Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2023 | Aug. 10, 2023 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 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 | RIDEQ | |
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 | 15,953,212 | |
Entity Central Index Key | 0001759546 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Balance Sheets
Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Current Assets | ||
Cash and cash equivalents | $ 115,732 | $ 121,358 |
Short-term investments | 22,000 | 100,297 |
Inventory, net | 13,672 | |
Prepaid expenses and other current assets | 16,697 | 20,548 |
Total current assets | 154,429 | 255,875 |
Property, plant and equipment, net | 193,780 | |
Assets held for sale | 6,882 | |
Other non-current assets | 1,783 | 2,657 |
Total Assets | 163,094 | 452,312 |
Current Liabilities | ||
Accounts payable | 3,507 | 12,801 |
Accrued and other current liabilities | 13,358 | 56,033 |
Total current liabilities | 16,865 | 68,834 |
Liabilities subject to compromise | 84,995 | |
Warrant and other non-current liabilities | 779 | 1,446 |
Total liabilities | 102,639 | 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 June 30, 2023 and December 31, 2022 | 31,484 | 30,261 |
Stockholders' equity | ||
Class A common stock, $0.0001 par value, 450,000,000 shares authorized; 15,953,212 and 15,928,299, as adjusted reflecting the May 2023 1:15 reverse stock split, shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 24 | 24 |
Additional paid in capital | 1,182,370 | 1,178,960 |
Accumulated deficit | (1,153,423) | (827,213) |
Total stockholders' equity | 28,971 | 351,771 |
Total liabilities and stockholders' equity | $ 163,094 | $ 452,312 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) | May 24, 2023 | May 24, 2022 | Jun. 30, 2023 $ / shares shares | Dec. 31, 2022 $ / shares shares | Aug. 17, 2022 $ / shares shares |
Consolidated Balance Sheets | |||||
Temporary equity par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Temporary equity shares authorized | 12,000,000 | 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 | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Common stock, shares authorized | 450,000,000 | 450,000,000 | 450,000,000 | ||
Common stock, shares issued | 15,953,212 | 15,928,299 | |||
Common stock, shares outstanding | 15,953,212 | 15,928,299 | |||
Reserve stock split | 0.067 | 0.067 |
Statements of Operations
Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Consolidated Statements of Operations | ||||
Net sales | $ 2,151 | $ 2,340 | ||
Cost of sales | 60,739 | 91,550 | ||
Operating Expenses | ||||
Selling, general and administrative expenses | 57,688 | $ 29,941 | 72,375 | $ 55,960 |
Research and development expenses | 12,303 | 10,510 | 26,728 | 72,374 |
Impairment of property plant & equipment and intangibles | 25,041 | 139,481 | ||
Total operating expenses | 95,032 | 40,451 | 238,584 | 128,334 |
Loss from operations | (153,620) | (40,451) | (327,794) | (128,334) |
Other income (expense) | ||||
(Loss) gain on sale of assets | (2,609) | 101,736 | (2,609) | 101,736 |
Other income | 93 | 1,991 | 157 | 499 |
Investment and interest income | 1,645 | 383 | 4,036 | 125 |
Loss before income taxes | (154,491) | 63,659 | (326,210) | (25,974) |
Net loss | (154,491) | 63,659 | (326,210) | (25,974) |
Less preferred stock dividend | (618) | (1,223) | ||
Net loss attributable to common shareholders | $ (153,873) | $ 63,659 | $ (324,987) | $ (25,974) |
Net loss per share attributable to common shareholders | ||||
Basic (in dollars per share) | $ (9.69) | $ 4.75 | $ (20.39) | $ (1.96) |
Diluted (in dollars per share) | $ (9.69) | $ 4.75 | $ (20.47) | $ (1.96) |
Weighted-average number of common shares outstanding | ||||
Basic (in shares) | 15,940 | 13,388 | 15,936 | 13,245 |
Diluted (in shares) | 15,940 | 13,401 | 15,936 | 13,245 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity/(Deficit) - USD ($) $ in Thousands | Preferred stock | Common Stock Equity Funding Agreement With Y A | Common Stock | Additional Paid-In Capital Equity Funding Agreement With Y A | Additional Paid-In Capital | Accumulated Deficit | Equity Funding Agreement With Y A | Total |
Beginning balance at Dec. 31, 2021 | $ 19 | $ 1,084,390 | $ (544,809) | $ 539,600 | ||||
Beginning Balance (in Shares) at Dec. 31, 2021 | 13,093,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of Class A Common stock | $ 1 | $ 1 | $ 13,733 | 1,852 | $ 13,734 | 1,853 | ||
Issuance of Class A Common stock (in shares) | 437,000 | 74,000 | 6,600,000 | |||||
Restricted stock vesting (in shares) | 121,000 | |||||||
Stock compensation | 6,546 | 6,546 | ||||||
Net income (loss) | (25,974) | (25,974) | ||||||
Ending balance at Jun. 30, 2022 | $ 21 | 1,106,521 | (570,783) | 535,759 | ||||
Ending Balance (in Shares) at Jun. 30, 2022 | 13,725,000 | |||||||
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 | 13,093,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of Class A Common stock | $ 40,400 | |||||||
Issuance of Class A Common stock (in shares) | 17,500,000 | |||||||
Ending balance at Dec. 31, 2022 | $ 24 | 1,178,960 | (827,213) | 351,771 | ||||
Ending Balance (in Shares) at Dec. 31, 2022 | 15,928,000 | |||||||
Beginning balance at Mar. 31, 2022 | $ 20 | 1,088,925 | (634,442) | 454,503 | ||||
Beginning Balance (in Shares) at Mar. 31, 2022 | 13,132,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of Class A Common stock | $ 1 | $ 13,733 | 1,237 | $ 13,734 | 1,237 | |||
Issuance of Class A Common stock (in shares) | 437,000 | 43,000 | ||||||
Restricted stock vesting (in shares) | 113,000 | |||||||
Stock compensation | 2,626 | 2,626 | ||||||
Net income (loss) | 63,659 | 63,659 | ||||||
Ending balance at Jun. 30, 2022 | $ 21 | 1,106,521 | (570,783) | 535,759 | ||||
Ending Balance (in Shares) at Jun. 30, 2022 | 13,725,000 | |||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Accrual of Preferred stock dividends | $ 1,223 | 1,200 | ||||||
Ending Balance at Jun. 30, 2023 | $ 31,484 | $ 31,484 | ||||||
Ending Balance (in Shares) at Jun. 30, 2023 | 300,000 | 300,000 | ||||||
Beginning balance at Dec. 31, 2022 | $ 24 | 1,178,960 | (827,213) | $ 351,771 | ||||
Beginning Balance (in Shares) at Dec. 31, 2022 | 15,928,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Restricted stock vesting | (65) | (65) | ||||||
Restricted stock vesting (in shares) | 25,000 | |||||||
Stock compensation | 4,698 | 4,698 | ||||||
Accrual of Preferred stock dividends | (1,223) | (1,223) | ||||||
Net income (loss) | (326,210) | (326,210) | ||||||
Ending balance at Jun. 30, 2023 | $ 24 | 1,182,370 | (1,153,423) | 28,971 | ||||
Ending Balance (in Shares) at Jun. 30, 2023 | 15,953,000 | |||||||
Beginning Balance at Mar. 31, 2023 | $ 30,866 | |||||||
Beginning Balance (in Shares) at Mar. 31, 2023 | 300,000 | |||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Accrual of Preferred stock dividends | $ 618 | 600 | ||||||
Ending Balance at Jun. 30, 2023 | $ 31,484 | $ 31,484 | ||||||
Ending Balance (in Shares) at Jun. 30, 2023 | 300,000 | 300,000 | ||||||
Beginning balance at Mar. 31, 2023 | $ 24 | 1,180,723 | (998,932) | $ 181,815 | ||||
Beginning Balance (in Shares) at Mar. 31, 2023 | 15,935,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Restricted stock vesting | (20) | (20) | ||||||
Restricted stock vesting (in shares) | 18,000 | |||||||
Stock compensation | 2,284 | 2,284 | ||||||
Accrual of Preferred stock dividends | (617) | (617) | ||||||
Net income (loss) | (154,491) | (154,491) | ||||||
Ending balance at Jun. 30, 2023 | $ 24 | $ 1,182,370 | $ (1,153,423) | $ 28,971 | ||||
Ending Balance (in Shares) at Jun. 30, 2023 | 15,953,000 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Cash flows from operating activities | |||||
Net loss | $ (326,210) | $ (25,974) | |||
Adjustments to reconcile net loss to cash used by operating activities: | |||||
Stock-based compensation | 4,698 | 6,546 | |||
(Loss) gain on disposal of fixed assets | $ 2,609 | $ (101,736) | 2,609 | (101,736) | |
Impairment of property plant and equipment and intangible assets | 25,041 | 139,481 | |||
Depreciation of property plant and equipment | 54,308 | ||||
Write down of inventory and prepaid inventory | 24,105 | ||||
Other non-cash changes | (1,761) | 9,123 | |||
Changes in assets and liabilities: | |||||
Inventory | (10,537) | (13,413) | |||
Prepaid expenses and other assets | 4,596 | 5,301 | |||
Accounts payable | (5,997) | 1,197 | |||
Accrued expenses and other liabilities | 39,016 | (2,471) | |||
Net Cash used in operating activities | (75,692) | (121,427) | |||
Cash flows from investing activities | |||||
Purchases of property plant and equipment | (10,188) | (40,043) | |||
Purchases of short-term investments | (32,147) | ||||
Maturities of short-term investments | 112,203 | ||||
Investment in Foxconn Joint Venture | (13,500) | ||||
Proceeds from the sale of capital assets | 198 | 37,553 | |||
Net Cash provided by (used in) investing activities | 70,066 | (15,990) | |||
Cash flows from financing activities | |||||
Proceeds from notes payable for Foxconn Joint Venture | 13,500 | ||||
Down payments received from Foxconn | 100,000 | ||||
Proceeds from Equity Purchase Agreement, net of issuance costs | 13,734 | ||||
Net Cash provided by financing activities | 129,087 | ||||
Decrease in cash and cash equivalents | (5,626) | (8,330) | |||
Cash and cash equivalents, beginning balance | 121,358 | 244,016 | $ 244,016 | ||
Cash and cash equivalents, ending balance | $ 115,732 | $ 235,686 | 115,732 | 235,686 | $ 121,358 |
Non-cash items | |||||
Capital assets acquired with payables | $ 321 | 1,846 | |||
Foxconn Investment Agreement for Common Stock | |||||
Cash flows from financing activities | |||||
Issuance of Class A common stock | $ 1,853 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 6 Months Ended |
Jun. 30, 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 was designed to accelerate the launch of new commercial electric vehicles (“EVs”). This included working on our own vehicle programs as well as partnering with third parties, including Foxconn and its affiliates (as defined below), as we sought to leverage our vehicle development experience, our proprietary and open-source code and other non-proprietary technologies, our existing Endurance vehicle platform, and potential 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 as we addressed launch and supplier quality related issues until June 30, 2023 when management made the decision to cease production. During the second quarter of 2023, we delivered 33 Endurance trucks to customers as we continued 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. Leading up to filing the Chapter 11 Cases (as further discussed below), it became apparent that we would be unable to effectively implement and realize the anticipated benefits of the Foxconn Transactions (as defined below) as Foxconn continued to shift its approach to the nature of the partnership and the product, failed to meet funding commitments and refused to engage with the Company on various initiatives contemplated by the Foxconn Transactions that were essential to sustain ongoing operations. Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail below) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. As part of these actions, two notices were provided to a substantial number of employees under the Worker Adjustment and Retraining Notification Act (“WARN Act”) in May 2023, for job eliminations to occur in July 2023. Therefore, this reduction in costs occurred after the end of the second quarter of 2023. 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 Under the Investment Agreement, 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 (as defined herein) budget and EV Program milestones established by the parties. The Preferred Stock funding could 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”). 