米国証券取引委員会
ワシントンD.C. 20549
フォーム
1934年の証券取引法のセクション13または15 (d) に基づく四半期報告書 | |
四半期終了時 |
または
1934年の証券取引法第13条または第15条 (d) に基づく移行報告書 | |
からへの移行期間について |
コミッションファイル番号:
（憲章に明記されている登録者の正確な名前）
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登録者の電話番号 (市外局番を含む): (
同法第12条 (b) に従って登録された証券：
各クラスのタイトル |
| トレーディングシンボル |
| 登録されている各取引所の名前 | |
価値は1株あたり0.0001ドルです |
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登録者が (1) 1934年の証券取引法第13条または第15条 (d) 条により提出が義務付けられているすべての報告書を過去12か月間（または登録者がそのような報告を提出する必要があったほど短い期間）に提出したかどうか、および（2）過去90日間にそのような申告要件の対象であったかどうかをチェックマークで示してください。
登録者が、過去12か月間（または登録者がそのようなファイルを提出する必要があったほど短い期間）に、規則S-tの規則405（この章の§232.405）に従って提出する必要のあるすべてのインタラクティブデータファイルを電子的に提出したかどうかをチェックマークで示してください。
登録者が大規模な加速申告者、加速申告者、非加速申告者、小規模な報告会社、または新興成長企業のいずれであるかをチェックマークで示してください。取引法規則12b-2の「大規模加速申告者」、「加速申告者」、「小規模報告会社」、および「新興成長企業」の定義を参照してください。
大型加速フィルター ☐ | アクセラレーテッド・ファイラー☐ | ||
小規模な報告会社 | 新興成長企業 | ||
新興成長企業の場合は、登録者が取引法のセクション13（a）に従って規定された新規または改訂された財務会計基準を遵守するために延長された移行期間を使用しないことを選択したかどうかをチェックマークで示してください。☐
登録者がシェル会社（取引法の規則12b-2で定義されている）であるかどうかをチェックマークで示してください。はい
2024年11月8日現在、
* 登録者のクラスA普通株式は、2023年7月7日に「RIDEQ」のシンボルで店頭市場でのみ取引を開始しました。2024年3月14日、登録者が第11章の破産手続きを終えると、ティッカーシンボルが「NRDE」に変わりました。
将来の見通しに関する注意事項
このレポート、特に「経営者による財務状況と業績の分析」という見出しの下に記載されているように、証券法（Securities Act）の第27A条（修正後）および証券取引法（Exchange Act）の第21E条（修正後）の意味での前向きな声明を含んでいます。これらの前向きな声明は、前向きな語句（「信じる」「見積もる」「予期する」「期待する」「意図する」「計画する」「可能性がある」「事業を予測する」「続ける」「できる」「べきである」など）を使用することによって特定されることがありますが、すべての前向きな声明がこのような語句とともに提示されるわけではありません。実際の結果が期待と実質的に異なることがないことを保証するものではありません。そのような声明には、当社の業績、財務状況、流動性、財務または運営見通し、成長、戦略、可能な事業結合およびその融資、関連事項について、当社の意図、信念、現在の期待を含む、私たちの意図、信念、現在の期待を述べたいかんするいかんの声明が含まれます。また、これらの前向きな声明は、将来に起こるかもしれないまたは起こらないであろう事象および事情に関連しているため、リスクおよび不確実性を伴います。前向きな声明は仮定に基づいており、将来の成績を保証するものではありません。実際の結果は、限られた経営、労働、および資金リソース、当社の事業の主要な側面に関してサードパーティーに依存していること、適切な内部統制を維持することができるかどうか、証券市場を維持することができるかどうか、存続性を維持することができるかどうか、必要な場合に適切な条件で資金調達を行うことができるかどうかを含む、さらには2023年12月31日までの年次報告書10-Kおよび2024年3月31日までの四半期報告書10-Qに記載されたリスクおよび要因も影響しています。「この報告書の日付から更新または修正する義務を一切負うものではありません。新しい情報、将来のイベント、法律によって必要とされる限り、更新または修正する義務を負いません」とは。
本質的に、将来の見通しに関する記述は、リスクと不確実性を伴います。なぜなら、それらは出来事に関連し、将来発生するかもしれない、または発生しない状況に依存するからです。将来の見通しに関する記述は仮定に基づいており、将来の業績を保証するものではありません。実際の結果は、経営、労働、財務リソースの限界、ビジネスの重要な側面における第三者への依存、適切な内部統制の維持、証券市場を維持する能力、継続企業としての地位を維持する能力、必要に応じて受け入れ可能な条件での資金調達能力、さらには2023年12月31日に終了した年の10-kフォームの「リスク要因」セクションや、2024年3月31日に終了した四半期の10-Qフォーム、2024年6月30日に終了した3か月および6か月の四半期に関するリスクや要因など、さまざまな要因により、将来の見通しに関する記述と実際の結果に重大な違いが生じる可能性があります。これらの将来の見通しに関する記述には過度の信頼を置かないように警告します。これらの記述は、この報告書の日付時点でのみ有効であり、新しい情報、将来の出来事、またはその他の理由により、将来の見通しに関する記述を更新または修正する義務は負いません。法律で要求される場合を除きます。
当社のクラスA普通株式の取引は非常に投機的です。クラスA普通株式の取引価格は、実際の価値とはほとんど関係ない場合があります。さらに、当社の第2次修正および再編成された設立証明書には、一部の取引制限が含まれており、これは営業損失の繰り越しなど当社の税の属性を保全するためのものであり、一定の株主（つまり、直接または間接に全発行済み株式の4.5％以上を実質的に保有する個人またはグループ）による取引を制限しています。そのため、当社のクラスA普通株式への既存および将来の投資に関しては、極めて注意が必要です。
「会社」「ロードタウン」「債務者」「私たち」「我々」「当社」といった用語は、Nu Ride Inc.（旧 Lordstown Motors Corp.、旧 DiamondPeak Holdings Corp.）およびその関連会社（Legacy Lordstown（以下で定義する）を含む）を指します。」ここで「DiamondPeak」とは、2020年10月23日に合併が完了した前身会社を指します。この合併は、2020年8月1日付けの合併契約書（以下「業務結合契約」といいます）に基づき、DiamondPeak、DPL Merger Sub Corp.（「Merger Sub」）およびLordstown Motors Corp.（「Legacy Lordstown」としても知られる、現在のLordstown EV Corporation）の間で行われ、Merger SubがLegacy Lordstownと合併し、Legacy Lordstownが完全子会社となります（以下「合併」と「業務結合契約」によるその他の取引を合わせて、「業務結合」といいます）
文脈によって異なる場合を除き、当社のクラスA普通株式の全株式は、2023年5月24日に発行済みクラスA普通株式の1:15の逆分割の効果を考慮して提示されています。
3
第一部
財務情報
項目1. 財務諸表
Nu Ride Inc.
以前は Lordstown Motors Corp. として知られていました。
簡易連結貸借対照表
(千単位、シェア及び1シェアあたりのデータを除く)
(未監査)
2024年9月30日 | 2023年12月31日 | |||||
資産: |
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流動資産 |
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現金及び現金同等物 | $ | $ | | |||
制限付き現金 | — | |||||
前払保険料 | | |||||
その他の流動資産 |
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合計流動資産 | $ | $ | | |||
その他の非流動資産 | — | | ||||
総資産 | $ | $ | | |||
負債、中間資本及び株主資本: |
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流動負債 |
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買掛金 | $ | $ | | |||
未払いの法律および専門職 | | |||||
未払費用及びその他の流動負債 |
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流動負債合計 | $ | $ | | |||
妥協の対象となる負債 | | |||||
総負債 | $ | $ | | |||
契約及び偶発事象（注8） | ||||||
メザニン・エクイティ | ||||||
シリーズA転換優先株式、 $ | $ | $ | | |||
株主資本 |
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Aクラスの普通株式$ | $ | $ | | |||
追加払い込み資本 |
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累積赤字 |
| ( |
| ( | ||
株主資本合計 | $ | $ | | |||
総負債、メザニン資本及び株主資本 | $ | $ | | |||
監査されていない要約連結財務諸表に関する注記を参照してください
4
Nu Ride Inc.
