxconn | Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Subsequent preferred funding | $ 70,000 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment agreement | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Proceeds from issuance of preferred stock | $ 70,000 | ||||||||||||||||
Shares issued price per share | $ / shares | $ 100 | ||||||||||||||||
Number of tranches of share issue | tranche | 2 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment agreement | Maximum | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Convertible preferred shares, shares issued | shares | 700 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement First Tranche | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Proceeds from issuance of preferred stock | $ 30,000 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement First Tranche | Maximum | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Convertible preferred shares, shares issued | shares | 300 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement Second Tranche | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Convertible preferred shares, shares issued | shares | 400 | ||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement Second Tranche | Maximum | Foxconn | Preferred stock | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Proceeds from issuance of preferred stock | $ 40,000 | ||||||||||||||||
Subsequent event | Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Threshold period for termination of investment agreement if the breach not cured | 30 days | ||||||||||||||||
Transaction with Workhorse Group Inc | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Issuance of Class A Common stock | $ 11,100 | ||||||||||||||||
Class A common stock | Equity Funding Agreement With Foxconn | Foxconn | |||||||||||||||||
Business Acquisition | |||||||||||||||||
Threshold period for subsequent common closing from the receipt of written communication | D | 10 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
Nov. 30, 2019 item | Mar. 31, 2023 USD ($) | Mar. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Aug. 31, 2021 USD ($) | Nov. 30, 2020 USD ($) | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Selling, general and administrative expenses | $ 14,687,000 | $ 26,019,000 | |||||
Research and development expenses | 14,425,000 | 61,864,000 | |||||
Amortization | $ 11,100,000 | ||||||
Impairment of Intangible Assets (Excluding Goodwill) | $ 1,000,000 | ||||||
Assets impairment charge | 109,800,000 | $ 0 | 95,600,000 | ||||
Transaction with Workhorse Group Inc | |||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Percentage ownership conveyed in connection with license agreement | 10% | ||||||
Royalty percentage | 1% | ||||||
Number of vehicles subject to royalty | item | 200,000 | ||||||
Prepaid Royalties | $ 4,750,000 | $ 4,750,000 | |||||
Software license | |||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Intangible asset value | $ 1,000,000 | ||||||
Cost of Sales [Member] | |||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||
Inventory Adjustments | $ 19,800,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ / shares in Units, $ in Thousands, shares in Millions | Mar. 31, 2023 USD ($) $ / shares shares | Dec. 31, 2022 USD ($) | Mar. 31, 2022 shares | Oct. 23, 2020 USD ($) |
FAIR VALUE MEASUREMENTS | ||||
Warrant and other non-current liabilities | $ | $ 889 | $ 1,446 | $ 100,900 | |
Private warrants to purchase common stock | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrant exercise price | $ / shares | $ 11.50 | |||
BGL Warrants - SBC - Equity | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrant exercise price | $ / shares | 10 | |||
Public warrants | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrant exercise price | $ / shares | $ 11.50 | |||
Warrants outstanding | shares | 0 | |||
Private warrants to purchase common stock | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrants outstanding | shares | 2.3 | 2.3 | ||
BGL Warrants - SBC - Equity | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrants outstanding | shares | 1.6 | 1.6 | ||
Warrants issued to Foxconn | ||||
FAIR VALUE MEASUREMENTS | ||||