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 provided for the second closing of Class A common stock (the “Subsequent Common Closing”), at which time Foxconn was required to purchase approximately 10% of the Class A common stock for approximately $47.3 million. The Subsequent Common Closing was 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 were or would have been satisfied). CFIUS Clearance was received on April 25, 2023, which means the Subsequent Common Closing was to occur on or before May 8, 2023. The Company was 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 was 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 have provided critical liquidity for the Company’s operations. Since April 21, 2023, Foxconn has disputed its obligations under the Investment Agreement to consummate the Subsequent Common Closing and to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. Foxconn initially asserted that the Company was in breach of the Investment Agreement due to the Company’s previously disclosed receipt of a notice (the “Nasdaq Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”), which Nasdaq Notice indicated that the Company’s Class A common stock price dropped below the $1.00 per share threshold set forth in Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”) and that the Company had a 180 -day period to remedy the drop in the stock price. As previously disclosed, Foxconn purported to terminate the Investment Agreement if that purported breach was not cured within 30 days . The Company continues to believe that the breach allegations by Foxconn are without merit, and that Foxconn was obligated to complete the Subsequent Common Closing on or before May 8, 2023. Despite the Company taking action to satisfy the Bid Price Requirement as of June 7, 2023, and discussions between the parties to seek a resolution regarding the Investment Agreement, Foxconn did not proceed with the Subsequent Common Closing or any Subsequent Preferred Funding. As a result of Foxconn’s actions, the Company has been deprived of critical funding necessary for its operations. To seek relief for Foxconn’s contractual breaches and other fraudulent and tortious conduct the Company believes were committed by Foxconn, the Company commenced the Foxconn Litigation. 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 (as defined herein), which are exercisable until the third anniversary of the APA Closing for 0.13 million shares of Class A common stock at an exercise price of $157.50 per share (the “Foxconn Warrants”). In October 2021, prior to entering into the APA, Foxconn purchased 0.48 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 was to (i) manufacture the Endurance at the Lordstown facility for a fee per vehicle, (ii) following a transition period, procure components for the manufacture and assembly of the Endurance, subject to sourcing specifications provided by Lordstown EV, and (iii) provide certain post-delivery services. To date, Foxconn has not provided the aforementioned procurement and post delivery services. The CMA provided us with an almost entirely variable manufacturing cost structure and alleviated the burden to invest in and maintain the Lordstown facility. The CMA required Foxconn to use commercially reasonable efforts to assist with reducing component and logistics costs and reducing the overall bill of materials (“BOM”) cost of the Endurance, and otherwise improving the commercial terms of procurement with suppliers. However, we did not realize any material reduction of raw material or component costs or improvement in commercial terms based on Foxconn’s actions. Foxconn was 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 invoiced 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 were based upon rolling weekly forecasts we provided that were 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. Voluntary Chapter 11 Petition On June 27, 2023, the Company and its subsidiaries (the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 cases are being jointly administered under the caption In re: Lordstown Motors Corp., et al. , Cases No. 23-10831 through 23-10833 (the “Chapter 11 Cases”). Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://www.kccllc.net/lordstown/document/list, a website administered by Kurtzman Carson Consultants LLC ("KCC"), a third-party bankruptcy claims and noticing agent. The information on this website is not incorporated by reference and does not constitute part of this Form 10-Q. The Bankruptcy Court has approved certain motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Cases on the Company’s remaining operations, customers and employees. The Debtors are authorized to conduct their business activities in the ordinary course, and pursuant to orders entered by the Bankruptcy Court, the Debtors are authorized to, among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) pay critical vendors; (iv) continue to honor certain customer obligations; (v) maintain their insurance program; (vi) continue their cash management system and (v) establish certain procedures to protect any potential value of the Company’s net operating loss carryforwards and other tax attributes (the “NOLs”). Shortly after filing the Chapter 11 Cases, the Company ceased production of the Endurance and new program development and, accordingly, the Company has no meaningful ongoing revenue stream. As part of the Chapter 11 Cases, on August 8, 2023, the Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process for all, substantially all or some of their assets in order to maximize the value of those assets. The Debtors’ investment banker, Jefferies LLC, has reached out to a wide range of potential buyers. The Debtors have received a number of non-binding indications of interest. The procedures approved by the Bankruptcy Court provide that August 24, 2023 is the deadline by which the Company may select and file with the Bankruptcy Court one or more stalking horses with respect to their assets. The deadline to submit bids is September 8, 2023 and the auction, if any, is scheduled for September 19, 2023. Each of these dates is subject to change and the sale process may be cancelled in accordance with the procedures approved by the Bankruptcy Court. The Company can provide no assurance that any sale of assets (whether in whole or in part) will be consummated or what the proceeds or other terms of any such transaction may be. Further, the assets included in this report or in any filing we make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases or the value of our assets in an organized sale process in light of the uncertainty of the estimates and assumptions used in the applicable reporting principles, and such values may be higher or lower as a result. The Company also intends to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities and to pursue the Foxconn Litigation before the Bankruptcy Court. However, the Company provides no assurance as to the timing or outcome of the resolution of these matters by the Bankruptcy Court or any other court in which these matters may be adjudicated, including as a result of the proceedings that will occur outside of the Bankruptcy Court prior to a final disposition by the Bankruptcy Court, including the Karma Action. In addition, the Bankruptcy Court has not established a deadline by which parties are required to file proofs of claim in the Chapter 11 Cases. The Company cannot provide any assurances regarding when such deadline will be, the amount or nature of the claims that may be filed by such deadline, or what the Company’s total estimated liabilities based on such claims will be. On July 31, 2023, the Bankruptcy Court granted Karma (defined below) relief from the automatic stay imposed by the commencement of the Chapter 11 Cases and to allow the multi-week trial in the Karma Action scheduled in September 2023 to continue. The Company is continuing to vigorously defend against Karma’s claims and continues to believe that there are strong defenses to the claims and damages demanded. However, the outcome of the Karma Action is subject to uncertainties inherent in the litigation process and no assurances can be given regarding the outcome of the trial or the impact of the Karma Action on the Company, including with respect to the amount of any claim that Karma may have against the Company and the Company’s ability to sell assets that Karma contends were misappropriated by the Company or that incorporate trade secrets or property that Karma claims were misappropriated by the Company. See Note 7 – Commitments and Contingencies and Note 9 – Subsequent Events. On July 20, 2023, Hon Hai Precision Industry Co., Ltd. (a/k/a Hon Hai Technology Group), Foxconn EV Technology, Inc., and Foxconn EV System LLC filed a motion to dismiss the Chapter 11 Cases or to convert the cases under Chapter 7 of the Bankruptcy Code (the “Foxconn Motion to Dismiss”). The movants allege that the Debtors filed the Chapter 11 Cases in bad faith, that the Debtors do not have a reasonable likelihood of rehabilitation, and that dismissal or conversion would benefit the Debtors’ creditors. The Debtors believe that there are strong defenses to the movants’ assertions and intend to vigorously oppose the motion. However, no assurances can be given regarding the outcome of the motion. Foxconn Litigation On June 27, 2023, the Company commenced an adversary proceeding against Foxconn (the “Foxconn Litigation”) in the Bankruptcy Court seeking relief for fraudulent and tortious conduct as well as breaches of the Investment Agreement, the parties’ joint venture agreement, the APA, and the CMA that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. See “Foxconn Transactions” above and Note 7 – Commitments and Contingencies for additional information. The Foxconn Litigation is Adversary Case No. 23-50414. Cessation of Production Shortly after commencing the Chapter 11 Cases, the Company ceased production of the Endurance and new program development. Accordingly, the Company lacks any meaningful revenue related to selling vehicles. Our ongoing operations as of the end of the second quarter and continuing into the third quarter of 2023 primarily include support of vehicles that have been delivered to customers, custody and maintenance of our assets for prospective sale under the process established in the Chapter 11 Cases or otherwise, support for the sale process and administration and facilitation of the Chapter 11 Cases and related proceedings. 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 materially from those estimates. Since filing the Chapter 11 petitions, the Company has operated as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. In the accompanying Balance Sheet, the “Liabilities subject to compromise” line is reflective of expected allowed claim amounts in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 852-10 and are subject to change materially based on the proceedings and continued consideration of claims that may be modified, allowed, or disallowed. Refer to Note 7 – Commitments and Contingencies for further detail. 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 a result of the Company’s recurring losses from operations, accumulated deficit, cessation of production of the Endurance and lack of any meaningful revenue stream, as well as the risks and uncertainties related to (i) the Company’s ability to successfully complete the Chapter 11 Cases, including our ability to sell all, substantially all or some of our assets, to successfully resolve litigation and other claims that may be filed against us, and to develop, negotiate, confirm and consummate a Plan, after which we do not expect to conduct ongoing business, (ii) the effects of disruption from the Chapter 11 Cases, including challenges with respect to retaining employees, (iii) the costs of the Chapter 11 Cases and (iv) the costs of defending the Company in substantial litigation and claims, along with the risk of future litigation or claims that we have and may continue to experience, substantial doubt exists regarding our 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 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 $137.7 million and an accumulated deficit of $1,153.4 million at June 30, 2023 and a net loss of $154.5 million and $326.2 million for the three and six months ended June 30, 2023, respectively. Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail above and elsewhere in this report) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. On June 27, 2023, we voluntarily initiated the Chapter 11 Cases in the Bankruptcy Court. Since filing the Chapter 11 petitions, we have operated our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. After we filed our Chapter 11 petitions, the Bankruptcy Court granted certain relief enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages and benefits, to pay taxes, to maintain our insurance policies, to honor certain of our customer obligations, to continue to operate our cash management system in the ordinary course, to pay the prepetition claims of certain of our vendors and to establish certain procedures to protect any potential value of the Company’s NOLs. Our liquidity and ability to continue as a going concern is dependent upon, among other things: (i) our ability to develop, confirm and consummate a Plan or other alternative liquidating transaction, (ii) the resolution of contingent and other claims, liabilities, the Karma Action and the Foxconn Litigation (see Note 7 – Commitments and Contingencies and Note 9 – Subsequent Events), (iii) the outcome of the Company’s efforts to sell all or a portion of its assets, and (iv) the cost, duration and outcome of the Chapter 11 Cases. We have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 Cases and expect to continue to incur significant professional fees and costs throughout our Chapter 11 Cases. In addition, we are subject to significant contingent liabilities, the full scope of which is uncertain at this time (see Note 7 – Commitments and Contingencies and Note 9 – Subsequent Events). Further, the Bankruptcy Court has not established a deadline by which parties are required to file proofs of claim in the Chapter 11 Cases and we cannot provide any assurances regarding when such deadline will be, the amount or nature of the claims that may be filed by such deadline, or what the Company’s total estimated liabilities based on such claims will be. The Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process with respect to all, substantially all or some of their assets in order to maximize the value of those assets. The Company provides no assurance that it will successfully complete any such dispositions or the pricing and other terms of any such transactions. The Company also intends to use the tools of Chapter 11 to fully, finally, and efficiently resolve its contingent and other liabilities and to pursue the Foxconn Litigation before the Bankruptcy Court. However, the Company provides no assurance as to the timing or outcome of the resolution of these matters by the Bankruptcy Court or any other court in which these matters may be adjudicated, including as a result of the proceedings that will occur outside of the Bankruptcy Court prior to a final disposition by the Bankruptcy Court, including the Karma Action. See Note 1 - Description of Organization and Business Operations - Description of Business – Voluntary Chapter 11 Petition, Note 7 – Commitments and Contingencies and Note 9 – Subsequent Events. On July 20, 2023, certain Foxconn entities filed the Foxconn Motion to Dismiss. See Note 1 — Description Of Organization And Business Operations. The movants allege that the Debtors filed the Chapter 11 Cases in bad faith, that the Debtors do not have a reasonable likelihood of rehabilitation, and that dismissal or conversion would benefit the Debtors’ creditors. The Debtors believe that there are strong defenses to the movants’ assertions and intend to vigorously oppose the motion. However, no assurances can be given regarding the outcome of the motion. If confirmation by the Bankruptcy Court of a Plan does not occur, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of claims and interests or upon the showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate the Company's assets for distribution in accordance with the priorities established by the Bankruptcy Code. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. As a result of these and other circumstances, there is substantial doubt regarding our ability to continue as a going concern, The value available to our various stakeholders, including our creditors and stockholders, is highly uncertain. The trading prices for our securities may bear little or no relationship to the actual recovery, if any, by holders of our securities in the Chapter 11 Cases, if any. Reverse Stock |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 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. The Chapter 11 Cases will result in continuous changes in facts and circumstances that will cause the Company’s estimates and assumptions to change, potentially materially. We undertake no obligation to update or revise any of the disclosures, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. There have been no material changes to the critical accounting policies and estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, except for the areas noted below, primarily driven by the filing of the Chapter 11 Cases. Liabilities Subject to Compromise As noted above, since filing the Chapter 11 petitions, the Company has operated as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. In the accompanying Balance Sheet, the “Liabilities subject to compromise” line is reflective of expected allowed claim amounts in accordance with ASC 852-10 and are subject to change materially based on the proceedings and continued consideration of claims that may be modified, allowed, or disallowed. Refer to Note 7 – Commitments and Contingencies for further detail. Inventory and Inventory Valuation Substantially all of the Company’s inventory is specific to the production of the Endurance and is stated at the lower of cost or net realizable value (“NRV”). NRV is the estimated value of the inventory in the context of the Chapter 11 Cases, which is minimal due to its unique nature. In addition to the NRV analysis, the Company recognizes an excess inventory reserve to adjust for inventory quantities in excess of anticipated Endurance production. As discussed above, the Company ceased production of the Endurance on June 30, 2023. Accordingly, NRV and excess inventory charges of $4.3 million and $24.1 million for the three and six months ended June 30, 2023, respectively, are recorded within Cost of Sales in the Company’s Condensed Consolidated Statement of Operations. No such charges were recognized for the three and six months ended June 30, 2022, as the Company had not yet commenced commercial production of the Endurance. Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation and impairment charges. Depreciation is computed using the straight-line method over the estimated useful lives and residual values of the related assets. Upon retirement or sale, the cost and related accumulated depreciation and impairments 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. Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail above and elsewhere in this report) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. 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, residual values 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. The uncertainties regarding the ability to determine the realizable value for our property, plant and equipment, including in light of the timing of the filing of the Chapter 11 Cases and lack of available reference data for market transactions, particularly with respect to Endurance-specific assets, resulted in a determination by the Company of the fair value of the assets based on their estimated residual or salvage values, which represent a range of 0% to 4% of original acquisition cost. This resulted in an impairment charge of $23.7 million for the quarter ended June 30, 2023. The Company also evaluated the decision to actively market the sale of its long-lived fixed assets in connection with the Chapter 11 Cases, against ASC 360-10-45-9 “Long-Lived Assets to Be Disposed of By Sale.” See Note 4 – Property, Plant and Equipment and Assets Held for Sale for details regarding our impairment assessment and classification of assets held for sale. Warrants As a result of the Chapter 11 Cases, the fair value of the Company’s warrants was deemed to be zero and adjusted accordingly as of June 30, 2023 . 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 | 6 Months Ended |
Jun. 30, 2023 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 3 — FAIR VALUE MEASUREMENTS Recurring 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 (with exercise prices shown in pre-Reverse Stock Split amounts): (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 (“ASC Topic 718”). As of June 30, 2023, following the Reverse Stock Split, we had 0.113 million Foxconn Warrants with an exercise price of $157.50 , 0.153 million Private Warrants with a strike price of $172.50 and 0.107 million BGL Warrants with a strike price of $150.00 outstanding. As of June 30, 2022, on a pre-Reverse Stock Split basis, we had outstanding 2.3 million Private Warrants and 1.6 million BGL Warrants. The fair value of the Foxconn Warrants was $0.3 million at issuance. The Private Warrants and the Foxconn Warrants were classified as a liability with any changes in the fair value recognized immediately in our condensed consolidated statements of operations. As a result of the Chapter 11 Cases, the fair value of the Company’s warrants was deemed to be zero and adjusted accordingly as of June 30, 2023.The following table summarizes the net gain on changes in fair value related to the Private Warrants and the Foxconn Warrants: (in thousands) Three months ended Three months ended Six months ended Six months ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Private Warrants $ 27 $ 1,797 $ 254 $ 277 Foxconn Warrants 34 — 170 — Net gain on changes in fair value $ 61 $ 1,797 $ 424 $ 277 The Private Warrants and the Foxconn Warrants were measured at fair value using Level 3 inputs. These instruments are not actively traded and were valued as of June 30, 2022 using a Monte Carlo option pricing model and Black-Scholes option pricing model, respectively, that use observable and unobservable market data as inputs. The stock price volatility rate utilized was 80% for the valuation as of June 30, 2022. This assumption considered 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, as well as the volatility implied by the traded options of the Company. The risk-free rate utilized was 2.454% for the valuation for the three and six months ended June 30, 2022. 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) June 30, 2023 Cash and cash equivalents $ 115,732 $ 115,732 $ — $ — Short-term investments 22,000 — 22,000 — Private Warrants — — — — Foxconn Warrants — — — — 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 June 30, 2023 Private Warrants $ 254 — — 254 $ — Foxconn Warrants 170 — 170 — Non-Recurring Fair Value Measurements At June 30, 2023, the Company had assets held for sale that have been adjusted to their fair value as the carrying value exceeded the estimated fair value. The categorization of the framework used to value the assets is Level 3 given the significant unobservable inputs used to determine fair value. During the three months ended June 30, 2023, we recorded a loss on asset impairment of $23.7 million related to the valuation of assets held for sale. Refer to Note 4 – Property, Plant and Equipment and Assets Held for Sale for further detail. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2023 | |