以前は Lordstown Motors Corp. として知られていました。
連結損益計算書
(千単位、シェアデータを除く)
(未監査)
終了した3ヶ月 | 終了した3ヶ月 |
| 9か月間終了 |
| 9か月間終了 | |||||||
| 2024年9月30日 |
| 2023年9月30日 | 2024年9月30日 | 2023年9月30日 | |||||||
純売上 | $ | — | $ | — | $ | — | $ | | ||||
売上原価 |
| — |
| — |
| — | | |||||
営業（利益）費用 | ||||||||||||
販売費及び一般管理費 |
| ( |
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研究開発費 |
| — | |
| — |
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法的和解および訴訟費用（利益）、ネット | ( | — | ( | — | ||||||||
再編成項目 | — | | | |||||||||
有形固定資産と無形資産の減損 | — | | — | | ||||||||
総営業費用、ネット | $ | $ | | $ | $ | | ||||||
営業損失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
その他の収入（費用） |
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資産の売却による損失 | — | ( | — | ( | ||||||||
その他費用、純額 | ( | ( | ( | ( | ||||||||
投資および利息収入 |
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法人税前の収益（損失） | $ | $ | ( | $ | ( | $ | ( | |||||
法人税費用 |
| — |
| — |
| — |
| — | ||||
当期純利益（損失） | ( | ( | ( | |||||||||
未計上の優先股配当 | ( | ( | ||||||||||
普通株主に帰属する純損失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
普通株主に帰属する希薄化後の一株当たりの純損失 |
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基本および希薄化後 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
発行済普通株式の加重平均数 |
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基本および希薄化後 |
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監査されていない要約連結財務諸表に関する注記を参照してください
5
Nu Ride Inc.
以前は Lordstown Motors Corp. として知られていました。
圧縮連結株主資本計算書
(千単位)
(普通株式は2023年5月の株式併合を反映するよう調整されています)
(未監査)
2024年9月30日を終了とする3か月 | |||||||||||||||||||
追加 | 合計 | ||||||||||||||||||
优先株 | 普通株式 | 払込資本 | 累積 | 株主の | |||||||||||||||
| 株式 |
| 金額 |
| 株式 |
| 金額 |
| 資本 |
| 赤字 |
| 資本 | ||||||
2024年7月1日の残高 |
| $ | $ | $ | $ | ( | $ | ||||||||||||
株式報酬 |
| — | — | — |
| — |
| — |
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シリーズA転換优先股の配当の発生 | — | — | — | ( | — | ( | |||||||||||||
当期純利益 |
| — | — | — |
| — | — |
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2024年9月30日の残高 |
| $ | $ | $ | $ | ( | $ | ||||||||||||
2023年9月30日を終期とする三ヶ月 | |||||||||||||||||||
追加 | 合計 | ||||||||||||||||||
优先株 | 普通株式 | 払込資本 | 累積 | 株主の | |||||||||||||||
| 株式 |
| 金額 |
| 株式 |
| 金額 |
| 資本 |
| 赤字 |
| 資本 | ||||||
2023年7月1日の残高 | $ | $ | $ | ( | $ | ||||||||||||||
株式報酬 | — | — | — |
| — | — |
| ||||||||||||
シリーズA転換優先株配当の発生 | — | ( | ( | ||||||||||||||||
純損失 | — | — | — |
| — | — | ( |
| ( | ||||||||||
2023年9月30日の残高 | $ | $ | $ | $ | ( | $ | |||||||||||||
2024年9月30日までの9ヶ月 | |||||||||||||||||||
追加 | 合計 | ||||||||||||||||||
优先株 | 普通株式 | 払込資本 | 累積 | 株主の | |||||||||||||||
| 株式 |
| 金額 |
| 株式 |
| 金額 |
| 資本 |
| 赤字 |
| 資本 | ||||||
2024年1月1日の残高 | $ | $ | $ | $ | ( | $ | |||||||||||||
RSUの権利確定 | — | — | — | ( | — | ( | |||||||||||||
株式報酬 |
| — | — | — | — | — | |||||||||||||
シリーズA転換优先股の配当の発生 | — | — | — | ( | — | ( | |||||||||||||
純損失 |
| — | — | — | — | — | ( | ( | |||||||||||
2024年9月30日の残高 | $ | $ | $ | $ | ( | $ | |||||||||||||
2023年9月30日終了の9か月 | |||||||||||||||||||
追加 | 合計 | ||||||||||||||||||
优先株 | 普通株式 | 払込資本 | 累積 | 株主の | |||||||||||||||
| 株式 |
| 金額 |
| 株式 |
| 金額 |
| 資本 |
| 赤字 |
| 資本 | ||||||
2023年1月1日の残高 | | $ | | $ | $ | $ | ( | $ | |||||||||||
RSUの権利確定 | — | — | — | ( | — | ( | |||||||||||||
株式報酬 | — | — | — | — | |||||||||||||||
A系列の転換優先株式配当の発生 | — | | — | — | ( | — | ( | ||||||||||||
純損失 |
| — | — | — |
| — |
| — |
| ( |
| ( | |||||||
2023年9月30日の残高 | | $ | | $ | $ | $ | ( | $ | |||||||||||
監査されていない要約連結財務諸表に関する注記を参照してください
6
Nu Ride Inc.
以前は Lordstown Motors Corp. として知られていました。
凝縮された連結キャッシュフロー計算書
(千単位)
(未監査)
9か月間終了 | 9か月間終了 | ||||||
| 2024年9月30日 |
| 2023年9月30日 |
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営業活動によるキャッシュフロー |
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純損失 | $ | ( | $ | ( | |||
純損失を営業活動で使用される現金に調整する項目： |
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株式報酬 |
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固定資産の処分損失 |
| — |
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有形及び無形資産の減損 | — | | |||||
有形固定資産の減価償却 | — | | |||||
在庫および前払在庫の帳消し | — | | |||||
その他の非現金の変更 | — | ( | |||||
資産及び負債の変動: | |||||||
在庫 | — | ( | |||||
前払保険及びその他資産 | | ||||||
買掛金 | ( | ( | |||||
未払いの法律および専門職 | ( | ( | |||||
未払費用及びその他の流動負債および合意対象の負債 |
| ( |
| | |||
営業活動に使用された現金 | $ | ( | $ | ( | |||
|
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投資活動 | |||||||
有形固定資産の購入 | $ | — | $ | ( | |||
短期投資の取得 | — | ( | |||||
短期投資の期限 | — | | |||||
固定資産の売却による収益 | — | | |||||
投資活動から提供される純現金 | $ | — | $ | | |||
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財務活動 | |||||||
ネット決済された制限付き株式報酬に関連する税金源泉徴収支払い | $ | ( | $ | — | |||
融資活動に使用された純現金 | $ | ( | $ | — | |||
現金、現金同等物及び制限付き現金の減少 | $ | ( | $ | ( | |||
現金及び現金同等物、期首残高 |
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現金、現金同等物、及び制限付き現金の期末残高 | $ | $ | | ||||
税金に支払った現金 | $ | — | $ | — | |||
支払利息 | $ | — | $ | — | |||
再編項目に対して支払われた現金 | $ | $ | — | ||||
監査されていない要約連結財務諸表に関する注記を参照してください
7
Nu Ride Inc.