Warrant exercise price | $ / shares | $ 10.50 | |||
Warrants outstanding | shares | 1.7 | |||
Fair value of warrants | $ | $ 300 | |||
Volatility | ||||
FAIR VALUE MEASUREMENTS | ||||
Derivative Liability, Measurement Input | 90 | 80 | ||
Risk Free Interest Rate | ||||
FAIR VALUE MEASUREMENTS | ||||
Derivative Liability, Measurement Input | 3.819 | 2.454 | ||
Risk Free Interest Rate | Warrants issued to Foxconn | ||||
FAIR VALUE MEASUREMENTS | ||||
Derivative Liability, Measurement Input | 3.896 |
FAIR VALUE MEASUREMENTS - Net g
FAIR VALUE MEASUREMENTS - Net gain (loss) on changes in fair value (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
FAIR VALUE MEASUREMENTS | ||
Net gain (loss) on changes in fair value | $ (367) | $ (1,520) |
Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Net gain (loss) on changes in fair value | (231) | $ (1,520) |
Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Net gain (loss) on changes in fair value | $ (136) |
FAIR VALUE MEASUREMENTS - Valua
FAIR VALUE MEASUREMENTS - Valuation of financial instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | $ 300 | |
Fair Value, Inputs, Level 3 | Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 23 | $ 254 |
Fair Value, Inputs, Level 3 | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 34 | 170 |
Fair Value, Recurring | ||
FAIR VALUE MEASUREMENTS | ||
Cash and Cash Equivalents | 108,086 | 121,358 |
Short-term investments with a fair value | 68,589 | 100,297 |
Fair Value, Recurring | Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 23 | 254 |
Fair Value, Recurring | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 34 | |
Fair Value, Recurring | Fair Value, Inputs, Level 1 | ||
FAIR VALUE MEASUREMENTS | ||
Cash and Cash Equivalents | 108,086 | 121,358 |
Fair Value, Recurring | Fair Value, Inputs, Level 2 | ||
FAIR VALUE MEASUREMENTS | ||
Short-term investments with a fair value | 68,589 | 100,297 |
Fair Value, Recurring | Fair Value, Inputs, Level 3 | Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 23 | $ 254 |
Fair Value, Recurring | Fair Value, Inputs, Level 3 | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | $ 34 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets, Liabilities, Rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss on fair value adjustments included in earnings | $ 367 | $ 1,520 |
Warrants issued to Foxconn | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss on fair value adjustments included in earnings | 136 | |
Derivative liability, ending balance | 300 | |
Private warrants to purchase common stock | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Loss on fair value adjustments included in earnings | 231 | $ 1,520 |
Fair Value, Inputs, Level 3 | Warrants issued to Foxconn | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Derivative liability, beginning balance | 170 | |
Loss on fair value adjustments included in earnings | (136) | |
Derivative liability, ending balance | 34 | |
Fair Value, Inputs, Level 3 | Private warrants to purchase common stock | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Derivative liability, beginning balance | 254 | |
Loss on fair value adjustments included in earnings | (231) | |
Derivative liability, ending balance | $ 23 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | |||
Property, Plant and Equipment, Gross | $ 94,273,000 | $ 202,256,000 | |
Less: Accumulated depreciation | (16,150,000) | (8,476,000) | |
Total | 78,123,000 | 193,780,000 | |
Gain on disposal of fixed assets | 100,900,000 | ||
Assets impairment charge | 109,800,000 | $ 0 | 95,600,000 |
Machinery and equipment | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, Plant and Equipment, Gross | 20,384,000 | 41,143,000 | |
Tooling | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, Plant and Equipment, Gross | 59,602,000 | 119,735,000 | |
Construction in progress | |||
PROPERTY, PLANT AND EQUIPMENT | |||
Property, Plant and Equipment, Gross | $ 14,287,000 | $ 41,378,000 |
MEZZANINE EQUITY (Details)
MEZZANINE EQUITY (Details) $ / shares in Units, $ in Thousands, shares in Millions | 3 Months Ended | 12 Months Ended | |||