PROPERTY, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE | |
PROPERTY, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE | NOTE 4 — PROPERTY, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail above and elsewhere in this report) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. During the first quarter of 2023, the Company lowered Endurance production targets, accelerating the depreciable lives of its manufacturing assets to July 31, 2023. Consistent with the decision to cease production of the Endurance as of June 30, 2023, the Company recognized an impairment charge of $23.7 million for the quarter. Prior to the quarterly impairment analysis, as discussed below, the Company’s property, plant and equipment, net of depreciation and prior period impairments, was $30.6 million. The Company has determined that its property, plant, and equipment represent one asset group which is the lowest level for which identifiable cash flows are available. Historically, fair value of the Company’s property, plant, and equipment was derived from the Company's enterprise value at the time of impairment as the Company believed it represented the most appropriate fair value of the asset group in accordance with accounting guidance. However, since the Company’s cash balances exceeded its market capitalization as of June 30, 2023, the Company determined that continuing the impairment analysis based on enterprise value was not appropriate. In light of the Chapter 11 Cases, as discussed above, the Company valued its property, plant and equipment based on its estimate of residual and salvage values, resulting in an impairment charge of $23.7 million. In conjunction with the Chapter 11 Cases, the Company commenced a comprehensive marketing and sale process for the Endurance and related assets to maximize the value of those assets. The Company evaluated this decision against ASC 360-10-45-9 “Long-Lived Assets to Be Disposed of By Sale” and determined that all criteria were met to present property, plant and equipment as “assets held for sale”, as of June 30, 2023. Based on the fact that there are significant unobservable inputs used to determine fair value, this is categorized as a Level 3 fair value measurement, Specifically, in this case since the assets were in most cases considered “Endurance-specific,” the estimates were primarily focused on residual or salvage value where appropriate. As noted above, the Company has already recorded an impairment charge to reduce the assets to the lower of carrying or fair value less costs to sell. In light of these uncertainties, limited market data and estimates used in the valuation, the assets included in this report or in any filing we make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases or the value of our assets in an organized sale process, and such values may be higher or lower as a result. |
MEZZANINE EQUITY
MEZZANINE EQUITY | 6 Months Ended |
Jun. 30, 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 was 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 would be in an amount equal to 0.3 million shares for an aggregate purchase price of $30 million; the second tranche would 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 have provided critical liquidity for the Company’s operations. Since April 21, 2023, Foxconn has disputed its obligations under the Investment Agreement to consummate the Subsequent Common Closing and to use necessary efforts to agree upon the EV Program budget and EV Program milestones to facilitate the Subsequent Preferred Funding. Foxconn initially asserted that the Company was in breach of the Investment Agreement due to the Company’s previously disclosed receipt of the Nasdaq Notice regarding the Bid Price Requirement. As previously disclosed, Foxconn purported to terminate the Investment Agreement if that purported breach was not cured within 30 days . The Company continues to believe that the breach allegations by Foxconn are without merit, and that Foxconn was obligated to complete the Subsequent Common Closing on or before May 8, 2023. Despite the Company taking action to satisfy the Bid Price Requirement as of June 7, 2023, and discussions between the parties to seek a resolution regarding the Investment Agreement, Foxconn did not proceed with the Subsequent Common Closing or any Subsequent Preferred Funding. As a result of Foxconn’s actions, the Company has been deprived of critical funding necessary for its operations. On June 27, 2023, the Company filed its Chapter 11 Cases and on that same date the Company commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for fraudulent and tortious conduct as well as breaches of the Investment Agreement, the parties’ joint venture agreement, the APA, and the CMA that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. See “Foxconn Transactions” above and Note 7 – Commitments and Contingencies for additional information. The Foxconn Litigation is Adversary Case No. 23-50414. The descriptions herein with respect to the Preferred Stock and any rights thereunder do not account for the potential effects of the Chapter 11 Cases or the Foxconn Litigation on the Preferred Stock or any rights thereunder. The Company reserves all claims, defenses, and rights with respect to the Chapter 11 Cases, the Foxconn Litigation, the Preferred Stock, and any treatment of Preferred Stock or other interests held by Foxconn or any other party. Among other things, the Foxconn Litigation includes a claim to subordinate Foxconn’s Preferred Stock and the descriptions below do not account for the impact of that relief should it be granted. 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. The Certificate of Designation provides that, 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 then 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. The Certificate of Designation provides that, commencing on 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 $29.04 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 three and six month periods ended June 30, 2023 the Company accrued $0.6 million and $1.2 million in 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 June 30, 2023, the Company did not consider change of control to be probable. The Chapter 11 Cases and the Foxconn Litigation were filed just prior to the June 30, 2023 determination date and in light of the significant uncertainty with respect to the process to be undertaken and any potential outcome of the Chapter 11 Cases and the Foxconn Litigation, this determination does not take into account any potential impact thereof. The Company reserves all rights with respect to the amounts and the effects of the Chapter 11 Cases and the Foxconn Litigation. |
CAPITAL STOCK AND LOSS PER SHAR
CAPITAL STOCK AND LOSS PER SHARE | 6 Months Ended |
Jun. 30, 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 Charter 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 . At the 2023 Annual Meeting, the stockholders of the Company approved a proposal to amend the Charter to effect a reverse split of the Company’s outstanding shares of Class A common stock at a ratio within a range of between 1: 3 and 1: 15 , with the timing and the exact ratio of the reverse split to be determined by the Board in its sole discretion. The Board authorized the Reverse Stock Split at a 1: 15 ratio, which became effective as of 12:01 a.m. Eastern Time on May 24, 2023, or the Effective Time. The Company filed the Amendment to the Charter on May 22, 2023, which provided that, at the Effective Time, every fifteen We had 16.0 million and 15.9 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 Six months ended Six months ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Basic weighted average shares outstanding 15,940 13,388 15,936 13,245 Diluted weighted average shares outstanding 15,940 13,401 15,936 13,245 For the three and six months ended June 30, 2023 and for the six months ended June 30, 2022 share awards and warrants were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. For the three months ended June 30, 2022, the calculation of diluted weighted average shares outstanding included, on a pre-Reverse Stock Split basis, 0.2 million share awards, 1.6 million BGL Warrants, 2.3 million Private Warrants, and 1.7 million Foxconn Warrants outstanding. For the three months ended June 30, 2022, the calculation of diluted weighted average shares outstanding included 0.2 million shares (on a pre-Reverse Stock Split basis) related to share awards. 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, 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 can use any proceeds from the sale of the Class A common stock for general corporate purposes as determined by the Board and the proceeds from the sale of the Preferred Stock was to be limited to funding the EV Program or any substitute or replacement electric vehicle program as agreed to by Foxconn and the Company. On November 22, 2022, the Company completed the Initial Closing under the Investment Agreement, at which Foxconn purchased (a) approximately 1.8 million shares of Class A common stock at a purchase price of $26.40 per share (such amounts give effect to the Reverse Stock Split), 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 provided for the Subsequent Common Closing, at which time Foxconn was required to purchase approximately 10% of the Class A common stock for approximately $47.3 million. The Subsequent Common Closing was to occur on or before May 8, 2023. The Company was 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 was 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. Foxconn has failed to proceed with the Subsequent Common Closing or any Subsequent Preferred Funding. As a result of Foxconn’s actions, the Company has been deprived of critical funding necessary for its operations. The Company commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for fraudulent and tortious conduct as well as breaches of the Investment Agreement, the parties’ joint venture agreement, the APA, and the CMA that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and significant damages. See Note 1 – Description of Organization and Business Operations – Description of Business and Note 7 – Commitments and Contingencies for additional information. As previously disclosed, the Investment Agreement also contains the following additional terms with respect to Foxconn’s ownership of the Company’s securities; however, as detailed herein, Foxconn has refused to fulfill its obligations under the Investment Agreement, and those breaches, among the Company’s other causes of action against Foxconn, are now subject to the Foxconn Litigation. ● Board Representation : Foxconn would have the right to appoint two designees to the Board subject to the resolution of our dispute with Foxconn and the consummation of the Subsequent Common Closing. Foxconn would relinquish one Board seat if it did not continue to beneficially own shares of Class A common stock, Preferred Stock and shares of Class A common stock issued upon conversion of shares of Preferred Stock that represent (on an as-converted basis) at least 50% of the number of shares of Class A common stock (on an as-converted basis) acquired by Foxconn in connection with the Investment Transactions and would relinquish its other Board seat if it did not continue to beneficially own at least 25% of the number of shares of Class A common stock (on an as-converted basis) acquired by Foxconn in connection with the Investment Transactions (the “ 25% Ownership Requirement”). ● Termination of Foxconn Joint Venture : The Company and Foxconn terminated the Joint Venture Agreement, the Note, dated June 24, 2022, issued by Lordstown EV Corporation and guaranteed by the Company and Lordstown EV Sales (the “Note”), and all liens on assets of Lordstown EV Corporation and the Company. All remaining funds held by the Foxconn Joint