以前は Lordstown Motors Corp. として知られていました。
連結財務諸表の注記
(監査未了)
注記 1 — 組織及びビジネス運営の説明
ビジネスの説明
概要
2023年6月27日、デラウェア州の法人であるローダスタウン・モーターズCORP（以下「ローダスタウン」、「会社」、または「債務者」と呼ぶ）は、デラウェア州のアメリカ合衆国破産裁判所（以下「破産裁判所」と呼ぶ）において、アメリカ合衆国破産法（以下「破産法」と呼ぶ）の第11章に基づく自発的な救済請求書（以下「第11章事件」と呼ぶ）を提出しました。
第11章事件に関連して、会社は主力車両であるエンデュランスの生産と販売、新プログラムの開発を停止しました。また、会社は大幅な人員削減を含むコスト削減策を継続しました。2023年9月29日、会社は特定の資産を商業フリート市場に焦点を当てた電気軽自動車の設計、生産、および販売に関連して、担保権、請求権、負担、その他の権益なしで売却するために、下記で定義されるLandX資産購入契約に署名しました。 $
破産からの回復後、同社の短期的な業務は、(a) Lordstown Motors Corp.およびその関連債務者の第二修正第1修正共同計画（「計画」）に基づく請求管理、(b) Foxconn訴訟への対応、(c) 保有する原因による訴訟の提起、追求、妥協、和解、またはその他の処分、(d) 同社に対する反訴の防御、(e) 証券取引法に基づく報告書の提出およびその他の規制要件の遵守を含みます。
今後、同社は戦略的な代替案やビジネスの統合を含む潜在的なビジネス機会を探求する可能性があります。これには、同社のNOLの価値を最大化するために設計されたものも含まれます。同社がいかなる請求や訴訟原因を成功裏に提起することができるという保証はなく、また、いかなる戦略的な代替案やビジネス統合が特定され、利益を上げる運営が得られるとも限りません。同社は、請求や訴訟原因の提起、潜在的な戦略的代替案の評価と追求が高コストで複雑かつリスクが伴うことを予想しています。この報告書の日付時点で、同社はいかなる当事者との間にも決定的な合意に達しておらず、特定のビジネス統合候補との間でビジネス機会に関する具体的な議論を行っていません。
文脈が異なることを示さない限り、同社のクラスA普通株式のすべての株式は、1:の効果を考慮して提示されています。2023年5月24日に有効となったクラスA普通株式の逆分割のためです。
LandXへの特定の資産の売却
2023年9月29日、当社はLAS Capital LLCおよびLAS Capitalの某義務の保証人である個人のStephen S. Burns氏との間で、資産購入契約（「LandX資産購入契約」）を締結しました。LandX資産購入契約は、LAS Capitalの関連会社であるDelaware州の法人LandX Motors Inc.に譲渡されました（譲受人）。
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and “Purchaser”) and approved by the Bankruptcy Court on October 18, 2023. The closing of the transactions contemplated by the LandX Asset Purchase Agreement occurred on October 27, 2023, at which time the Purchaser acquired certain assets held for sale related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assumed certain specified liabilities for a total purchase price of $
Emergence From Bankruptcy
On September 1, 2023, the Debtors filed a Joint Plan of Lordstown Motors Corp. and Its Affiliated Debtors and a related proposed disclosure statement, which were amended and modified on each of October 24, 2023, October 29, 2023, and October 30, 2023. On January 31, 2024, the Debtors filed the Plan. The modifications to the Plan since the previously filed version incorporated, among other things, a settlement (the “Ohio Securities Litigation Settlement”) of claims against the Debtors and certain directors and officers of the Debtors that were serving in such roles as of December 12, 2023, asserted in, or on the same or similar basis as those claims asserted in, the securities class action captioned In re Lordstown Motors Corp. Securities Litigation (the “Ohio Securities Litigation”). The Plan also included, as a condition to confirmation of the Plan, that the SEC approve an offer of settlement submitted by the Debtors to resolve the SEC Claim (as defined below).
On March 5, 2024, the Bankruptcy Court entered a confirmation order confirming the Plan. Following the entry of the confirmation order and all conditions to effectiveness of the Plan being satisfied, the Debtors emerged from bankruptcy on March 14, 2024 under the name “Nu Ride Inc.” Upon emergence, the SEC Claim was deemed withdrawn pursuant to the terms of the settlement with the SEC and the confirmation order. Upon emergence, a new Board of Directors was appointed pursuant to the Plan and all remaining full-time employees, including the Company’s pre-emergence executive officers, were terminated. Some of those employees continue to provide services to the Company as consultants. The Company’s Chief Executive Officer, who is its sole executive officer, was elected by the new Board of Directors in accordance with the Plan, as of the Company’s emergence.
Upon emergence, the Company’s primary operations are: (i) resolving claims filed in the bankruptcy, (ii) prosecuting the Foxconn Litigation, (iii) pursuing, compromising, settling or otherwise disposing of other retained causes of action of the Company, and (iv) identifying potential transactions, including business combinations, or otherwise, that could create value, including through permitting the Company to make use of the NOLs, if preserved.
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 (as defined below) and other agreements, the parties’ joint venture agreement, the Foxconn APA (as defined below), and the CMA (as defined below) that the Company believes were committed by Foxconn. As set forth in the complaint relating to the adversary proceeding, the Company believes Foxconn’s actions have caused substantial harm to the Company’s operations and prospects and caused significant damages.
On September 29, 2023, Foxconn filed a motion to dismiss all counts of the Foxconn Litigation and brief in support of the same (the “Foxconn Adversary Motion to Dismiss”), asserting that all of the Company’s claims are subject to binding arbitration provisions and that the Company has failed to state a claim for relief. The Company believes that the Foxconn Adversary Motion to Dismiss is without merit and, on November 6, 2023, the Company filed an opposition to Foxconn’s Adversary Motion to Dismiss. Foxconn filed a reply in support of the Foxconn Adversary Motion to Dismiss on November 30, 2023. On December 7, 2023, the Company and its equity committee (the “Equity Committee”) filed a notice of completion of briefing, which provided that
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the briefing of the Foxconn Adversary Motion to Dismiss has been completed and such motion is ready for disposition.
On August 1, 2024, the Bankruptcy Court entered an opinion and order partially denying and partially granting the Foxconn Adversary Motion to Dismiss, which was subsequently amended on October 1, 2024.
See Note 8 – Commitments and Contingencies – Foxconn Litigation for additional information.
Basis of Presentation and Principles of Consolidation
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 8-03 of Regulation S-X. The unaudited condensed consolidated interim financial statements include the accounts and operations of the Company and its wholly owned subsidiary. All intercompany accounts and transactions are eliminated upon consolidation. 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 Annual Report on Form 10-K for the year ended December 31, 2023.
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.
Liquidity and Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which presumes the Company will continue in operation for one year after the date these condensed consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business. In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, the Company has evaluated whether there are any conditions and 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 condensed consolidated financial statements are issued.
The Company had cash and cash equivalents of approximately $
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including strategic alternatives or business combinations, including those designed to maximize the value of the Company’s NOLs.
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 condensed 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 may result in ongoing, additional changes in facts and circumstances that may cause the Company’s estimates and assumptions to change, potentially materially. The Company undertakes 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, 2023.
Fresh Start Accounting
Upon emergence from bankruptcy, the Company assessed the requirements of fresh start accounting as required in Accounting Standards Codification 852: Reorganizations (“ASC 852”). Based on the Company’s assessment, management concluded that the Company does not qualify for fresh start accounting under ASC 852 upon emergence from bankruptcy. Management’s conclusion was based on the fact the total of all post-petition liabilities and reserve for allowed claims did not exceed the reorganization value, and the holders of existing voting shares immediately prior to confirmation did not lose control of the entity, as defined as receiving less than
Segment Information
The Company has
Cash and Cash Equivalents, Short-term Investments, and Restricted Cash
Cash includes cash equivalents which are highly liquid investments that are readily convertible to cash. The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. The Company maintains its cash in bank deposit and securities accounts that exceed federally insured limits. The Company has not experienced significant losses in such accounts and management believes it is not exposed to material credit risk.
The Company’s short-term investments consist primarily of U.S. Treasury notes and bills and U.S. Government and prime asset money market funds. The short-term investments are accounted for as available-for-sale securities. The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities.
Restricted cash balances represent cash reserves as required by the Plan. Under the Plan, the Company established an escrow for the payment of certain professional fees incurred in connection with the Chapter 11 Cases (“Professional Fee Escrow”). The Professional Fee Escrow was established based upon estimates and assumptions as of the date the Company emerged from bankruptcy. Therefore, the actual obligations may be more or less than the amount escrowed. To the extent the Professional Fee Escrow is insufficient, the Company will be required to use its available unrestricted cash to settle its obligations. In the event the
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Professional Fee Escrow exceeds the Company’s obligations, funds will be returned to the Company and become unrestricted. The Plan also required the Company to establish a $
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the condensed consolidated balance sheets to the amounts reported on the condensed consolidated statements of cash flows (in thousands):
September 30, 2024 | December 31, 2023 | |||||
Cash and cash equivalents | $ | $ | | |||
Restricted cash |
|
| — | |||
Total cash, cash equivalents, and restricted cash reported on the condensed consolidated statements of cash flows | $ | $ | | |||
Liabilities Subject to Compromise
In the accompanying condensed consolidated balance sheets, 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 continued consideration of claims that may be modified, allowed, or disallowed. Refer to Note 8 – Commitments and Contingencies for further detail.