Nov. 22, 2022 USD ($) tranche $ / shares shares | Nov. 07, 2022 USD ($) $ / shares shares | Mar. 31, 2023 USD ($) D $ / shares | Dec. 31, 2022 USD ($) | Apr. 21, 2023 $ / shares | |
Business Acquisition [Line Items] | |||||
Convertible preferred shares, shares issued | shares | 0.3 | ||||
Temporary Equity, Share Price | $ / shares | $ 100 | ||||
Proceeds from Issuance of Convertible Preferred Stock | $ 30,000 | ||||
Percentage of receive dividends at a rate | 8% | ||||
Temporary Equity Conversion Price | $ / shares | $ 1.936 | ||||
Convertible, threshold percentage of stock price trigger | 200% | ||||
Convertible, threshold trading days | D | 20 | ||||
Convertible, threshold consecutive trading days | D | 30 | ||||
Beneficial ownership (as a percent) | 25% | ||||
Accrual of Preferred stock dividends | $ 600 | $ 300 | |||
Liquidation preference per share | $ / shares | $ 100 | ||||
Series A Convertible Preferred | Subsequent event | |||||
Business Acquisition [Line Items] | |||||
Accrued unpaid dividends (per share) | $ / shares | $ 100 | ||||
Preferred stock | |||||
Business Acquisition [Line Items] | |||||
Accrual of Preferred stock dividends | $ 605 | ||||
Investment agreement | Preferred stock | Foxconn | |||||
Business Acquisition [Line Items] | |||||
Proceeds from issuance of preferred stock | $ 52,700 | ||||
Number of tranches of share issue | tranche | 2 | ||||
Investment agreement | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Shares issued price per share | $ / shares | $ 100 | ||||
Proceeds from issuance of preferred stock | $ 70,000 | ||||
Number of tranches of share issue | tranche | 2 | ||||
Investment agreement | Maximum | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Convertible preferred shares, shares issued | shares | 0.7 | ||||
Investment Agreement First Tranche | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Proceeds from issuance of preferred stock | $ 30,000 | ||||
Investment Agreement First Tranche | Maximum | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Convertible preferred shares, shares issued | shares | 0.3 | ||||
Investment Agreement Second Tranche | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Convertible preferred shares, shares issued | shares | 0.4 | ||||
Investment Agreement Second Tranche | Maximum | Preferred stock | Foxconn | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Proceeds from issuance of preferred stock | $ 40,000 |
CAPITAL STOCK AND LOSS PER SH_3
CAPITAL STOCK AND LOSS PER SHARE (Details) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 | Aug. 17, 2022 |
CAPITAL STOCK AND LOSS PER SHARE | |||
Common stock, shares authorized | 450,000,000 | 450,000,000 | 450,000,000 |
Preferred stock, shares authorized | 12,000,000 | ||
Preferred stock, par value | $ 0.0001 | ||
Common stock, shares issued | 239,025,591 | 238,924,486 | |
Common stock, shares outstanding | 239,025,591 | 238,924,486 | |
Temporary equity shares outstanding | 300,000 | 300,000 | |
Minimum | |||
CAPITAL STOCK AND LOSS PER SHARE | |||
Shares authorized per charter | 312,000,000 | ||
Maximum | |||
CAPITAL STOCK AND LOSS PER SHARE | |||
Shares authorized per charter | 462,000,000 |
CAPITAL STOCK AND LOSS PER SH_4
CAPITAL STOCK AND LOSS PER SHARE - Basic and diluted net loss per share (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
CAPITAL STOCK AND LOSS PER SHARE | ||
Basic weighted average shares outstanding | 239,754 | 196,503 |
Diluted weighted average shares outstanding | 239,754 | 196,503 |
CAPITAL STOCK AND LOSS PER SH_5
CAPITAL STOCK AND LOSS PER SHARE - Anti-dilutive effect on dilutive net loss per share (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 21,708 | 7,825 |
Foxconn convertible preferred shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 15,943 | |
Share awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 102 | 3,862 |
Warrants issued to Foxconn | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 1,700 | |
BGL Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 1,649 | 1,649 |
Private warrants to purchase common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities, earnings per share amount | 2,314 | 2,314 |
CAPITAL STOCK AND LOSS PER SH_6
CAPITAL STOCK AND LOSS PER SHARE - Purchase Agreements (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||