Venture were distributed to Foxconn EV Technology, Inc. as a distribution for amounts contributed by it and as a repayment in full of any loans advanced by it to Lordstown EV Corporation under the Note. ● Standstill : Until the date that is the later of December 31, 2024 and 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors, without the approval of the Board, Foxconn would not (A) acquire any equity securities of the Company if after the acquisition Foxconn and its affiliates would own (i) prior to the Subsequent Common Closing, 9.99% of the capital stock of the Company that is entitled to vote generally in any election of directors of the Company (“Voting Power”), (ii) prior to the time the Company obtains the approval of stockholders contemplated by Rule 5635 of the Nasdaq listing rules as in effect on November 7, 2022 with respect to certain equity issuances (the “Requisite Stockholder Approval”), 19.99% of the Voting Power, and (iii) at all times following the Subsequent Common Closing and the Requisite Stockholder Approval, 24% of the Voting Power (collectively, the “Ownership Limitations”), or (B) make any public announcement with respect to, or offer, seek, propose or indicate an interest in, any merger, consolidation, business combination, tender or exchange offer, recapitalization, reorganization or purchase of more than 50% of the assets, properties or securities of the Company, or enter into discussions, negotiations, arrangements, understandings, or agreements regarding the foregoing. ● Exclusivity : Prior to the Subsequent Common Closing, (i) without Foxconn’s consent, the Company had agreed not to (A) encourage, solicit, initiate or facilitate any Acquisition Proposal (as defined below), (B) enter into any agreement with respect to any Acquisition Proposal or that would cause it not to consummate any of the Investment Transactions or (C) participate in discussions or negotiations with, or furnish any information to, any person in connection with any Acquisition Proposal, and (ii) the Company had agreed to inform Foxconn of any Acquisition Proposal that it receives. An “Acquisition Proposal” means any proposal for any (i) sale or other disposition by merger, joint venture or otherwise of assets of the Company representing 30% or more of the consolidated assets of the Company, (ii) issuance of securities representing 15% or more of any equity securities of the Company, (iii) tender offer, exchange offer or other transaction that would result in any person beneficially owning 15% or more of any equity securities of the Company, (iv) merger, dissolution or similar transaction involving the Company representing 30% or more of the consolidated assets of the Company, or (v) combination of the foregoing. The Company had also agreed that, while the Preferred Stock is outstanding, it would not put in place a poison pill arrangement that applies to Foxconn to the extent of its ownership of shares of Preferred Stock or Class A common stock that it acquired from the Company as of the date such arrangement is adopted by the Company. ● Voting Agreement and Consent Rights : The terms of the Investment Agreement and Certificate of Designations provide that, until the later of (i) December 31, 2024 and (ii) 90 days after the first day on which no Foxconn-appointed director serves on the Board and Foxconn no longer has a right to appoint any directors, Foxconn 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 agreed not to (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 : Following the Subsequent Common Closing and until Foxconn no longer has the right to appoint a director to the Board, other than with respect to certain excluded issuances, Foxconn has the right to purchase its pro rata portion of equity securities proposed to be sold by the Company; provided, that the Company is not required to sell Foxconn securities if the Company would be required to obtain stockholder approval under any applicable law or regulation. The Investment Agreement also contains closing conditions. The Investment Agreement provides for termination 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 Class A common stock issuable upon conversion of the Preferred Stock under the Investment Agreement, which was 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. The Company filed a registration statement on Form S-3 with the SEC on May 11, 2023 with the intent to satisfy its obligations under the Registration Rights Agreement. Sales Agreement and ATM Offering 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 could offer and sell up to approximately 50.2 million shares of our Class A common stock, from time to time through Jefferies (the “ATM Offering”). 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 June 30, 2023. As a result of our delisting from Nasdaq, we do not anticipate any transactions under the ATM Offering in the future. 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. During the six months ended June 30, 2022, we issued 6.6 million shares to YA and received $13.7 million cash, net of equity issuance costs. 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 – COMMITMENTS AND CONTINGENCIES The Company has been subject to extensive pending and threatened legal proceedings arising in the ordinary course of business and has already incurred, and expects 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 may seek to achieve resolution of these matters with respect to the Company as part of the Chapter 11 Cases and 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’s stakeholders. Legal fees and costs of litigation, settlement by the Company or adverse decisions with respect to the matters disclosed may result in liability that is not insured or that is in excess of insurance coverage and could significantly exceed our current accrual and ability to pay and be, individually or in the aggregate, material to the Company’s consolidated results of operations, financial condition or cash flows, impair our ability to sell certain assets and diminish or eliminate any assets available for any distribution to stockholders in the Chapter 11 Cases. On June 27, 2023, the Company and its subsidiaries commenced the Chapter 11 Cases in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re: Lordstown Motors Corp., et al. , Cases No. 23-10831 through 23-10833 and the Foxconn Litigation is Adversary Case No. 23-50414. The Company received the Bankruptcy Court’s approval of its customary motions filed on June 27, 2023. The Debtors are authorized to conduct their business activities in the ordinary course, and pursuant to orders entered by the Bankruptcy Court, the Debtors are authorized to, among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) pay critical vendors; (iv) continue to honor certain customer obligations; (v) maintain their insurance program; (vi) continue their cash management system; and (v) establish certain procedures to protect any potential value of the Company’s NOLs. The filing of the Chapter 11 Cases resulted in an initial automatic stay of legal proceedings against the Company. Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://www.kccllc.net/lordstown/document/list, a website administered by KCC, a third-party bankruptcy claims and noticing agent. The information on this web site is not incorporated by reference and does not constitute part of this Form 10-Q. On July 27, 2023, the Bankruptcy Court modified the automatic stay that was in effect at the time of filing the Chapter 11 Cases to allow the Karma Action (defined below) to proceed against the Company in the District Court (defined below). On August 8, 2023, the Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process for all, substantially all or some of their assets in order to maximize the value of those assets. The Debtors’ investment banker, Jefferies LLC, has reached out to a wide range of potential buyers. The Debtors have received a number of non-binding indications of interest. The procedures approved by the Bankruptcy Court provide that August 24, 2023 is the deadline by which the Company may select and file with the court one or more stalking horses with respect to its assets. The deadline to submit bids is September 8, 2023 and the auction, if any, is scheduled for September 19, 2023. Since filing the Chapter 11 petitions, the Company has operated as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. In accordance with ASC 852, in the accompanying June 30, 2023 Condensed Consolidated Balance Sheet, the caption “Liabilities subject to compromise” reflects the expected allowed amount of the pre-petition claims that are not fully secured and that have at least a possibility of not being repaid at the full claim amount. “Liabilities subject to compromise” at June 30, 2023 consisted of the following: (in thousands) June 30, 2023 Accounts payable $ 3,279 Accrued expenses and other current liabilities 6,716 Accrued legal settlements 75,000 Liabilities subject to compromise $ 84,995 “Liabilities subject to compromise” are recorded at the expected amount of the total allowed claim, however, the ultimate settlement of these liabilities remain at the discretion of the Bankruptcy Court, thus may be settled for different amounts. These amounts are also subject to adjustments if we make changes to our assumptions or estimates related to claims as additional information becomes available to us. Such adjustments may be material, and the Company will continue to evaluate the amount and classification of its pre-petition liabilities. Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of “Liabilities subject to compromise” may change. The Company had accruals of $75.0 million and $35.9 million, for the periods ending June 30, 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. Any such additional losses may be significant; however, the Company 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. The Bankruptcy Court has not established the deadline by which parties are required to file proofs of claim in the Chapter 11 Cases. There is substantial risk of additional litigation and claims against the Company or its indemnified directors and officers, as well as other claims by third parties that may be known or unknown and the Company does not have the resources to adequately defend or dispute due to the Chapter 11 Cases. The Company cannot provide any assurances regarding when such deadline will be, the amount or nature of the claims that may be filed by such deadline, or what the Company’s total estimated liabilities based on such claims will be. The Company was notified by its primary insurer under its 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. The Company 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. 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 (the “Karma Action”) 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 in excess of $900 million 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. 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 District Court initially stayed the Karma Action in light of the automatic stay imposed by the commencement of the Chapter 11 Cases. However, the Bankruptcy Court granted Karma relief from the automatic stay on July 31, 2023 to allow the multi-week trial in the Karma Action to proceed, which trial is scheduled for trial in California beginning on September 12, 2023. The jury trial is expected to last approximately three weeks. The Company is continuing to vigorously defend against Karma’s claims. The Company continues to believe that there are strong defenses to the claims and damages demanded. However, the outcome of the Karma Action is subject to uncertainties inherent in the litigation process and no assurances can be given regarding the outcome of the trial or the impact of the Karma Action on the Company, including its ability to sell assets that Karma claims were misappropriated by the Company or that incorporate trade secrets or property that Karma claims were misappropriated by the Company. The outcome of the litigation with Karma may have an impact upon which assets the Company is able to sell through the process before the Bankruptcy Court. 