Inventory and Inventory Valuation
Substantially all the Company’s inventory was specific to the production of the Endurance. As discussed above, the Company ceased production of the Endurance in June 2023. All of our Endurance inventory was sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023.
The Company’s inventory was stated at the lower of cost or net realizable value (“NRV”). In addition to the NRV analysis, the Company recognized an excess inventory reserve to adjust for inventory quantities that were in excess of anticipated Endurance production. There were
Property, Plant and Equipment
Property, plant and equipment were stated at cost less accumulated depreciation and impairment charges. Depreciation was computed using the straight-line method over the estimated useful lives and residual values of the related assets. Maintenance and repair expenditures were expensed as incurred, while major improvements that increase functionality of the asset are capitalized and depreciated ratably to expense over the identified useful life.
Substantially all our property, plant and equipment were sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023.
Valuation of Long-Lived and Intangible Assets
Long-lived assets, including intangible assets, were 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 required 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
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assets acquired, assigned useful lives, residual values functional obsolescence, asset condition and discount rates. When performing impairment tests, we estimated 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 initiated our review whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The 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 recognized was measured by the amount by which the carrying amount of the asset exceeded its fair value. Significant management judgment is required in this process.
The Company recognized impairment charges of $
Warrants
The Company accounted for its warrants in accordance with the guidance contained in Accounting Standards Codification 815: Derivatives and Hedging (“ASC 815”) 815-40-15-7D and 7F under which the warrants did not meet the criteria for equity treatment and were recorded as liabilities at their fair value at each reporting period. Any change in fair value was recognized in the statement of operations. As a result of the Chapter 11 Cases, the fair value of the Company’s warrants was deemed to be
Revenue Recognition
Revenue was recognized when control of a promised good or service was transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for the good or service. Our performance obligations were satisfied at a point in time. The Company recognized revenue when the customer confirmed acceptance of vehicle possession. Costs related to shipping and handling activities are a part of fulfillment costs and are therefore recognized under cost of sales. The Company’s sales are final and do not have a right of return clause. There were limited instances of sales incentives offered to fleet management companies. The incentives offered were of an immaterial amount per vehicle, and there were
Product Warranty
The estimated costs related to product warranties were accrued at the time products were sold and are charged to cost of sales, which included our best estimate of the projected costs to repair or replace items under warranties and recalls if identified. As part of the bankruptcy proceedings, the Company received authorization from the Bankruptcy Court to repurchase all vehicles that were in the possession of the Company’s customers. The Company repurchased and sold for parts all but
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Research and Development Costs
The Company expensed research and development costs as they were incurred. Research and development costs consisted primarily of personnel costs for engineering, testing and manufacturing costs, along with expenditures for prototype manufacturing, testing, validation, certification, contract and other professional services and costs.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC Topic 718, Accounting for Stock-Based Compensation (ASC Topic 718), which establishes a fair value-based method of accounting for stock-based compensation plans. In accordance with ASC Topic 718, the cost of stock-based awards issued to employees and non-employees over the awards vesting period is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model, which incorporates assumptions regarding the expected volatility, expected option life and risk-free interest rate. The resulting amount was charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. Further, pursuant to ASU 2016-09 – Compensation – Stock Compensation (Topic 718), the Company has elected to account for forfeitures as they occur. See Note 7 – Stock Based Compensation.
Reorganization Items
Reorganization items of $
Income Taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (ASC Topic 740). Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance against its deferred tax assets.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. The Company does not have any accrued interest or penalties accrued related to unrecognized tax benefits as of September 30, 2024 and December 31, 2023, respectively.
At December 31, 2023, the Company had $
Reclassifications
Certain reclassifications have been made in the presentation of the prior period balance sheet related to prepaid expenses, prepaid insurance, and other current assets as well as to the prior period statement of cash flows
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related to accrued legal and professional and accrued expenses and other liabilities to conform with the September 30, 2024 presentation.
Recently issued accounting pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)-Improvements to Reportable Segment Disclosures. This ASU requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on the Company’s condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures. This ASU requires that reporting entities disclose specific categories in the effective tax rate reconciliation as well as information about income taxes paid. The authoritative guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on the Company’s condensed consolidated financial statements.
NOTE 3 — FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The Company follows the accounting guidance in ASC Topic 820, Fair Value Measurements (ASC Topic 820) for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes when inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value.
As of September 30, 2023, following the Reverse Stock Split, we had
Non-Recurring Fair Value Measurements
At September 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. There was
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NOTE 4 — PROPERTY, PLANT AND EQUIPMENT AND ASSETS HELD FOR SALE
The Company 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. In light of the Chapter 11 Cases, as discussed above, the Company valued its property, plant and equipment based on their estimated residual value as of June 30, 2023. Accordingly, there was
NOTE 5 – SERIES A CONVERTIBLE PREFERED STOCK
Except as set forth below, the circumstances set forth in Note 5 – Mezzanine Equity to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 appropriately represent, in all material respects, the current status of our Series A convertible preferred stock, $
Upon emergence from bankruptcy, and as of the date of this report, the Preferred Stock remains outstanding and unimpaired. Upon a change of control (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), Foxconn can cause the Company to purchase any or all of its Preferred Stock at a purchase price equal to the greater of its $
NOTE 6 — CAPITAL STOCK AND INCOME (LOSS) PER SHARE
The Company has authorized shares of capital stock totaling
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: and 1:, 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: ratio, which became effective as of May 24, 2023 (the “Effective Date”).
The Company filed an Amendment to the Charter on May 22, 2023, which provided that, at the Effective Date, every shares of the issued and outstanding Class A common stock would automatically be combined into one issued and outstanding share of Class A common stock.
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FASB ASC Topic 260, Earnings Per Share, requires the presentation of basic and diluted earnings per share (“EPS”). Basic EPS is calculated based on the weighted average number of shares outstanding during the period. Dilutive EPS is calculated to include any dilutive effect of our share equivalents.
The following outstanding potentially dilutive common stock equivalents have been excluded from the computation of diluted net loss per share attributable to common shareholders for the nine months ended September 30, 2024 as well as the three and nine months ended September 30, 2024 and 2023, respectively, due to their anti-dilutive effect (in thousands):
September 30, 2024 | September 30, 2023 | ||||||
Foxconn Preferred Stock | |||||||
Share awards | — | ||||||
Foxconn Warrants | |||||||
BGL Warrants | — | ||||||
Private Warrants | |||||||
Total |
NOTE 7 – STOCK BASED COMPENSATION
The vesting and settlement of any unvested equity awards was suspended during the pendency of the Chapter 11 Cases. Upon emergence, the suspended awards were settled if the vesting conditions had been satisfied. All vested options to purchase Class A common stock that remain outstanding as of the date the Company emerged remain outstanding in accordance with their terms and the terms of the Plan and any options not exercised within
Prior to emergence, the Company and each of its Named Executive Officers (“NEO’s) were parties to employment agreements that provided for certain payments, including the accelerated vesting of equity awards, to the NEO upon the NEO’s termination of employment by the Company without “Cause” or by the NEO’s choice with “Good Reason”. Accordingly, upon emergence, the Company issued
In accordance with the Plan, on March 14, 2024, the Board of Directors approved, adopted and ratified an amendment to the Company’s 2020 Equity Incentive Plan, as amended to increase the number of shares of Class A common stock reserved for issuance thereunder to an aggregate of
On May 13, 2024, the Compensation Committee of the Board of Directors of the Company adopted a modified director compensation plan for the five outside directors that constitute the Board of Directors. The director compensation plan includes a
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NOTE 8 – COMMITMENTS AND CONTINGENCIES
Voluntary Chapter 11 Proceedings, Liabilities Subject to Compromise and Other Potential Claims
On June 27, 2023, the Company and its subsidiaries commenced the Chapter 11 Cases in the Bankruptcy Court. See Note 1 – Description of Organization and Business Operations – Description of Business – Voluntary Chapter 11 Proceedings.
Since filing the Chapter 11 petitions, until our emergence from bankruptcy on March 14, 2024, the Company operated as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.