Apr. 21, 2023 | Nov. 22, 2022 USD ($) D tranche $ / shares shares | Nov. 07, 2022 USD ($) $ / shares shares | Jul. 23, 2021 shares | Mar. 31, 2023 USD ($) item shares | Mar. 31, 2022 USD ($) shares | Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) shares | |
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 616 | |||||||
Aggregate share purchase price | shares | 300 | |||||||
Maximum | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Aggregate liquidation preference | $ 30,000 | |||||||
Subsequent event | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Threshold period for termination of investment agreement if the breach not cured | 30 days | |||||||
Common Stock | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 70,000 | $ 1 | ||||||
Stock issued in aggregate purchase | shares | 464 | |||||||
Common Stock | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Stock issued in aggregate purchase | shares | 26,900 | |||||||
Issuance of Class A Common stock | $ 47,300 | |||||||
Number business days | D | 10 | |||||||
Equity Funding Agreement With Y A | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 40,400 | $ 49,400 | ||||||
Stock issued in aggregate purchase | shares | 400 | 17,500 | 9,600 | |||||
Equity Funding Agreement With Y A | Maximum | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 400,000 | |||||||
Investment agreement | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Threshold sale of assets as percent of consolidated assets for acquisition proposal | 30% | |||||||
Threshold issuance of securities as percent of equity securities for acquisition proposal | 15% | |||||||
Threshold beneficial ownership of equity securities for acquisition proposal | 15% | |||||||
Threshold consolidated assets representing merger, dissolution or similar transaction for acquisition proposal | 30% | |||||||
Investment agreement | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Aggregate value of shares for issuance | $ 100,000 | |||||||
Voting rights (as a percent) | 25% | |||||||
The threshold percent of beneficial ownership for relinquishment of first board seat | 25% | |||||||
Investment agreement | Maximum | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Interest on asset purchase restriction | 50% | |||||||
Investment agreement | Prior to CFIUS Clearance | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Voting rights (as a percent) | 9.99% | |||||||
Investment agreement | Prior to Requisite Stockholder Approval | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Voting rights (as a percent) | 19.99% | |||||||
Investment agreement | CFIUS Clearance and Requisite Stockholder Approval | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Voting rights (as a percent) | 24% | |||||||
Investment agreement | Common Stock | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 22,700 | |||||||
Share issued | shares | 12,900 | |||||||
Shares issued price per share | $ / shares | $ 1.76 | |||||||
Proceeds from issuance of preferred stock | $ 47,300 | |||||||
Number of members that can be appointed to board | item | 2 | |||||||
The threshold percent of beneficial ownership for relinquishment of first board seat | 50% | |||||||
Investment agreement | Common Stock | Scenario, Plan | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
The threshold percent of beneficial ownership for relinquishment of first board seat | 25% | |||||||
Investment agreement | Preferred stock | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 30,000 | |||||||
Shares issued price per share | $ / shares | $ 100 | |||||||
Proceeds from issuance of preferred stock | $ 52,700 | |||||||
Stock issued in aggregate purchase | shares | 300 | |||||||
Number of tranches of share issue | tranche | 2 | |||||||
Investment agreement | Preferred stock | Scenario, EV Program Milestone Achievement [Member] | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Shares issued price per share | $ / shares | $ 100 | |||||||
Proceeds from issuance of preferred stock | $ 70,000 | |||||||
Number of tranches of share issue | tranche | 2 | |||||||
Investment agreement | Preferred stock | Scenario, EV Program Milestone Achievement [Member] | Maximum | Foxconn | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Aggregate share purchase price | shares | 700 | |||||||