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. The Company filed a suggestion of bankruptcy on June 28, 2023, and filed an amended suggestion of bankruptcy on July 11, 2023, which notified the court of the filing of the Chapter 11 Cases and resulting automatic stay; however the ultimate scope and effect of the stay remains subject to further proceedings before the Bankruptcy Court. 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. On May 9, 2023, the court reinstated the stay and ordered the parties to advise the court of any developments in the consolidated securities class action or material changes to Lordstown’s condition. The Company filed a suggestion of bankruptcy on June 27, 2023, which notified the court of the filing of the Chapter 11 Cases and resulting automatic stay; however the ultimate scope and effect of the stay remains subject to further proceedings before the Bankruptcy Court. The court entered an order acknowledging the effect of the automatic stay on June 28, 2023. 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 Company filed a suggestion of bankruptcy on June 28, 2023, and filed an amended suggestion of bankruptcy on July 19, 2023, which notified the court of the filing of the Chapter 11 Cases and resulting automatic stay; however the ultimate scope and effect of the stay remains subject to further proceedings before the Bankruptcy Court. 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. On June 27, 2023, the Company filed a suggestion of bankruptcy, which notified the court of the filing of the Chapter 11 Cases and resulting automatic stay; however the ultimate scope and effect of the stay remains subject to further proceedings before the Bankruptcy Court. 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)) (collectively, the “ Delaware Class Action Litigation ”). 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. On June 9, 2023, the court granted in part and denied in part the plaintiffs’ motion to compel regarding the appropriate scope of the Company’s response to the subpoena. On July 5, 2023, in the Chapter 11 Cases, the Company filed (i) an adversary complaint seeking injunctive relief to extend the automatic stay to the plaintiffs in the Delaware Class Action Litigation, initiating the adversary proceeding captioned Lordstown Motors Corp. v. Amin , Adv. Proc. No. 23-50428 (Bankr. D. Del.) and (ii) a motion and brief in support thereof, seeking a preliminary injunction extending the automatic stay to the Delaware Class Action Litigation. On August 3, 2023, the Bankruptcy Court denied the Company’s preliminary injunction motion. On July 21, 2023, plaintiffs filed a motion for class certification in the Delaware Class Action Litigation. Plaintiffs 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. 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. The Company has potential indemnification obligations with respect to the current and former directors named in the above-referenced actions, which obligations may not be covered by the Company’s applicable directors and officers insurance. On June 27, 2023, the Company commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for breaches of the Investment Agreement and other agreements and fraudulent and tortious actions that the Company believes were committed by Foxconn, which have caused substantial harm to our operations and prospects and significant damages. Foxconn’s answer is currently due on September 1, 2023. On July 20, 2023, Hon Hai Precision Industry Co., Ltd. (a/k/a Hon Hai Technology Group), Foxconn EV Technology, Inc., and Foxconn EV System LLC filed a motion to dismiss the Chapter 11 Cases or to convert the cases under Chapter 7 of the Bankruptcy Code. The movants allege that the Debtors filed the Chapter 11 Cases in bad faith, that the Debtors do not have a reasonable likelihood of rehabilitation, and that dismissal or conversion would benefit the Debtors’ creditors. The Debtors believe that there are strong defenses to the movants’ assertions and will vigorously oppose the motion. However, no assurances can be given regarding the outcome of the motion. As a result of the Chapter 11 Cases and ceasing production of the Endurance, the Company has received claims from its suppliers and vendors for amounts those parties believe the Company owes. The Company and its advisors are analyzing the claims for validity. As of June 30, 2023, the Company has accrued $6.7 million for claims it believes are appropriate to recognize as a liability. There are significant additional claims being asserted and we are likely to learn of additional claims once the Bankruptcy Court establishes a deadline by which parties are required to file proofs of claims. The Company intends to vigorously defend against claims it believes are invalid. No assurances can be provided as to the extent of the claims, its ability to minimize future losses, or the substantial costs that may be incurred to evaluate known or unknown claims. As part of the Chapter 11 Cases, the Company engaged Jefferies to act as its investment banker, and such engagement was authorized by the Bankruptcy Court on July 25, 2023. The engagement letter with Jefferies, dated June 26, 2023 (the “Engagement Letter”), provides for certain payment, reimbursement, contribution, and indemnification obligations, including the payment by the Company of (i) a monthly fee equal to $0.2 million per month until the Engagement Letter is terminated (the “Monthly Fee”), (ii) a fee equal to $3.0 million (a “Transaction Fee”) upon either the consummation of (x) any transaction involving the restructuring, reorganization, recapitalization, repayment or material modification of the Company’s outstanding indebtedness (other than any dismissal of the Chapter 11 Cases or any conversion of these cases to cases under Chapter 7 of the Bankruptcy Code) or (y) any sale, disposition or other similar business transaction or series of related transactions involving all or substantially all of the Company’s assets (any such event, a “Transaction”), and (iii) reasonable out-of-pocket fees and expenses. All Monthly Fees actually paid to and retained by Jefferies will be credited once, without duplication, against any Transaction Fee that becomes payable to Jefferies. Either party may terminate the Engagement Letter upon five days ’ notice, but if a Transaction occurs within twelve months after termination, Jefferies remains entitled to the applicable fee. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 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 7 – Commitments and Contingencies 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. Shortly after filing the Chapter 11 Cases, the Company ceased production of the Endurance and new program development. In November 2020, we prepaid a royalty payment of $4.75 million to Workhorse Group, representing an advance on the royalties, 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 license agreement during 2022. 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 | 6 Months Ended |
Jun. 30, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 9 — SUBSEQUENT EVENTS Bankruptcy and Litigation Matters On June 27, 2023, the Company and its subsidiaries filed voluntary petitions for relief under Chapter 11 in the Bankruptcy Court. The Chapter 11 Cases are being jointly administered under the caption In re: Lordstown Motors Corp., et al ., Cases No. 23-10831 through 23-10833. Additional information about the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court, is available online at https://www.kccllc.net/lordstown/document/list, a website administered by KCC. The information on this website is not incorporated by reference and does not constitute part of this Form 10-Q. The Bankruptcy Court has approved certain motions filed by the Debtors that were designed primarily to mitigate the impact of the Chapter 11 Cases on the Company’s operations, customers and employees. The Debtors are authorized to conduct their business activities in the ordinary course, and pursuant to orders entered by the Bankruptcy Court, the Debtors are authorized to, among other things and subject to the terms and conditions of such orders: (i) pay employees’ wages and related obligations; (ii) pay certain taxes; (iii) pay critical vendors; (iv) continue to honor certain customer obligations; (v) maintain their insurance program; (vi) continue their cash management system and (v) establish certain procedures to protect any potential value of the Company’s NOLs. As part of the Chapter 11 Cases, on August 8, 2023, the Bankruptcy Court approved procedures for the Debtors to conduct a comprehensive marketing and sale process for all, substantially all or some of their assets in order to maximize the value of those assets. The Debtors’ investment banker, Jefferies LLC, has reached out to a wide range of potential buyers. The Debtors have received a number of non-binding indications of interest. The procedures approved by the Bankruptcy Court provide that August 24, 2023 is the deadline by which the Company may select and file with the Bankruptcy Court one or more stalking horse bids with respect to their assets. The deadline to submit bids is September 8, 2023 and the auction, if any, is scheduled for September 19, 2023. Each of these dates is subject to change and the sale process may be modified or cancelled in accordance with the procedures approved by the Bankrupt Court. The Company can provide no assurance that any sale of assets (whether in whole or in part) will be consummated or what the proceeds or other terms of any such transaction may be. Further, the assets included in this report or in any filing we make with the Bankruptcy Court may not reflect the fair values thereof during the pendency of or following the Chapter 11 Cases or the value of our assets in an organized sale process in light of the uncertainty of the estimates and assumptions used in the applicable reporting principles, and such values may be higher or lower as a result. On July 31, 2023, the Bankruptcy Court granted Karma relief from the automatic stay imposed by the commencement of the Chapter 11 Cases and to allow the multi-week trial in the Karma Action scheduled in September 2023 to continue. The Company is continuing to vigorously defend against Karma’s claims and continues to believe that there are strong defenses to the claims and damages demanded. However, the outcome of the Karma Action is subject to uncertainties inherent in the litigation process and no assurances can be given regarding the outcome of the trial or the impact of the Karma Action on the Company, including its ability to sell assets that Karma claims were misappropriated by the Company or that incorporate trade secrets or property that Karma claims were misappropriated by the Company. See Note 7 – Commitments and Contingencies. On July 26, 2023, a purported class action lawsuit was filed against certain of the Company’s officers in the U.S. District Court for the Northern District of Ohio (Bandol Lim, Individually and on behalf of other stockholders (Case No. 4:23-cv-01454-BYP) asserting violations of Section 10(b), Section 20(a) of the Exchange Act and Rule 10b-5 thereunder relating to the Company’s disclosure regarding the status of its relationship with Foxconn and the Foxconn Transactions. The defendants, as well as the Company, are reviewing the claims and the timing thereof in light of the Chapter 11 Cases. A vigorous defense is expected and the Company may have indemnification obligations with respect thereto. The proceedings are subject to uncertainties inherent in the litigation process. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 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. The Chapter 11 Cases will result in continuous changes in facts and circumstances that will cause the Company’s estimates and assumptions to change, potentially materially. We undertake no obligation to update or revise any of the disclosures, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. There have been no material changes to the critical accounting policies and estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, except for the areas noted below, primarily driven by the filing of the Chapter 11 Cases. |