The Company received the Bankruptcy Court’s approval of its customary motions filed on June 27, 2023, which authorized the Company to conduct its business activities in the ordinary course, including 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 (vii) establish certain procedures to protect any potential value of the Company’s NOLs.
On August 8, 2023, the Bankruptcy Court approved procedures for the Company to conduct a comprehensive marketing and sale process for some, all, or substantially all of their assets in order to maximize the value of those assets. The marketing process culminated in the Company entering into the LandX Asset Purchase Agreement on March 29, 2023, providing for the sale of specified assets of the Company related to the design, production and sale of electric light duty vehicles focused on the commercial fleet market free and clear of liens, claims, encumbrances, and other interests, and assume certain specified liabilities of the Company for a total purchase price of $
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 sought and achieved resolution of many of these matters as part of the Chapter 11 Cases and has and may in the future enter into further 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. 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. Legal fees and costs of litigation, settlement by the Company or adverse decisions with respect to the matters disclosed may result in a 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, and diminish or eliminate any assets available for any distribution to creditors and Interest holders.
The filing of the Chapter 11 Cases resulted in an initial automatic stay of legal proceedings against the Company, as further described below. 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) and that matter was settled, as further described below.
With respect to the stockholder derivative suits filed on behalf of the Company against certain of its officers and directors and certain former DiamondPeak directors prior to the Chapter 11 Cases, the derivative claims asserted in those suits became the property of the Company. The Company appointed an independent committee of directors to evaluate such claims with the assistance and advice of special litigation counsel, to make a recommendation as to the disposition of such claims, including, among other things, whether to
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pursue or release some or all of those claims against some or all of those officers and directors. Ultimately, such claims were retained by the Company and not released under the Plan.
With respect to the Ohio Securities Class Action opt-out claims (discussed below), the Post-Petition Securities Action and any other similar claims for damages arising from the purchase or sale of the Class A common stock, Section 510(b) the Bankruptcy Code treats such claims as subordinated to all claims or Interests that are senior to the Class A common stock and having the same priority as the Class A common stock.
The Bankruptcy Court established October 10, 2023 as the deadline by which parties were required to file proofs of claim in the Chapter 11 Cases and December 26, 2023 for all governmental entities to file their proofs of claim, which includes any claim asserted by the SEC with respect to the matter described under “SEC Matter” below or that may arise due to our obligations under the Highway Safety Act of 1970 (the “Safety Act”) administered by the National Highway Traffic Safety Administration (“NHTSA”) described under “NHTSA Matters” below.
In addition, the deadline for parties to file proofs of claim arising from the Company’s rejection of an executory contract or unexpired lease, and proofs of claim for administrative expense claims, was April 15, 2024.
Several rejection damages and administrative expense claims were filed and are being reviewed by the Company. While the Company may file objections to some or all of these additional claims, the Company cannot provide any assurances as to what the Company’s total actual liabilities will be based on such claims. The amount of such liability may diminish the assets available to satisfy general unsecured claims. There is substantial risk of litigation by and against the Company or its indemnified directors and officers with respect to such claims.
“Liabilities subject to compromise” are recorded at the expected or estimated amount of the total allowed claim, however, the ultimate settlement of these liabilities remains subject to analysis and negotiation, approval of the Bankruptcy Court and the other factors discussed above, and they may be settled or resolved for materially 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 materially.
Upon emergence from bankruptcy, the Company recorded $
Concurrently, the Company recorded a liability totaling $
The Company had accruals of $
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as of September 30, 2024 was estimated based on available information and legal advice, the potential resolution of these matters in light of historical negotiations with the parties, and the potential impact of the outcome of one or more claims on related matters, but does not take into account the impact of the applicable provisions of the Bankruptcy Code, the terms of the Plan, ongoing discussions with the parties thereto and other stakeholders or actual amounts that may be asserted in Claims submitted in the Chapter 11 Cases or for indemnification as these factors cannot yet be determined and are subject to substantial uncertainty. Accordingly, the accrued amount may be adjusted in the future based on new developments and it does not reflect a full range of possible outcomes for these proceedings, or the full amount of any damages alleged, which are significantly higher.
Insurance Matters
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 Ohio 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. 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 directors and officers (“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. The Company continues to analyze the insurer’s position and intends to pursue any available coverage under this policy and other insurance.
On October 25, 2024, the Company filed a complaint in the United States Bankruptcy Court for the District of Delaware seeking a declaration that the Company is entitled to coverage from the 2020-2022 primary layer D&O liability insurance company for costs to defend certain lawsuits and respond to certain SEC and DOJ investigations. The primary policy has a face limit of $
Ohio Securities Class Action
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The Plan settled the Ohio Securities Class Action, with the lead plaintiff receiving (i) $
Derivative Litigation
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.), 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. 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. An independent committee of directors evaluated the derivative claims with the assistance and advice of special litigation counsel to make a recommendation as to the disposition of such claims. Ultimately, such claims were retained by the Company and not released under the Plan. 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
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derivative lawsuit was filed in the Delaware Court of Chancery on February 18, 2023 (Jackson v. Burns, et al. (C.A. No. 2023-0164)), also asserting breach of fiduciary duties, unjust enrichment, and insider selling, based on similar facts as the federal derivative actions. On April 19, 2023, 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, 2023, 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, 2023, 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. An independent committee of directors evaluated the derivative claims with the assistance and advice of special litigation counsel to make a recommendation as to the disposition of such claims. Ultimately, such claims were retained by the Company and not released under the Plan. The proceedings are subject to uncertainties inherent in the litigation process.
DiamondPeak Delaware Class Action Litigation
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. The parties have advised the Company that they have reached an agreement to resolve this matter, and the former DiamondPeak directors are seeking indemnification from the Company with respect to a portion of the settlement amount. The Company believes it has defenses to such indemnification claims, including that such indemnification claims are subject to subordination pursuant to applicable law, and, if allowed, should receive the treatment
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set forth in Article III B.8 of the Plan. The proceedings remain subject to uncertainties inherent in the litigation process.
On September 8, 2024, the Company and the former DiamondPeak directors entered into a settlement agreement pursuant to which, among other things, such former directors’ claims against the Company were settled.
SEC Claim
The Company received
Indemnification Obligations
The Company may have potential indemnification obligations with respect to the current and former directors named in the above-referenced actions, which obligations may be significant and may not be covered by the Company’s applicable directors and officers insurance. The Company believes it has defenses to certain of these potential indemnification obligations, including that such claims for indemnification are subject to subordination pursuant to applicable law, and, if allowed, should receive the treatment set forth in Article III.B.8 of the Plan.
Foxconn Transactions
The Company entered into a series of transactions with affiliates of Foxconn, beginning with the Agreement in Principle that was announced on September 30, 2021, pursuant to which the Company entered into definitive agreements to sell our manufacturing facility in Lordstown, Ohio under an asset purchase agreement (the “Foxconn APA”) and outsource manufacturing of the Endurance to Foxconn under a contract manufacturing agreement (the “CMA”). On November 7, 2022, the Company entered into an investment agreement with Foxconn under which Foxconn agreed to make additional equity investments in the Company (the “Investment Agreement”). The Investment Agreement superseded and replaced an earlier joint venture agreement. The Foxconn APA, the CMA and the Investment Agreement together are herein referred to as the “Foxconn Transactions.”
On June 27, 2023, the Company commenced the Foxconn Litigation in the Bankruptcy Court seeking relief for breaches of the Investment Agreement, the Foxconn APA and the CMA and fraudulent and tortious actions that the Company believes were committed by Foxconn. See the following section and Note 1 – Description of Business – Foxconn Litigation for additional information. The Investment Agreement and the CMA were rejected pursuant to the Plan upon the Company’s emergence from bankruptcy. The Foxconn APA transaction was consummated before the Chapter 11 Cases.
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Foxconn Litigation
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. On September 29, 2023, Foxconn filed a motion to dismiss all counts of the Foxconn Litigation and brief in support of the same (the “Foxconn Adversary Motion to Dismiss”), asserting that all of the Company’s claims are subject to binding arbitration provisions and that the Company has failed to state a claim for relief.
On November 6, 2023, the Company filed an opposition to Foxconn’s Adversary Motion to Dismiss. Subsequently, Foxconn filed a reply in support of the Foxconn Adversary Motion to Dismiss on November 30, 2023.