Open Market Sales Agreement | Jefferies LLC | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Stock issued in aggregate purchase | shares | 0 | 7,800 | ||||||
Issuance of Class A Common stock | $ 12,400 | |||||||
Percentage of commissions for services | 3% | |||||||
Increase in sale price | $ / shares | $ 1 | |||||||
Open Market Sales Agreement | Maximum | Jefferies LLC | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Number of shares to be issued | shares | 50,200 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | |||||||||
Oct. 22, 2022 shares | Mar. 24, 2022 plaintiff | Mar. 21, 2022 USD ($) | Mar. 04, 2022 USD ($) | Jul. 09, 2021 lawsuit | May 14, 2021 lawsuit | Nov. 30, 2022 item | Mar. 31, 2023 USD ($) lawsuit | Dec. 31, 2022 USD ($) | Dec. 31, 2021 lawsuit | Apr. 16, 2021 employee item | |
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Aggregate reserve within Accrued and other current liabilities | $ | $ 35.9 | ||||||||||
Accrued and Other Current Liabilities | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Aggregate reserve within Accrued and other current liabilities | $ | $ 34.7 | ||||||||||
Shareholder claim for separate proposal | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Loss contingency Shareholder claim | shares | 200 | ||||||||||
Lawsuit Alleging Misappropriation Of Trade Secrets | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Number of employees | employee | 2 | ||||||||||
Number of company contractors | item | 2 | ||||||||||
Number of counts in amended complaint | item | 28 | ||||||||||
Loss contingency | item | 9 | ||||||||||
Loss contingency, partial summary judgment | item | 11 | ||||||||||
Shareholder claim for separate proposal | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Loss contingency Shareholder claim | shares | 200 | ||||||||||
Number of plaintiffs | plaintiff | 3 | ||||||||||
Class Action Lawsuits Alleging Securities Laws Violations | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Number of suits or actions filed | lawsuit | 6 | ||||||||||
Stockholder Derivative Complaints | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Number of suits or actions filed | lawsuit | 4 | ||||||||||
S E C Inquiry Relating To Merger | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Number of subpoenas received | lawsuit | 2 | ||||||||||
Class Action Lawsuits Alleged Misrepresentations | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Number of putative class action lawsuits filed | lawsuit | 2 | ||||||||||
Karma Agreement | |||||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | |||||||||||
Litigation amount sought | $ | $ 0.1 | ||||||||||
Litigation settlement amount | $ | $ 0.1 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | |||
Nov. 30, 2022 | Nov. 30, 2019 USD ($) item | Mar. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Nov. 30, 2020 USD ($) | |
Transaction with Workhorse Group Inc | |||||
RELATED PARTY TRANSACTIONS | |||||
Percentage ownership conveyed in connection with license agreement | 10% | ||||
Stock Issued During Period, Value, Purchase of Assets | $ 11,100 | ||||
Royalty percentage | 1% | ||||
Number of vehicles subject to royalty | item | 200,000 | ||||
Prepaid Royalties | $ 4,750 | $ 4,750 | |||
Minimum | |||||
RELATED PARTY TRANSACTIONS | |||||
Threshold beneficial ownership percentage | 5% | ||||
Threshold related party transaction amount | $ 120,000 | ||||
Minimum | Foxconn | |||||
RELATED PARTY TRANSACTIONS | |||||
Related party beneficial ownership percentage | 5% |
SUBSEQUENT EVENTS (Detail)
SUBSEQUENT EVENTS (Detail) - Subsequent event | Oct. 16, 2023 D $ / shares | May 22, 2023 | Apr. 21, 2023 |
Subsequent Event [Line Items] | |||
Minimum bid price | $ / shares | $ 1 | ||
Threshold consecutive business days | D | 10 | ||
Foxconn | |||
Subsequent Event [Line Items] | |||
Threshold period for termination of investment agreement if the breach not cured | 30 days | ||
Minimum | |||
Subsequent Event [Line Items] | |||
Proposed reverse stock split | 0.333 | ||
Maximum | |||
Subsequent Event [Line Items] | |||
Proposed reverse stock split | 0.666 |