Liabilities Subject to Compromise | Liabilities Subject to Compromise As noted above, since filing the Chapter 11 petitions, the Company has operated as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. In the accompanying Balance Sheet, the “Liabilities subject to compromise” line is reflective of expected allowed claim amounts in accordance with ASC 852-10 and are subject to change materially based on the proceedings and continued consideration of claims that may be modified, allowed, or disallowed. Refer to Note 7 – Commitments and Contingencies for further detail. |
Inventory and Inventory Valuation | Inventory and Inventory Valuation Substantially all of the Company’s inventory is specific to the production of the Endurance and is stated at the lower of cost or net realizable value (“NRV”). NRV is the estimated value of the inventory in the context of the Chapter 11 Cases, which is minimal due to its unique nature. In addition to the NRV analysis, the Company recognizes an excess inventory reserve to adjust for inventory quantities in excess of anticipated Endurance production. As discussed above, the Company ceased production of the Endurance on June 30, 2023. Accordingly, NRV and excess inventory charges of $4.3 million and $24.1 million for the three and six months ended June 30, 2023, respectively, are recorded within Cost of Sales in the Company’s Condensed Consolidated Statement of Operations. No such charges were recognized for the three and six months ended June 30, 2022, as the Company had not yet commenced commercial production of the Endurance. |
Property, plant and equipment | Property, plant and equipment Property and equipment are stated at cost less accumulated depreciation and impairment charges. Depreciation is computed using the straight-line method over the estimated useful lives and residual values of the related assets. Upon retirement or sale, the cost and related accumulated depreciation and impairments 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. Due to the failure to identify a strategic partner for the Endurance, lack of expected funding and other support from Foxconn (as discussed in more detail above and elsewhere in this report) and extremely limited ability to raise sufficient capital in the current market environment, we determined it was in the best interests of the Company’s stakeholders to take aggressive actions to cut costs and preserve cash, file the Chapter 11 Cases and cease production of the Endurance and new program development. |
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, residual values 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. The uncertainties regarding the ability to determine the realizable value for our property, plant and equipment, including in light of the timing of the filing of the Chapter 11 Cases and lack of available reference data for market transactions, particularly with respect to Endurance-specific assets, resulted in a determination by the Company of the fair value of the assets based on their estimated residual or salvage values, which represent a range of 0% to 4% of original acquisition cost. This resulted in an impairment charge of $23.7 million for the quarter ended June 30, 2023. The Company also evaluated the decision to actively market the sale of its long-lived fixed assets in connection with the Chapter 11 Cases, against ASC 360-10-45-9 “Long-Lived Assets to Be Disposed of By Sale.” See Note 4 – Property, Plant and Equipment and Assets Held for Sale for details regarding our impairment assessment and classification of assets held for sale. |
Warrants | Warrants As a result of the Chapter 11 Cases, the fair value of the Company’s warrants was deemed to be zero and adjusted accordingly as of June 30, 2023 . |
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) | 6 Months Ended |
Jun. 30, 2023 | |
FAIR VALUE MEASUREMENTS | |
Summary of the net gain on changes in fair value related to warrants | (in thousands) Three months ended Three months ended Six months ended Six months ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Private Warrants $ 27 $ 1,797 $ 254 $ 277 Foxconn Warrants 34 — 170 — Net gain on changes in fair value $ 61 $ 1,797 $ 424 $ 277 |
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) June 30, 2023 Cash and cash equivalents $ 115,732 $ 115,732 $ — $ — Short-term investments 22,000 — 22,000 — Private Warrants — — — — Foxconn Warrants — — — — 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 June 30, 2023 Private Warrants $ 254 — — 254 $ — Foxconn Warrants 170 — 170 — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of liability subject to compromise | (in thousands) June 30, 2023 Accounts payable $ 3,279 Accrued expenses and other current liabilities 6,716 Accrued legal settlements 75,000 Liabilities subject to compromise $ 84,995 |
DESCRIPTION OF ORGANIZATION A_2
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||||||
May 24, 2023 | May 22, 2023 | Apr. 21, 2023 | Nov. 22, 2022 USD ($) tranche D $ / shares shares | Nov. 07, 2022 USD ($) $ / shares shares | May 24, 2022 | May 22, 2022 shares | May 11, 2022 | Nov. 10, 2021 USD ($) | Jul. 23, 2021 USD ($) | Oct. 31, 2021 USD ($) shares | Jun. 30, 2023 USD ($) item $ / shares shares | Jun. 30, 2022 USD ($) shares | Jun. 30, 2023 USD ($) item $ / shares shares | Jun. 30, 2022 USD ($) shares | Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) | May 07, 2023 USD ($) | Dec. 30, 2022 USD ($) | Aug. 17, 2022 $ / shares | Apr. 15, 2022 USD ($) | |
Business Acquisition | |||||||||||||||||||||
Number of endurance truck | item | 33 | ||||||||||||||||||||
Number of notices Provided to employees | item | 2 | ||||||||||||||||||||
Net loss | $ 154,491 | $ (63,659) | $ 326,210 | $ 25,974 | |||||||||||||||||
Research and development expenses | $ 12,303 | 10,510 | $ 26,728 | 72,374 | |||||||||||||||||
Exchange ratio | 0.067 | 0.067 | |||||||||||||||||||
Common stock shares converted | shares | 15 | ||||||||||||||||||||
Shares issued in conversion | shares | 1 | ||||||||||||||||||||
Issuance of Class A Common stock | $ 1,237 | $ 1,853 | |||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||||||||||
cash, cash equivalents and short-term investments | $ 137,700 | $ 137,700 | |||||||||||||||||||
Accumulated deficit | $ 1,153,423 | $ 1,153,423 | $ 827,213 | ||||||||||||||||||
Convertible preferred shares, shares issued | shares | 300,000 | ||||||||||||||||||||
Common Stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Stock issued in aggregate purchase | shares | 43,000 | 74,000 | |||||||||||||||||||
Issuance of Class A Common stock | $ 70,000 | $ 1 | |||||||||||||||||||
Foxconn | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Number of days to remedy drop in stock price | 180 days | ||||||||||||||||||||
Research and development expenses | $ 18,400 | ||||||||||||||||||||
Threshold period for termination of investment agreement if the breach not cured | 30 days | ||||||||||||||||||||
Contract Manufacturing Agreement | Lordstown EV Corporation | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Initial term | 18 months | ||||||||||||||||||||
Notice period | 12 months | ||||||||||||||||||||
Minimum | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Exchange ratio | 0.33 | 0.33 | |||||||||||||||||||
Maximum | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Exchange ratio | 0.067 | 0.067 | |||||||||||||||||||
Equity Funding Agreement With Y A | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Aggregate value of shares for issuance | $ 400,000 | ||||||||||||||||||||
Stock issued in aggregate purchase | shares | 6,600,000 | 17,500,000 | |||||||||||||||||||
Issuance of Class A Common stock | $ 13,734 | $ 13,734 | $ 40,400 | ||||||||||||||||||
Equity Funding Agreement With Y A | Common Stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Stock issued in aggregate purchase | shares | 437,000 | 437,000 | |||||||||||||||||||
Issuance of Class A Common stock | $ 1 | $ 1 | |||||||||||||||||||
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 | ||||||||||||||||||||
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 | 480,000 | ||||||||||||||||||||
Proceeds from stock issuance | $ 50,000 | ||||||||||||||||||||
Equity Funding Agreement With Foxconn | Foxconn | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Threshold period for subsequent common closing from the receipt of written communication | D | 10 | ||||||||||||||||||||
Open Market Sales Agreement | Jefferies LLC | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Stock issued in aggregate purchase | shares | 0 | 7,800,000 | |||||||||||||||||||
Proceeds from stock issuance | $ 12,400 | ||||||||||||||||||||
Open Market Sales Agreement | Maximum | Jefferies LLC | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Number of shares to be issued | shares | 50,200,000 | ||||||||||||||||||||
Investment agreement | Foxconn | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Aggregate value of shares for issuance | $ 100,000 | ||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | ||||||||||||||||||||
Proceeds from stock issuance | $ 47,300 | ||||||||||||||||||||
Investment agreement | Foxconn | Common Stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Shares available for issuance (as a percent) | 10% | ||||||||||||||||||||
Proceeds from issuance of preferred stock | $ 47,300 | ||||||||||||||||||||
Stock issued in aggregate purchase | shares | 1,800,000 | ||||||||||||||||||||
Issuance of Class A Common stock | $ 22,700 | $ 70,000 | |||||||||||||||||||
Shares issued price per share | $ / shares | $ 26.40 | ||||||||||||||||||||
Investment agreement | Foxconn | Preferred stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Aggregate value of shares for issuance | $ 100,000 | ||||||||||||||||||||
Issuance of Class A Common stock | $ 30,000 | ||||||||||||||||||||
Shares issued price per share | $ / shares | $ 100 | ||||||||||||||||||||
Number of tranches of share issue | tranche | 2 | ||||||||||||||||||||
Convertible preferred shares, shares issued | shares | 300,000 | ||||||||||||||||||||
Scenario, Plan | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Warrants to purchase common stock | shares | 130,000 | 130,000 | |||||||||||||||||||
Warrant exercise price | $ / shares | $ 157.50 | $ 157.50 | |||||||||||||||||||
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 | Preferred stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Proceeds from issuance of preferred stock | $ 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 | 700,000 | ||||||||||||||||||||
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 | 300,000 | ||||||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement Second Tranche | Foxconn | Preferred stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Convertible preferred shares, shares issued | shares | 400,000 | ||||||||||||||||||||
Scenario, EV Program Milestone Achievement [Member] | Investment Agreement Second Tranche | Maximum | Foxconn | Preferred stock | |||||||||||||||||||||
Business Acquisition | |||||||||||||||||||||
Proceeds from issuance of preferred stock | $ 40,000 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Inventory Adjustments | $ 24,105 | |||
Assets impairment charge | $ 0 | $ 0 | ||
Impairment charge | $ 23,700 | |||
Cost of sales | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Inventory Adjustments | $ 4,300 | $ 24,100 | ||