On August 1, 2024, the Bankruptcy Court entered an opinion and order partially denying and partially granting the Foxconn Adversary Motion to Dismiss, which was subsequently amended on October 1, 2024.
The Post-Petition Securities Action
On July 26, 2023, a putative class action lawsuit was filed in the U.S. District Court for the Northern District of Ohio by Bandol Lim (“Plaintiff Lim”), individually and on behalf of other stockholders 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 its relationship with Foxconn and the Foxconn Transactions (the “Post-Petition Securities Action”). The lawsuit names Edward Hightower, Adam Kroll, and Daniel Ninivaggi as Defendants (“Defendants”) in their capacities as Company officers and/or directors. Defendants dispute the allegations and intend to vigorously defend against the suit. None of the Debtors is named as a Defendant in the Post-Petition Securities Action. Plaintiff Lim and RIDE Investor Group have each filed motions for appointment as lead plaintiff in the Post-Petition Securities Action and those motions remain pending as of the date of this filing. Separately, each of the members of the RIDE Investor Group filed proofs of claim (the “RIDE Proofs of Claims”) against the Company, purportedly on behalf of themselves and the putative class in the Post-Petition Securities Action, in an unliquidated amount. The RIDE Investor Group has not sought authority from the Bankruptcy Court to file its purported class proofs of claim. The Debtors dispute, each of the RIDE Proofs of Claim, and further dispute that the members of the Ride Investment Group had authority to file proofs of claim on behalf of the putative class in the Post-Petition Securities Action. Messrs. Hightower, Kroll, and Ninivaggi contend that they are both insureds under the directors’ and officers’ insurance policies of the Debtors that are currently in effect and have been granted relief from the automatic stay with respect to the Company to seek advancement and payment of expenses relating to the Post-Petition Securities Action under such policies. The Plan constituted an objection to each of the RIDE Proofs of Claim. To the extent any of the RIDE Claims are Allowed, the Plan provides for the treatment of Claims filed against the Debtors on the same or similar basis as those set forth in the Post-Petition Securities Action to limit recoveries (if any) from the Debtors on account of such Claims to available insurance. The Debtors dispute the merits of any such claims.
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NHTSA Matters
The Company’s obligations under the Safety Act administered by NHTSA for the vehicles it has manufactured and sold continued in force during the pendency of and following the Chapter 11 Cases. During the Chapter 11 Cases, the Company’s obligations were treated as a claim of the United States government against the Company. The Plan did not discharge the Company from claims arising after emergence from bankruptcy, nor did it preclude or enjoin the enforcement of any police or regulatory power. The Company sought to repurchase all vehicles that remain in the possession of our customers (other than LAS Capital or its affiliates); however, it repurchased
NOTE 9 — RELATED PARTY TRANSACTIONS
Under the Investment Agreement, Foxconn made additional equity investments in the Company, whereby it became a related party under the Company’s Related Party Transaction Policy as a
William Gallagher, the Company’s Chief Executive Officer, is a principal of M3 Partners, LP (“M3 Partners”). M3 Partners served as the Equity Committee’s financial consultant during the bankruptcy proceedings. Upon emergence from bankruptcy, the Company engaged M3 Partners to provide executive management and support services pursuant to the terms of an engagement agreement (the “Engagement Agreement”). Mr. Gallagher has been, and will remain, employed by M3 Partners and will provide his services pursuant to the Engagement Agreement. Pursuant to the Engagement Agreement, M3 Partners’ fees are calculated on an hourly basis. The Company incurred approximately $
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Cautionary Note Regarding Forward-Looking Statements" and Part II Item 1A. Risk Factors for a discussion of these risks and uncertainties, including without limitation, with respect to the Chapter 11 Cases, our emergence from bankruptcy and our liquidity, capital resources and financial condition.
As previously disclosed, on June 27, 2023, Lordstown Motors Corp. and its subsidiaries commenced voluntary proceedings under chapter 11 (the “Chapter 11 Cases”) of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On September 1, 2023, we filed with the Bankruptcy Court a plan of reorganization and related disclosure statement, which were amended and modified on each of October 24, 2023, October 29, 2023, and October 30, 2023 (as amended, the “Proposed Plan”). On November 1, 2023, the Bankruptcy Court entered the Disclosure Statement Order and, thereafter, we solicited votes from their creditors and shareholders for approval of the Proposed Plan. On January 31, 2024, we filed the as-approved Proposed Plan with the Bankruptcy Court. On March 5, 2024, the Bankruptcy Court entered a confirmation order confirming the Proposed Plan (as confirmed, the “Plan”). Following the entry of the confirmation order and all conditions to effectiveness of the Plan being satisfied, we emerged from bankruptcy on March 14, 2024 under the name “Nu Ride Inc.”
The Bankruptcy Court established October 10, 2023, as the general bar date for all creditors (except governmental entities) to file their proofs of claim or interest, and December 26, 2023, as the bar date for all governmental entities, which was extended until January 5, 2024, in the case of the SEC. In addition, the deadline for parties to file proofs of claim arising from the Debtors’ rejection of an executory contract or unexpired lease is the later of (a) the general bar date or the governmental bar date, as applicable, and (b) 5:00 p.m. (ET) on the date that is 30 days after the service of an order of the Bankruptcy Court authorizing the Debtors’ rejection of the applicable executory contract or unexpired lease. Finally, the deadline for parties to file administrative claims against the Debtors was April 15, 2024. Claimants may have the ability to amend their proofs of claim that could significantly increase the total claims, beyond our estimates or reserve. Furthermore, proofs of claim have been filed asserting unliquidated damages or claims in respect of certain indemnifications or otherwise, that we may not be able to estimate, or may be materially more than we estimate.
Upon emergence: (i) the Foxconn Litigation and other retained causes of action of the Company were preserved and may be prosecuted; (ii) claims filed in the bankruptcy will continue to be resolved pursuant to the claims resolution process with allowed claims being treated in accordance with the Plan; (iii) distributions to holders of allowed claims and allowed Interests will be made subject to the provisions of the Plan of Reorganization, and (iv) we will continue to conduct business and may enter into transactions, including business combinations, or otherwise, that could permit the Company to create value, including through use of the NOLs.
Upon emergence, a new Board of Directors was appointed pursuant to the Plan and all remaining full-time employees, including the Company’s pre-emergence executive officers, were terminated. The Board of Directors oversees and directs the administration of the Company’s operations, in accordance with the Plan. Some of those employees continue to provide services to the Company as consultants. Our Chief Executive Officer, who is the sole executive officer, was elected by the new Board of Directors in accordance with the Plan, as of the date we emerged from bankruptcy.
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Our primary operations during the nine months ended September 30, 2024 and to date in the fourth quarter of 2024 have consisted of actions and related expenditures associated with completing the Chapter 11 Cases and emerging from bankruptcy, resolving substantial litigation, claims reconciliation, financial reporting and regulatory compliance. Our assets consist of cash, cash equivalents and restricted cash. Additional potential assets, such as the Foxconn Litigation claims, claims the Company may have against other parties, and NOLs, are not reflected in the financial statements.
In light of our emergence from bankruptcy on March 14, 2024, our results for the three and nine months ended September 30, 2024, reflect the accounting assumptions and treatment caused by the Chapter 11 Cases and the Plan and may not be representative of our operations and results going forward. See Part II – Item 1A. Risk Factors for further discussion of the risks associated with our emergence from bankruptcy, our liquidity, capital resources and financial condition, and the use of estimates and resulting uncertainty in establishing our presented financial results, among other risks.