Minimum | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Fair value original acquisition cost | 0% | 0% | ||
Maximum | ||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||
Fair value original acquisition cost | 4% | 4% |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | |
Jun. 30, 2023 USD ($) $ / shares shares | Jun. 30, 2022 shares | |
FAIR VALUE MEASUREMENTS | ||
Impairment charge | $ | $ 23.7 | |
Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Warrant exercise price | $ 11.50 | |
Strike price per warrant | $ 172.50 | |
Warrants outstanding | shares | 153 | |
BGL Warrants - SBC - Equity | ||
FAIR VALUE MEASUREMENTS | ||
Warrant exercise price | $ 10 | |
Strike price per warrant | $ 150 | |
Warrants outstanding | shares | 107 | |
Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Warrant exercise price | $ 157.50 | |
Warrants outstanding | shares | 113 | |
Public warrants | ||
FAIR VALUE MEASUREMENTS | ||
Warrant exercise price | $ 11.50 | |
Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Warrants outstanding | shares | 2,300 | |
BGL Warrants - SBC - Equity | ||
FAIR VALUE MEASUREMENTS | ||
Warrants outstanding | shares | 1,600 | |
Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Warrant exercise price | $ 10.50 | |
Fair value of warrants | $ | $ 0.3 | |
Volatility | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability, Measurement Input | 0.80 | |
Risk Free Interest Rate | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability, Measurement Input | 0.02454 |
FAIR VALUE MEASUREMENTS - Net g
FAIR VALUE MEASUREMENTS - Net gain on changes in fair value (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
FAIR VALUE MEASUREMENTS | ||||
Net gain on changes in fair value | $ 61 | $ 1,797 | $ 424 | $ 277 |
Private warrants to purchase common stock | ||||
FAIR VALUE MEASUREMENTS | ||||
Net gain on changes in fair value | 27 | $ 1,797 | 254 | $ 277 |
Warrants issued to Foxconn | ||||
FAIR VALUE MEASUREMENTS | ||||
Net gain on changes in fair value | $ 34 | $ 170 |
FAIR VALUE MEASUREMENTS - Valua
FAIR VALUE MEASUREMENTS - Valuation of financial instruments (Details) - USD ($) $ in Thousands | Jun. 30, 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 | $ 254 | |
Fair Value, Inputs, Level 3 | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 170 | |
Fair Value, Recurring | ||
FAIR VALUE MEASUREMENTS | ||
Cash and Cash Equivalents | 115,732 | 121,358 |
Short-term investments with a fair value | 22,000 | 100,297 |
Fair Value, Recurring | Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 254 | |
Fair Value, Recurring | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 170 | |
Fair Value, Recurring | Fair Value, Inputs, Level 1 | ||
FAIR VALUE MEASUREMENTS | ||
Cash and Cash Equivalents | 115,732 | 121,358 |
Fair Value, Recurring | Fair Value, Inputs, Level 2 | ||
FAIR VALUE MEASUREMENTS | ||
Short-term investments with a fair value | $ 22,000 | 100,297 |
Fair Value, Recurring | Fair Value, Inputs, Level 3 | Private warrants to purchase common stock | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | 254 | |
Fair Value, Recurring | Fair Value, Inputs, Level 3 | Warrants issued to Foxconn | ||
FAIR VALUE MEASUREMENTS | ||
Derivative Liability | $ 170 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets, Liabilities, Rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Loss on fair value adjustments included in earnings | $ (61) | $ (1,797) | $ (424) | $ (277) |
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 | (34) | (170) | ||
Derivative liability, ending balance | 300 | 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 | $ (27) | $ (1,797) | (254) | $ (277) |
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 | 170 | |||
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 | $ 254 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Details) $ in Millions | 3 Months Ended |
Jun. 30, 2023 USD ($) | |
PROPERTY, PLANT AND EQUIPMENT | |
Impairments | $ 30.6 |
Impairment charge | $ 23.7 |
MEZZANINE EQUITY (Details)
MEZZANINE EQUITY (Details) $ / shares in Units, $ in Thousands, shares in Millions | 3 Months Ended | 6 Months Ended | |||
Nov. 22, 2022 USD ($) tranche $ / shares shares | Nov. 07, 2022 USD ($) $ / shares shares | Jun. 30, 2023 USD ($) $ / shares | Jun. 30, 2023 USD ($) D $ / shares | 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 | $ 29.04 | $ 29.04 | |||
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 | $ 1,200 | |||
Liquidation preference per share | $ / shares | $ 100 | $ 100 | |||
Series A Convertible Preferred | |||||
Business Acquisition [Line Items] | |||||
Accrued unpaid dividends (per share) | $ / shares | $ 100 | ||||
Preferred stock | |||||
Business Acquisition [Line Items] | |||||
Accrual of Preferred stock dividends | $ 618 | $ 1,223 | |||
Investment agreement | Foxconn | |||||
Business Acquisition [Line Items] | |||||
Beneficial ownership (as a percent) | 25% | ||||
Investment agreement | Preferred stock | Scenario, EV Program Milestone Achievement [Member] | |||||
Business Acquisition [Line Items] | |||||
Proceeds from issuance of preferred stock | $ 70,000 | ||||
Investment agreement | Preferred stock | Foxconn | |||||
Business Acquisition [Line Items] | |||||
Convertible preferred shares, shares issued | shares | 0.3 | ||||
Shares issued price per share | $ / shares | $ 100 | ||||
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_2
CAPITAL STOCK AND LOSS PER SHARE (Details) | May 24, 2023 | May 22, 2023 | May 24, 2022 | May 22, 2022 | Jun. 30, 2023 $ / shares shares | Dec. 31, 2022 $ / shares shares | Aug. 17, 2022 $ / shares shares | Aug. 16, 2022 shares |
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Shares authorized per charter | 462,000,000 | 312,000,000 | ||||||
Common stock, shares authorized | 450,000,000 | 450,000,000 | 450,000,000 | |||||
Temporary equity shares authorized | 12,000,000 | 12,000,000 | 12,000,000 | |||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Temporary equity par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||
Exchange ratio | 0.067 | 0.067 | ||||||
Common stock, shares issued | 15,953,212 | 15,928,299 | ||||||
Common stock, shares outstanding | 15,953,212 | 15,928,299 | ||||||
Temporary equity, shares issued | 300,000 | 300,000 | ||||||
Temporary equity shares outstanding | 300,000 | 300,000 | ||||||
Minimum | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Exchange ratio | 0.33 | 0.33 | ||||||
Maximum | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Exchange ratio | 0.067 | 0.067 |
CAPITAL STOCK AND LOSS PER SH_3
CAPITAL STOCK AND LOSS PER SHARE - Basic and diluted net loss per share (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
CAPITAL STOCK AND LOSS PER SHARE | ||||
Basic weighted average shares outstanding | 15,940 | 13,388 | 15,936 | 13,245 |
Diluted weighted average shares outstanding | 15,940 | 13,401 | 15,936 | 13,245 |
CAPITAL STOCK AND LOSS PER SH_4
CAPITAL STOCK AND LOSS PER SHARE - Anti-dilutive effect on dilutive net loss per share (Details) shares in Millions | 3 Months Ended |
Jun. 30, 2022 shares | |
Share awards | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Anti-dilutive securities, earnings per share amount | 0.2 |
Warrants issued to Foxconn | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Anti-dilutive securities, earnings per share amount | 1.7 |
BGL Warrants | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Anti-dilutive securities, earnings per share amount | 1.6 |
Private warrants to purchase common stock | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Anti-dilutive securities, earnings per share amount | 2.3 |
CAPITAL STOCK AND LOSS PER SH_5
CAPITAL STOCK AND LOSS PER SHARE - Purchase Agreements (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Nov. 22, 2022 USD ($) tranche item $ / shares shares | Nov. 07, 2022 USD ($) shares | Jul. 23, 2021 USD ($) | Jun. 30, 2023 shares | Jun. 30, 2022 USD ($) shares | Jun. 30, 2023 | Jun. 30, 2022 USD ($) shares | Dec. 31, 2022 USD ($) shares | |
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 1,237 | $ 1,853 | ||||||
Aggregate share purchase price | shares | 300 | |||||||
Beneficial ownership (as a percent) | 25% | |||||||
Maximum | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Aggregate liquidation preference | $ 30,000 | |||||||
Common Stock | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 70,000 | $ 1 | ||||||
Stock issued in aggregate purchase | shares | 43 | 74 | ||||||
Equity Funding Agreement With Y A | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 13,734 | $ 13,734 | $ 40,400 | |||||
Aggregate value of shares for issuance | $ 400,000 | |||||||
Stock issued in aggregate purchase | shares | 6,600 | 17,500 | ||||||
Equity Funding Agreement With Y A | Common Stock | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Issuance of Class A Common stock | $ 1 | $ 1 | ||||||
Stock issued in aggregate purchase | shares | 437 | 437 | ||||||
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 | |||||||
Percentage of common stock to be acquired | 10% | |||||||
Issuance of Class A common stock | $ 47,300 | |||||||
Proceeds from sale of equity | $ 52,700 | |||||||
Beneficial ownership (as a percent) | 25% | |||||||
Investment agreement | Minimum | 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 | 70,000 | ||||||
Shares issued price per share | $ / shares | $ 26.40 | |||||||
Proceeds from issuance of preferred stock | $ 47,300 | |||||||
Stock issued in aggregate purchase | shares | 1,800 | |||||||
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 | ||||||||
Beneficial ownership (as a percent) | 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 | |||||||
Aggregate value of shares for issuance | $ 100,000 | |||||||
Aggregate share purchase price | shares | 300 | |||||||
Number of tranches of share issue | tranche | 2 | |||||||
Investment agreement | Preferred stock | Scenario, EV Program Milestone Achievement [Member] | ||||||||
CAPITAL STOCK AND LOSS PER SHARE | ||||||||
Proceeds from issuance of preferred stock | $ 70,000 | |||||||
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 | |||||||
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_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | 1 Months Ended | |||||||
Jul. 26, 2023 USD ($) | Dec. 06, 2022 lawsuit | Jul. 09, 2021 lawsuit | May 14, 2021 lawsuit | Nov. 30, 2022 item | Jun. 30, 2023 USD ($) | Dec. 31, 2022 USD ($) | Apr. 16, 2021 employee item | |
Loss Contingency, Information about Litigation Matters [Abstract] | ||||||||
Claims accrued | $ | $ 6.7 | |||||||
Debtor reorganization items, monthly fee payable | $ | $ 0.2 | |||||||
Debtor reorganization items, transaction fee payable | $ | $ 3 | |||||||
Engagement letter termination term | 5 days | |||||||
Term of occurrence of transaction | 12 months | |||||||
Accrued and Other Current Liabilities | ||||||||
Loss Contingency, Information about Litigation Matters [Abstract] | ||||||||
Aggregate reserve within Accrued and other current liabilities | $ | $ 75 | $ 35.9 | ||||||
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 | |||||||
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 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Liabilities subject to compromise (Details) $ in Thousands | Jun. 30, 2023 USD ($) |
COMMITMENTS AND CONTINGENCIES | |
Accounts payable | $ 3,279 |
Accrued expenses and other current liabilities | 6,716 |
Accrued legal settlements | 75,000 |
Liabilities subject to compromise | $ 84,995 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | ||
Nov. 30, 2022 | Jun. 30, 2023 | Dec. 31, 2022 | Nov. 30, 2020 | |
Transaction with Workhorse Group Inc | ||||
RELATED PARTY TRANSACTIONS | ||||
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) - Foxconn | Apr. 21, 2023 $ / shares |
Subsequent Event [Line Items] | |
Minimum bid price | $ 1 |
Threshold period for termination of investment agreement if the breach not cured | 30 days |