Results of Operations for the three months ended September 30, 2024 and 20231
(in thousands) | |||||
Three months ended | Three months ended | ||||
September 30, 2024 |
| September 30, 2023 | |||
Net sales | $ | — | $ | — | |
Cost of sales: | — | — | |||
Operating (income) expense: | |||||
Selling, general and administrative expenses | 2,308 | (2,600) | |||
Research and development expenses | — | 5,716 | |||
Legal settlement and litigation charges (benefit), net | (1,789) | — | |||
Reorganization items | — | 13,641 | |||
Impairment of property plant & equipment and intangibles | — | 738 | |||
Total operating expenses, net | $ | 519 | $ | 17,495 | |
Loss from operations | (519) | (17,495) | |||
Other income (expense) |
|
| |||
Loss on sale of assets | — | (175) | |||
Other expense | (55) | (240) | |||
Investment and interest income | 912 | 1,404 | |||
Income (loss) before income taxes | $ | 338 | $ | (16,506) | |
Income tax expense | — | — | |||
Net income (loss) | $ | 338 | $ | (16,506) | |
Less preferred stock dividend | 682 | (630) | |||
Net loss attributable to common shareholders | $ | (344) | $ | (15,876) | |
| 1 | Certain of our assets were sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023, the effect of which is not reflected in these financial statements. See Note 4 – Property Plant, and Equipment and Assets Held for Sale for additional details regarding our impairment. |
As a result of filing for Chapter 11 bankruptcy protection in June 2023 and the significant events that have transpired since then, the period-over-period comparisons of our results of operations are not indicative of consistent underlying business operations.
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Net Sales and Cost of Sales
As a result of the Chapter 11 Cases, production of the Endurance ended in June 2023. Upon emergence from bankruptcy as a shell company, there were no sales or cost of sales during the three months ended September 30, 2024.
The Company completed homologation and testing and received required certifications enabling sales to begin in the fourth quarter of 2022. As a result of filing for bankruptcy protection, there were no sales during the three months ended September 30, 2023.
Selling, General and Administrative Expense
Selling, general and administration expenses (“SG&A”) totaled $2.3 million for the three months ended September 30, 2024 compared to a credit of $2.6 million for the three months ended September 30, 2023. With the Chapter 11 Cases commencing in June 2023, our SG&A expense is not comparable on a year-over-year basis.
Legal and professional fees made up almost the entire SG&A expenses for the three months ended September 30, 2024.
The credit to selling, general and administration expenses (“SG&A”) of $2.6 million for the three months ended September 30, 2023 reflects the reduction of $10.0 million in legal settlement accruals, partially offset by $6.3 million in personnel and professional fees, and $2.2 million in insurance premium amortization.
Research and Development Expense
As a result of the actions taken in connection with the Chapter 11 Cases, there were no research and development (“R&D”) expenses during the three months ended September 30, 2024.
Research and development (“R&D”) expenses during the three months ended September 30, 2023, principally represent personnel costs that have been consistently allocated to R&D, and our remaining personnel, most of whom were subject to separation notice periods. R&D expenses for the three months ended September 30, 2023, were $5.7 million during the three months ended September 30, 2023, consisting of $4.7 million in personnel costs, and $0.7 million in prototype and engineering costs, consisting principally of engineering software amortization.
Legal settlement and litigation charges (benefit), net
Legal settlement and litigation charges (benefit), net represents adjustments to accrued liabilities subject to compromise from claims as a result of the final settlement of claims. Given that claims began to be settled in 2024, no legal settlement and litigation charges (benefit) was recorded during the three months ended September 30, 2023.
Impairment of property, plant, and equipment, prepaids and other intangibles
As of September 30, 2023, property, plant, and equipment and other intangibles were reviewed for potential impairment for recoverability. In light of the Chapter 11 Cases, the Company valued its property, plant and equipment and other intangibles based on its estimate of residual and salvage values. For the three months ended September 30, 2023, the Company recognized an impairment charge of $0.7 million to adjust the carrying value of its right of use assets. No such impairment charges were incurred for the same period of 2024.
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Results of Operations for the nine months ended September 30, 2024 and 20231
Nine months ended | Nine months ended | ||||
September 30, 2024 |
| September 30, 2023 | |||
Net sales | $ | — | $ | 2,340 | |
Cost of sales | — | 91,550 | |||
Operating (income) expense: | |||||
Selling, general and administrative expenses |
| 9,033 |
| 69,775 | |
Research and development expenses |
| — |
| 32,445 | |
Legal settlement and litigation charges (benefit), net | (4,348) | — | |||
Reorganization items | 4,785 |
| 13,641 | ||
Impairment of property plant & equipment, prepaids and intangibles | — | 140,219 | |||
Total operating expense, net | $ | 9,470 | $ | 256,080 | |
Loss from operations |
| (9,470) |
| (345,290) | |
Other income (expense) | |||||
Loss on sale of assets | — | (2,784) | |||
Other expense | (217) | (83) | |||
Investment and interest income |
| 3,030 |
| 5,440 | |
Loss before income taxes | $ | (6,657) | $ | (342,717) | |
Income tax expense |
| — |
| — | |
Net loss | $ | (6,657) | $ | (342,717) | |
Less accrued preferred stock dividend | 2,005 | (1,852) | |||
Net loss attributable to common shareholders | $ | (8,662) | $ | (340,865) | |
| 1 | Certain of our assets were sold pursuant to closing the LandX Asset Purchase Agreement in the fourth quarter of 2023, the effect of which is not reflected in these financial statements. See Note 4 – Property Plant, and Equipment and Assets Held for Sale for additional details regarding our impairment. |
As a result of filing for Chapter 11 bankruptcy protection in June 2023 and the significant events that have transpired since then, the period-over-period comparisons of our results of operations are not indicative of consistent underlying business operations.
Net Sales and Cost of Sales
As a result of the Chapter 11 Cases, production of the Endurance ended in June 2023. Upon emergence from bankruptcy as a shell company, there were no sales or cost of sales during the nine months ended September 30, 2024. The Company completed homologation and testing and received required certifications enabling sales to begin in the fourth quarter of 2022. Production of the Endurance ended in June 2023. A total of 35 vehicles were sold in the first nine months of 2023.
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Cost of sales totaled $91.6 million for the first nine months of 2023, consisting of $7.6 million in costs associated with producing the Endurance, including direct materials net of an adjustment to inventory to reflect its NRV, product warranty accruals and other costs related to selling and delivering the vehicles. The Company recorded $54.3 million in manufacturing depreciation, a $25.8 million charge to reduce the carrying value of inventory to NRV, and a $4.1 million reserve for potential claims from suppliers regarding costs incurred or otherwise that may be owed during the nine months ended September 30, 2023. See Note 2 - Summary of Significant Accounting Policies and Note 4 - Property, Plant and Equipment and Assets Held for Sale regarding depreciation and inventory charges.
Selling, General and Administrative Expense
SG&A totaled $9.0 million for the nine months ended September 30, 2024 compared to $69.8 million for the nine months ended September 30, 2023. With the Chapter 11 Cases commencing in June 2023, our SG&A expense is not comparable on a year-over-year basis.
SG&A for the nine months ended September 30, 2024 consisted primarily of $6.1 million in personnel and professional fees, including $3.4 million in accelerated stock compensation expense as well as insurance premium amortization of $2.9 million.
Selling, general and administration expenses (“SG&A”) of $69.8 million during the nine months ended September 30, 2023 consisted primarily of $37.8 million in non-reorganization related legal fees and expenses, including net litigation settlement accruals of $30.3 million, $21.9 million in personnel and professional fees, and $5.2 million in insurance premium amortization.
Research and Development Expense
As a result of the actions taken in connection with the Chapter 11 Cases, there were no R&D expenses during the nine months ended September 30, 2024.
For the nine months ended September 30, 2023, the Company’s R&D costs were $32.4 million, including $23.4 million in personnel costs, $3.4 million in outside engineering and consulting services, and $4.5 million in prototype components and other engineering costs.
Legal settlement and litigation charges (benefit), net
Legal settlement and litigation charges (benefit), net represents adjustments to accrued liabilities subject to compromise from claims as a result of the final settlement of claims. Given that claims began to be settled in 2024, no legal settlement and litigation charges (benefit) was recorded during the nine months ended September 30, 2023.
Reorganization Items
Reorganization items represent the expenses directly and incrementally resulting from the Chapter 11 Cases filed on June 27, 2023. For the nine months ended September 30, 2024, reorganization items consisted of $3.6 million in legal fees and $1.1 million in consulting fees. The reorganization items include costs incurred by us as well as those incurred by the official Unsecured Creditors Committee and official Equity Committee, for which we are responsible.
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For the nine months ended September 30, 2023, reorganization items consisted of $7.1 million in legal fees, $3.7 million in consulting fees and $2.8 million in potential bankruptcy claims and settlements.
Impairment of property, plant, and equipment, prepaids and other intangibles
As of September 30, 2023, property, plant and equipment and other intangibles were reviewed for potential impairment for recoverability. In prior periods, 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. In light of the Chapter 11 Cases, the Company valued its property, plant and equipment based on its estimate of residual and salvage values, resulting in an impairment charge of $134.2 million, for the nine months ended September 30, 2023, compared to an impairment charge of $74.9 million for the same period of 2022. See Note 4 - Property, Plant and Equipment and Assets Held For Sale for additional details regarding our impairment. Additionally, during the nine months ended September 30, 2023, the Company recognized an impairment of $6.0 million related to other intangible assets.
No such impairment charges were incurred for the nine months ended September 30, 2024.
Liquidity and Capital Resources
As a result of our accumulated deficit, lack of any immediate sources of revenue, and the risks and uncertainties related to (i) our ability to successfully resolve litigation and other claims that may be filed against us, (ii) the effects of disruption from the Chapter 11 Cases, including the loss of our personnel, and (iii) the costs of the Chapter 11 Cases, 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 condensed consolidated financial statements.
We had cash and cash equivalents of approximately $26.1 million, excluding restricted cash of approximately $30.9 million, an accumulated deficit of $1.2 billion at September 30, 2024, net income of $0.3 million for the three months ended September 30, 2024, and a net loss of $6.7 million for the nine months ended September 30, 2024.
Our liquidity and ability to continue as a going concern is dependent upon, among other things: (i) the resolution of significant contingent and other claims, liabilities (see Note 8 – Commitments and Contingencies) and (ii) the outcome of our efforts to realize value, if any, from the Company’s retained causes of action, including the Foxconn Litigation, and other remaining assets.
We have incurred significant professional fees and other costs in connection with preparation for and prosecution of the Chapter 11 Cases and expect to continue to incur significant professional fees and costs. In addition, we are subject to significant contingent liabilities, the full scope of which is uncertain at this time (see Note 8 – Commitments and Contingencies). Furthermore, under the Plan, we are conducting a process to reconcile the claims asserted that has resulted in approximately $30.9 million of our cash being reserved for settling outstanding claims against the Company, including litigation and indemnification claims. Pursuant to the Bankruptcy Code, the Company is first required to pay all administrative claims in full. Under the Plan, the Company established an escrow for the payment of certain professional fees incurred in connection with the Chapter 11 Cases (“Professional Fee Escrow”), which was fully paid out as of September 30, 2024. The Professional Fee Escrow was established based upon estimates and assumptions as of the date the Company emerged from bankruptcy. The Plan also required the Company to establish a $45 million reserve for allowed and disputed claims of general unsecured creditors (the “Claims Reserve”), including interest (although there can be no assurance the Company will be able to pay such claims in full, with interest). As of September 30, 2024, $27.3 million was included in restricted cash, which represents the initial Claims Reserve of $45 million, less $17.7 million which was released from the Claims Reserve related to the claims reconciliation process. Pursuant to the Plan (which includes certain exceptions), upon emergence (i) the Claims Ombudsman was appointed to oversee the administration of claims asserted against the Company by general unsecured creditors and (ii) a trustee was appointed to oversee the litigation trust, which may be
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funded with certain retained causes of action of the Company, as was determined by the Board. Holders of certain unsecured claims are expected to be entitled to receive post-petition interest on their claim amount as of the later of the date the claim was due to be paid, or the petition date. Therefore, if the claims resolution process takes longer than anticipated, the total liability to settle claims will increase.
The amount of the Claims Reserve is subject to change and could increase materially. The Claims Reserve is adjusted downward as payments are made for allowed claims, and may also be adjusted downward as claims are resolved or otherwise as a result of the claims resolution process. Claimants may have the ability to amend their proofs of claim that could significantly increase the total claims, beyond our estimates or reserve. There is also risk of additional litigation and claims that may be asserted after the Chapter 11 Cases against the Company or its indemnified directors and officers that may be known or unknown and the Company may not have the resources to adequately defend or dispute such claims due to the Chapter 11 Cases. The Company cannot provide any assurances as to what the Company’s total actual liabilities will be based on any such claims. To the extent that the Claims Reserve is insufficient to pay general unsecured creditors in full with interest, such deficiency will be payable from certain other assets of the Company, as set forth in the Plan.
Our assets consist of cash and cash equivalents, restricted cash, the Foxconn Litigation claims, claims the Company may have against other parties and NOLs.
See Risk Factors under Part I – Item 1A. and Part II – Item 1A. below for further discussion of the risks associated with our limited capital resources and loss exposures, among other risks.
Summary of Cash Flows
The following table provides a summary of Nu Ride’s cash flow data for the period indicated:
| Nine months ended |
| Nine months ended | |||
| September 30, 2024 |
| September 30, 2023 | |||
Net Cash used in operating activities | $ | (29,969) | $ | (120,006) | ||
Net Cash provided by investing activities | $ | — | $ | 92,301 | ||
Net Cash used in financing activities | $ | (106) | $ | — | ||
Net Cash Used in Operating Activities
Net cash used in operating activities decreased by $90.0 million for the nine months ended September 30, 2024 compared to 2023. The decrease of cash used in operating activities, was principally due to the cessation of operations as a result of the Chapter 11 Cases. The Company’s net loss, as adjusted to reconcile cash used by operating activities was $342.7 million for the first nine months of 2023, compared to $6.9 million for same period of 2024. The net loss, as adjusted to reconcile cash used by operating activities for the first nine months of 2023 included non-cash impairment charges of $140.2 million, $24.1 million related to the write down of inventory and prepaid inventory, $2.8 million for the loss on disposal of fixed assets, $6.6 million of stock-based compensation, and $54.4 million in depreciation of property, plant and equipment and intangible assets, partially offset by $2.2 million of other non-cash changes. No such charges were incurred in the first nine months of 2024 with the exception of stock-based compensation, which totaled $3.5 million for the nine months ended September 30, 2024.
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Net Cash Provided by Investing Activities
The Company had no investing activities for the nine months ended September 30, 2024. Investing activities for the nine months ended September 30, 2023, included $134.2 million in maturities of short-term investments, offset by $32.1 million in purchases of short-term investments and $10.2 million in purchases of property, plant, and equipment.
Net Cash Used in Financing Activities
For the nine months ended September 30, 2024, financing activities were limited to tax withholding payments related to net-settled restricted stock compensation associated with the Company’s 2020 Plan. There were no financing transactions during the nine months ended September 30, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Critical Accounting Estimates
Liabilities Subject to Compromise
Since filing the Chapter 11 Cases, the Company has operated as a 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 8 - Commitments and Contingencies for further detail.
Recent Accounting Pronouncements
See Note 2 — Summary of Significant Accounting Policies to the Condensed Consolidated Financial Statements for more information about recent accounting pronouncements, the timing of their adoption, and management’s assessment, to the extent they have made one, of their potential impact on the Company’s financial condition and results of operations.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Management’s Evaluation of our Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls, activities, and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. The design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs and the nature of operating activities. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer, who also serves as our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In light of the limited nature of our operations, our controls primarily relate to financial reporting and payment of our expenses. As a result of eliminating personnel, including full-time employees, we have enhanced our oversight of accounting and payment processing with increased executive involvement and support from consultants and advisors to facilitate the presentation of information with respect to our operations that is accurate and complete. Our Chief Executive Officer also serves as our Chief Financial Officer.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
For a description of our legal proceedings, see Note 8 – Commitments and Contingencies of the notes to the unaudited Condensed Consolidated Financial Statements contained herein.
Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. You should carefully consider the risks set forth in the section captioned "Risk Factors" in (i) our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024, and (ii) our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 14, 2024 and for the three and six months ended June 30, 2024, filed with the SEC on August 13, 2024, before making an investment decision. During the period covered by this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors previously discussed in the Company’s SEC filings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
| (a) | Not applicable. |
| (b) | None. |
| (c) | During the quarter ended September 30, 2024, |
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Item 6. Exhibits
Exhibit Index
Exhibit No. |
| Description |
|---|---|---|
31.1* | ||
32.1** | ||
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
* | Filed herewith |
** | Furnished herewith |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NU RIDE INC. | |
Date: November 13, 2024 | /s/ William Gallagher____________ |
William Gallagher | |
Chief Executive Officer, President, Secretary, and Treasurer | |
(Principal Executive Officer and Principal Financial Officer) | |
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